Small businesses face slow, difficult recovery after Ida
Some areas could be without power for weeks
NEW WORK – 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’s another blow for business owners who have been coping with the disruption caused by the coronavirus pandemic for over a year.
“Our fear is many businesses aren’t going to be able to recover, given everything else they’ve gone through for the past 18 months,” said David Chase, vice president of outreach for the advocacy
group Small Business Majority.
More than 1 million homes and businesses in Louisiana and Mississippi were left without power as Ida pushed through 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. Consider low-interest natural disaster loans from the government and insurance claims.
“It’s a big storm, slow moving, and hitting a number of states,” said Todd McCracken, president of National Small Business Association. “The higher the number of claims, the slower response is going to be.”
For Bill Rau, the owner of M.S. Rau, an antiques business on Royal Street in the French Quarter in New Orleans, the biggest obstacle isn’t damage to the physical location. It’s that without power and water, no one can tenably live in the city. He said most of his 62 employees have evacuated.
During Katrina, Rau dealt with as many as 14 insurance adjusters. But he hasn’t even begun to consider if he will apply for disaster relief this time.
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 in advance, letting customers know how to reach the company if power is lost.
Businesses that didn’t forewarn customers should reach out by forwarding a company phone to a cell phone, 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,” Lewis said.
Business owners also should closely review their insurance policies to know what is covered. In the aftermath of Superstorm Sandy, it became apparent that some insurers covered storm damage but not wind damage. Alternatively, owners might be covered for some things they didn’t realize.
Alex Contreras, director of preparedness, communication, and coordination for the U.S. Small Business Administration’s Office of Disaster Assistance, said 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 is about 2.9% and the money can be repaid over 30 years.
Chase, of the Small Business Majority, also recommends 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 or $50,000,” Chase said. “CDFIs may be an option if they’re not getting a loan from a big bank, or having trouble getting loans from SBA.”