Rebuilding Your Small Biz After a Disaster

Many small businesses have been disabled by Superstorm Sandy, but they can take certain measures to speed recovery. Bankrate talked to a wide range of experts, both in the academic and business communities, to come up with a business disaster recovery plan.

"The first step is to assess your damage," says Jeffrey Robinson, an assistant professor at Rutgers Business School in Newark and New Brunswick, N.J. "It sounds simple," but in a time of great stress, it can be easy to skip vital steps.

Check for damage to your equipment or building. If you lease your space, building damage is the owner's responsibility. "Document damages and take photos of losses," says Gerald McSwiggan, senior manager of the Business Civic Leadership Center's disaster assistance service. The BCLC is affiliated with the U.S. Chamber of Commerce.

Then, figure out your economic damage, Robinson says. "If your power was out for a couple days, what would you have been making without a hurricane? The impact can last for weeks if you can't get supplies or get to clients or if customers can't come to a retailer."

If you have property or business interruption insurance, contact your insurer immediately, so you can find out exactly what reimbursement you are entitled to and get it quickly. Many insurers are now besieged with storm requests, so it may take some time.

Next, identify local, state and federal resources that are available to provide assistance. "They are plentiful, but it's a challenge to know which ones are for you," Robinson says. You can find the resources through an Internet search.

Unfortunately for businesses in great distress, almost all aid programs provide loans rather than grants. "But even if you think right now you don't want a loan, you might think differently in 30 days," McSwiggan says. "Go ahead and apply to see what assistance is available."

SBA Programs for Business Disaster Recovery Plans

The Small Business Administration, or SBA, has two loan programs to help storm victims. One is a disaster loan for physical damages. Businesses can borrow up to $2 million to repair real estate, machinery and other assets damaged by Sandy. The interest rate does not exceed 4%, and the SBA offers terms of up to 30 years.

You can also increase the loan by up to 20% of the amount of damages to make improvements to mitigate the cost of future disasters.

The second program consists of economic injury disaster loans. These loans apply to any expenses a business would have been able to handle had the storm not occurred -- rent and utilities, for example. Think of the loan as working capital to cover operational costs. Again, up to $2 million can be borrowed at up to a 4% interest rate with terms up to 30 years.

If you apply for both loans, you can only receive $2 million altogether, not $4 million. The loans are available to companies in the portions of New York, New Jersey and Connecticut that were declared disaster areas.

The SBA encourages businesses to file their applications online for a quicker turnaround. The agency tries to give applicants a decision within 10 days, says spokeswoman Carol Chastang.

The average approval rate for disaster loans between 2006 and when Sandy hit was 42%.

Other Options

An array of loan programs and helpful information is available at the state and local level, too, offered by groups such as the New Jersey Economic Development Authority and the New York City Economic Development Corporation. The NYCEDC also serves as a repository of information about workspace available to flooded businesses from other businesses with extra space.

Your local Chamber of Commerce also may be able to help. The BCLC has set up an assistance hotline: (888) 692-4943. Some local chambers are setting up business disaster recovery programs that may include grants, says McSwiggan.

Government agencies should implement grant programs, says Robinson. "Everything can't be a loan because it puts people deeper into debt," he maintains. "Some people say, why give them free money? The money will go in one way or another. The question is, what's the best way to get money directly to business owners with the lowest impact?"

On the insurance front, many small businesses go without coverage such as business interruption insurance. It is during disasters such as Sandy when they learn the folly of their decisions, experts say. The best way to be ready after a catastrophe hits is by preparing beforehand.

More Insurance Issues

Many people are unfamiliar with business interruption insurance. It reimburses you for loss of income when your business is disabled by a disaster. For example, Robinson, who owns a day spa with his wife, has coverage that is triggered after they lose power for more than eight hours.

Keep in mind that you'll need documentation of your sales history to get properly reimbursed, he says.

A lot of businesses also don't realize that private insurance companies' property coverage doesn't include floods. The government provides flood insurance through the National Flood Insurance Program.

In purchasing insurance, consider policies with high deductibles and low premiums, says Dennis Ceru, an adjunct professor of entrepreneurship at Babson College in Babson Park, Mass. You can "self-insure" with the money you save in premiums, putting it aside for a rainy day.

To put a business disaster recovery plan in place, "a lot of it comes down to being a good Boy Scout -- be prepared," Ceru says.