The 2018 hurricane season (June through November) has become increasingly more intense since the calendar turned to September. The National Hurricane Center (NHC) issued advisories for Hurricane Florence, which threatened the coast of Virginia and the Carolinas and other regions, as well as other storms that developed right behind it: Hurricane Helene and Hurricane Isaac.
Hurricanes often cause billions of dollars’ worth of damage. Even if your business has insurance, it likely will not cover all of the damages that you incur. Further, it could be a long and drawn out process to receive payment for your claims at a time when you can ill afford to wait for funding.
One major issue related to extreme weather events and insurance coverage (highlighted by Super Storm Sandy) was the distinction between whether damage was caused by wind or by storm surge. Wind damage is generally covered in the policy, whereas storm surge or flood damage requires a rider to a policy-holder’s coverage; or even a separate flood insurance policy.
This distinction accounted for nearly half of all claims (for Sandy) being denied, totaling nearly $20 billion (regionally) in uncovered damage. If a business is in a flood zone, it is wise for them to get flood insurance coverage.
SBA Disaster Loans can help. If your small business is impacted by a storm, wildfire, or other natural disaster, these loans can be a lifeline to help get your business up and running again. The loans come at low interest rates and have attractive repayment terms.
The SBA provides low-interest disaster loans to help businesses recover from declared disasters. These don’t always have to be hurricanes. For instance, the SBA is providing loans for companies affected by the Kīlauea volcanic eruption and earthquakes in Hawaii. Already, more than $8 million in SBA Disaster Loans have been approved for businesses trying to recover from the volcanic eruptions that began in May 2018.
“SBA’s disaster assistance employees are committed to helping businesses and residents rebuild as quickly as possible,” said Tanya Garfield, director of the SBA’s Disaster Field Operations Center – West, in a release. “Don’t miss out on any assistance you may be entitled to by not registering for help. You don’t need to wait for your insurance to settle or obtain a contractor’s estimate.”
There are two major kinds of disaster recovery loans the SBA provides. Funding can be used to cover repairs and replacement of property damaged in a declared disaster. Additionally, SBA funding can help small business owners pay for operating expenses after an emergency and overcome economic injury following a hurricane or other catastrophic event.
Business Physical Disaster Loans enable businesses to fund repairs or replace disaster-damaged property of up to $2 million to qualifying businesses and non-profit organizations. The money can be used to fix or replace buildings, machinery and equipment, inventory, and supplies. Businesses seeking to make property improvements such as installing a drainage system to help reduce the risk of future flooding from may qualify for an even bigger loan.
Economic Injury Disaster Loans are working capital loans to help small businesses meet their ordinary financial obligations that cannot be met as a direct result of disasters. These short-term loans are intended to assist through the disaster recovery period. This funding is determined by the actual economic injury suffered and the company’s financial needs, even if no property damage was sustained.
If your business sustains damages from a natural disaster, here is a checklist of action items:
- Check disaster declarations. The SBA has a web page that list areas that currently have disaster declarations, including areas of California and other states where wildfires have caused millions of dollars in damage.
- Assess the damage and document it by taking photos and videos to accompany your insurance claims.
- Read your insurance policy and contact your agent if you have any questions to determine what is covered and what is not. (Determine if you are satisfied with the insurance company’s resolution. If not, you may want to look for a new insurer.)
- File your insurance claims quickly; many policies require that claims are filed within a specific time frame in order to be compensated for any losses.
- To cover expenses that insurance might not meet, apply for an SBA Disaster Loan.
- FEMA offers assistance with filing insurance claims, landlord issues, and other legal problems for business operating in places that have been designated as federal disaster areas. Visit FEMA’s website, http://disasterlegalaid.org, to learn more.
- Continuously backup all your records on your computers and the cloud. This is a good practice not only in times of disaster, but also throughout the year.
In planning for the future, if you lost revenue because you did not invest in a generator, don’t make the same mistake twice. Purchase one so that you have it before the next storm hits. Further, if you company has been performing well, apply for a business line of credit, which differs from a business loan because it is a lump sum of cash that is available in times of need. A line of credit can provide a financial lifeline in times of emergency or even during periods of seasonal cash flow tightening. The best part about it is that once a line of credit has been established, you can begin drawing against it immediately – even if you’ve also applied and are waiting for an approval for an SBA Disaster Loan.
In many ways, a line of credit is similar to a business credit card. No interest charges are incurred until you draw against the line, and you are charged interest only on the amount that you use. Often, a business line of credit comes at much lower interest rates than those offered by credit card companies. The money can be used for a wide variety of business purposes, including working capital and payroll expenses.
So take these tips with you into the rest of this hurricane season and be prepared no matter what Mother Nature decides to throw your way. If you can know exactly what to do to get your business back up and running when disaster strikes, you’ll be far ahead of the curve.