Disaster Loan Demand Booms
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UPDATED: Nov 10, 2012
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Super-storm Sandy has prompted a massive demand for disaster loans among small businesses.
One of these businesses was Parliament Tutors, an in-home tutoring business in the New England area. When the super-storm hit and knocked out large amounts of power, the business cleverly continued operations in internet equipped cafes.
“We had to find a solution, or we were going to take a very serious hit. We were able to recoup a lot,” said David Greenberg, owner of Parliament Tutors, in an interview with Reuters.
Unlike Parliament Tutors, many businesses were unable to remain operational. As the clouds from Sandy cleared, many businesses were left damaged and beyond the capability of generating revenue. Many owners are now in need of disaster loans to get back into operation.
Rohit Arora, the CEO of Biz2Credit, told Reuters that the demand for disaster financing has spiked since the storm hit.
“At least 40 to 50 percent of our customers in these areas have asked for disaster loans. Over the next two weeks, I foresee a bigger increase,” he said.
Commercial banks have heard the needs of businesses and have begun to offer disaster loans.
Financial giant JPMorgan Chase & Co has begun offering $5 billion in disaster loans to small and medium-sized businesses that have been damaged by Sandy.
“We’ve put in place an expedited process so that clients can call, and we will review their case in a very short period of time—sometimes right on the phone,” said Chase Business Banking CEO Scott Geller, according to Reuters.
In a proactive response, Chase bankers have contacted over 40,000 businesses in the New England area.
“People are starting to catch wind of what is out there and available. We’ll expedite the requests,” said Geller.
In New York, Goldman Sachs has begun offering disaster loans in the range of $5,000 to $25,000 to small businesses within New York City. These loans will carry a one percent interest rate over 30 months, but will require payments beginning on the seventh month so as to allow borrowers a period of time to return to operational status.
In addition to the private sector, the Small Business Administration began initiatives to lend financing to businesses in need that were in super-storm affected areas.
Despite the efforts of both the private and public sector many, businesses are facing the sobering prospect that aid may be prove ineffective.
Windsor Resources, a business that say its infrastructure severely damaged by Sandy, may have been mortally wounded. CEO John Schapiro expressed his fears to Reuters.
“Basically, I have to write it off as a loss,” he said.