The tropics are active again and hurricane season is at its peak. Most of the news on the weather channels focus on how to get yourself and your home prepared for the bad weather. If you have a small business that might be in the way of one of these giant cyclones, you will have to prepare as well. If you don’t have insurance, which should be highly unlikely, it is too late to get it. Once a hurricane or tropical storm has formed no underwriter will take on any new liability. One distinction that you need to determine is what your policy covers. There are really two that will come in to play. Wind and hail insurance, and flood insurance. Most policies carry wind and hail as a standard component on your business. Wind can cause a significant amount of damage, but so can storm surge. While wind damage is generally covered in the policy, storm surge or flood damage requires a rider to a policy-holder’s coverage, or even a separate flood insurance policy. These flood policies are affordable and necessary. This distinction accounted for nearly half of all claims for Hurricane Sandy being denied, totaling nearly $20 billion regionally in uncovered damage. If a business is in a flood zone, it is wise to get flood insurance coverage.
When it’s okay to come out in the clear after the storm, it’s time to assess the damage and make claims if need be. It could be a long and drawn out process to receive payment for your claims at a time when you can ill afford to wait for funding. Let’s look at a couple of places you can turn to get a bridge loan so-to-speak to cover you until insurance money is available or if you didn’t have enough coverage to rebuild entirely.
The SBA makes available disaster relief loans to help businesses recover from national declared disasters. For instance, more than $8 million in SBA Disaster Loans have been approved for businesses trying to recover from the volcanic eruptions that began in May 2018 in Hawaii. There are two major kinds of disaster recovery loans the SBA provides.
- Business Physical Disaster Loans: These loans enable businesses to fund repairs or replace disaster-damaged property of up to $2 million to qualifying businesses and non-profit organizations.
- Economic Injury Disaster Loans: These loans are working capital loans to help small businesses meet their ordinary financial obligations that cannot be met as a direct result of disasters. This funding is determined by the actual economic injury suffered and the company’s financial needs, even if no property damage was sustained.
Talk to your bank about a business line of credit. If your credit is good, this could be an invaluable tool to you in times such as this. While you may be waiting for insurance claims to be processed and for the SBA to approve your loan, a bank line of credit is available immediately up to the lump sum that was pre-approved. Similar to a credit card, there is no charge or interest until the line is used. Typically rates for bank lines of credit are much lower than you will find with credit cards. While it may be too late to change your insurance policy and flood rider this year, put this on your to-do list after hurricane season ends (November 30) and gain peace of mind going into next year.
