SUDDEN IMPACT: When Disaster Strikes

Levi@CAIED · Joined: 20 Nov 2006 Posts: 4 Location: Flagstaff

SUDDEN IMPACT: When Disaster Strikes
By Bruce Hodgman

On a warm June day in 2003, Pamela Rinella had just taken three peach pies out of the oven and set them to cool in her Mount Lemmon Café atop the mountains overlooking Tucson, Arizona. The raging Aspen forest fire forced her to flee almost immediately thereafter. She lost her home and the Café’s storage facilities and supplies to the blaze.

As Pamela puts it, her dream life would have come to an end that day if it had not been for disaster assistance loans she received from the U.S. Small Business Administration. The loans allowed her to rebuild her home and keep her restaurant open throughout the cleanup and recovery processes. Today the 34-year resident of the mountains is happy to say of SBA assistance: “you made my day!”

When disaster strikes, the U.S. Small Business Administration is prepared to support homeowners, renters and businesses of all sizes as they rebuild in the aftermath of a disaster. SBA loan officers swing into action once a disaster declaration is made by the president or the Administrator of the SBA.

Since 1953, the SBA has approved over 2 million low interest disaster loans for more than $52 billion. After the devastating 2005 hurricane season, when Hurricane Katrina came ashore, the SBA approved more than $9 billion in disaster loans to about 85,000 residents and business owners.

Typically, the majority of disaster loans are made to homeowners and renters. Homeowners may borrow up to $250,000 to repair or replace damaged or destroyed real estate. The SBA may also lend up to $40,000 to renters and homeowners to cover the costs of replacing personal property such as appliances, furniture, clothing or cars.

When a disaster causes property damage to a business of any size, the business owner may borrow up to $1.5 million to repair or replace the building, equipment, machinery, inventory, and other business assets.

SBA also makes economic injury disaster loans of up to $1.5 million to small businesses that may not have suffered any physical damage, but were financially impacted by the disaster.

Interest rates on all SBA disaster loans are typically 4 percent or less, with up to 30-year terms.

It’s impossible to predict where or how severely a disaster will affect a home or business, but it’s always a good idea to prepare. Maintaining adequate insurance, assessing hazards and developing a solid emergency plan are strategies that can lessen the financial impact of a disaster and save lives as well.

The true secret of managing a disaster is to plan ahead. Here are five simple things you can do to protect your small business:

1. Recognize that your small business can suffer a natural disaster. Arizona small businesses have been affected by natural disasters such as drought, severe storms, floods, high winds, freezes, and wildfires, and man-made such as fire. Remember your damage can be physical and economic – for example a drought affecting farmers if your business is agriculture-dependent.
2. Develop a recovery plan and make sure everyone is familiar with the plan and knows what steps to take in emergencies.
3. Have adequate insurance. You’ll need coverage not only for property damage and loss (including inventory), but also for business interruption.
4. Draw up an emergency list of telephone numbers for all employees and assign key employees to call others if disaster strikes. That way, you can learn who is all right and who needs help, and you can quickly communicate instructions about your business.
5. Don’t forget your computer system. Keep backup programs and duplicate records (accounts receivable, client information, and the like) at a different, safe site.

For more information on the SBA’s Disaster Assistance programs, visit the SBA’s Web site at http://www.sba.gov/disaster_recov/index.html. If you need help in preparing a disaster plan, please contact the nearest SCORE chapter for free assistance online at http://www.sba.gov/az/az_counselingt.html or call (602) 745-7250 for the nearest office.

NOTE: Bruce Hodgman is the Deputy Director of the SBA in Arizona and is considered a disaster recovery specialist with nine years experience in disaster operations. He can be reached at bruce.hodgman@sba.gov .
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Levi Esquerra, Program Director
Center for American Indian Economic Development