Financial Options

Business Financing Options for Small Business Owners After a Major Incident or Disaster

Experiencing a major incident or disaster can severely impact your small business, disrupting operations and causing financial strain. Securing financing is a crucial step in the recovery process.

This guide provides detailed information on various financing options, including grants, loans, and community resources, to help small business owners rebuild and recover.

Understanding the Need for Financing

1. Immediate Financial Relief

  • Operational Continuity: Maintain day-to-day operations and payroll.

  • Emergency Repairs: Address urgent repairs to prevent further damage and ensure safety.

2. Long-Term Recovery

  • Reconstruction: Fund the rebuilding of damaged infrastructure and facilities.

  • Growth and Expansion: Support long-term growth strategies post-recovery.

Grants for Small Businesses

1. Federal Grants

Federal Emergency Management Agency (FEMA)

  • Purpose: Provides disaster assistance to small businesses affected by natural disasters.

  • Eligibility: Businesses in federally declared disaster areas.

  • Application: Apply through the FEMA website.

Small Business Administration (SBA)

  • Economic Injury Disaster Loans (EIDL): Provides low-interest loans and grants to businesses that suffer substantial economic injury.

  • Eligibility: Small businesses in declared disaster areas.

  • Application: Apply through the SBA website.

Loti can help:

In addition to tracking your insurance submissions and payouts, Loti also offers tools to track grants from folks like FEMA. We are really trying to help you organize everything all in one place.

2. State and Local Grants

State Economic Development Agencies

  • Purpose: Provide grants and funding to support local businesses affected by disasters.

  • Eligibility: Varies by state; typically requires proof of disaster impact.

  • Application: Contact your state’s economic development agency for details.

Local Government Programs

  • Purpose: Municipalities and counties may offer grants for disaster-affected businesses.

  • Eligibility: Local businesses impacted by disasters.

  • Application: Check with your local government offices or chambers of commerce.

Loans for Small Businesses

1. Federal Loans

Small Business Administration (SBA) Loans

  • Disaster Loans: Low-interest loans for businesses and homeowners to repair or replace damaged property.

  • Economic Injury Disaster Loans (EIDL): Working Capital loans to help small businesses meet financial obligations.

  • Eligibility: Businesses in federally declared disaster areas.

  • Application: Apply through the SBA website.

Example:

  • Scenario: Your business incurs substantial damage from a flood. You apply for an SBA Disaster Loan to cover repair costs and an EIDL to manage ongoing expenses.

2. Private Loans

Commercial Banks

  • Purpose: Offer various loan products, including term loans and lines of credit.

  • Eligibility: Based on creditworthiness and business financials.

  • Application: Contact your bank or financial institution.

Credit Unions

  • Purpose: Provide loans and lines of credit to members.

  • Eligibility: Membership required; based on creditworthiness.

  • Application: Contact your local credit union.

Example:

  • Scenario: After a fire damages your office, you secure a term loan from your bank to cover reconstruction costs and a line of credit from your credit union for ongoing operational expenses.

Community Resources and Assistance

1. Nonprofit Organizations

Red Cross

  • Purpose: Provides emergency relief, including financial assistance and resources for disaster-affected businesses.

  • Eligibility: Businesses and individuals affected by disasters.

  • Application: Contact your local Red Cross chapter.

Local Chambers of Commerce

  • Purpose: Offer support and resources to local businesses, including disaster recovery assistance.

  • Eligibility: Membership may be required.

  • Application: Contact your local chamber of commerce.

2. Community Development Financial Institutions (CDFIs)

Purpose: Provide financial products and services to underserved communities, including disaster recovery loans and grants.

  • Eligibility: Small businesses, particularly those in low-income areas.

  • Application: Locate a CDFI through the Opportunity Finance Network.

3. Business and Industry Loan Guarantee Program

Purpose: Offered by the USDA, this program guarantees loans to rural businesses for recovery and development.

  • Eligibility: Businesses in rural areas.

  • Application: Apply through participating lenders.

Steps to Accessing Financial Assistance

1. Documentation and Assessment

Document Damage:

  • Photographic Evidence: Take photos and videos of all damage.

  • Inventory Loss: Document any inventory losses with detailed records.

Financial Records:

  • Financial Statements: Gather recent financial statements, including profit and loss statements, balance sheets, and cash flow statements.

  • Tax Returns: Have recent tax returns available for review.

2. Research and Application

Identify Funding Sources:

  • Grants: Research available federal, state, and local grants.

  • Loans: Explore SBA loans, commercial bank loans, and other private financing options.

  • Community Resources: Investigate assistance from nonprofit organizations, CDFIs, and local chambers of commerce.

Application Process:

  • Complete Applications: Fill out applications thoroughly and accurately, providing all required documentation.

  • Follow Up: Regularly follow up on the status of your applications and provide any additional information requested.

3. Financial Management and Utilization

Budgeting:

  • Create a Budget: Develop a detailed budget for the use of funds, prioritizing critical expenses like repairs, payroll, and operational costs.

  • Track Spending: Monitor and track all expenditures to ensure funds are used appropriately and efficiently.

Wrap-Up

Recovering from a major incident or disaster requires a strategic approach to securing financing. By exploring grants, loans, and community resources, small business owners can access the financial support needed to rebuild and recover. Proper documentation, thorough research, and diligent application processes are essential for successfully obtaining financial assistance. Effective financial management ensures that funds are used efficiently, supporting both immediate relief and long-term recovery.

Through these steps, small businesses can navigate the challenges of disaster recovery and work towards a stable and prosperous future.