Small Businesses and Ida

Small businesses hit by Hurricane Ida face a slow and daunting recovery as they grapple with storm damage, a lack of power, water, and internet service and limited ability to communicate with clients or customers. It is yet another blow for business owners who have been coping with the disruption caused by the coronavirus pandemic for over a year. The fear is many businesses aren't going to be able to recover, given everything else they've gone through for the past 18 months. More than 1 million homes and businesses in Louisiana and Mississippi were left without power as Ida pushed through on Sunday into early Monday. Officials said some areas could be without power for weeks.

Experts say there are several ways for businesses to begin to recover from a disaster. First and foremost is making sure all staff and their families are safe. Then consider low-interest natural disaster loans from the government and insurance claims. The process could drag on for weeks if not longer. For Bill Rau, the owner of M.S. Rau, an antiques business which has a gallery on Royal Street in the French Quarter in New Orleans, the biggest obstacle to recovery isn't damage to the physical location. Instead, it's the fact that without power and water, no one can tenably live in the city. He said most of his 62 employees in New Orleans have evacuated, spread out to 11 states. The gallery survived Ida with minor leaks. Back in 2005, the warehouse sustained several million dollars of damage from Hurricane Katrina. Rau says his employees are "safe and sound." He evacuated to Bentonville, Arkansas, and then New York. He was hoping to return Tuesday but is now resigned to wait until power officials give the all clear.

During Katrina, Rau dealt with as many as 14 insurance adjustors. But he hasn't even begun to consider whether he will apply for disaster relief this time. "It's way too early to think about that," he said. While efforts to assess the damage are just underway, an early estimate from Fitch Ratings says Ida will cost insurance companies $15 billion to $25 billion. That's well below the record $65 billion of insured losses from Hurricane Katrina in 2005. But Ida will likely surpass the winter storm dubbed Uri that hit in February as the costliest storm in 2021.

Power and internet are lifelines for small businesses, said David Lewis, CEO of HR services firm Operations Inc. Ideally, businesses had a hurricane plan in place and sent out emails ahead of time, letting customers know how to reach the company if power is lost.

Businesses that didn't forewarn customers should attempt to reach out, by forwarding a company phone to a cell phone, for example, or using a mobile phone as a hot spot for an internet connection. While they have had some problems with their mobile networks, Verizon, AT&T, and T-Mobile all said they would offer customers in affected areas free talk, text, and data throughout the week. If you are able to have connectivity, you're often able to provide some level of continuity for clients.

Business owners also should closely review their insurance policies to know exactly what is covered. In the aftermath of Superstorm Sandy, it became apparent that some insurers covered storm damage but not wind damage, for example. Alternatively, owners might be covered for some things they didn't realize. The areas hit by Hurricane Ida were declared disaster zones, so businesses of all sizes can apply for physical disaster loans as well as working capital loans. The maximum amount is $2 million for both types of loans combined. The interest rate for business loans is about 2.9% and the money can be repaid over 30 years. Businesses should apply for the loans as soon as they can. Those that wait could receive smaller-than-expected settlements from insurance companies and then find themselves in immediate need of cash. By then it may be too late for a loan, which takes about 16 days to process, based on past disasters.

There is an online portal for businesses to apply and the Small Business Administration (SBA) will have staff assisting the Federal Emergency Management Agency and state recovery efforts. Businesses aren't obligated to accept a loan but could feel reassured knowing it's available if needed. The SBA advises owners to take the largest loan they're eligible for because the loan process takes time and other things could come up.

Unfortunately, there's no magic bullet and it's a difficult situation for everyone. It is recommended that businesses look into Community Development Financial Institutions funds. They focus on offering loans to underserved communities that big banks might reject. The loans are low interest, but also low dollar amounts. A lot of small businesses may only need $20,000 to $50,000. CDFIs may be an option if they're not getting a loan from a big bank, or having trouble getting loans from SBA.