The Search for Funding in Hurricane Sandy’s Rubble
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UPDATED: Nov 8, 2012
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In the destroyed remains left by Hurricane Sandy, business owners are searching for ways to keep their businesses afloat. Many are turning to disaster business loans while waiting for insurance funding to be approved.
An estimated $50 billion in damages was caused by Hurricane Sandy. The staggering estimate is due to the large loss of electric and utility power, as well as road closures. And Sandy did not discriminate; it destroyed homes, boats and businesses large and small. Some businesses left standing are still closed. Now, not only are owners faced with rebuilding their businesses, but they are trying to find a way to make or obtain capital during this time to cover repairs, routine bills, and employee wages.
Banks of all sizes are stepping in to provide assistance. Besides the most common Small Business Association (SBA) disaster business loans, other banks are expanding their lending plans. Gold Coast Bank, a small bank with locations in New York, is providing over $1 million in “Sandy Relief Loans” for Long Island businesses. Bank board member John King said getting businesses back to normal is crucial for the area.
“Local restaurants, including many that have been mainstays in our communities, have to rebuild their entire facility— and they need to keep their staff employed in the process,” King said to Newsday. “Without additional cash flow this could be catastrophic for many.”
Gold Coast Bank is offering business loans up to $100,000 with a 3.9 percent fixed interest rate for three and a half years. SBA loans normally offer a four percent interest rate.
Although the water is receding, and public transportation is beginning to move again, some business loan companies expect the need to only grow.
“At least 40 to 45 percent of our customers in these areas have asked for disaster loans,” Rohit Arora, CEO of New-York based Biz2Credit.com, told Reuters. “Over the next two weeks, I foresee a bigger increase.”
In addition to new disaster business loans, many owners with insurance are filing any and all types of insurance claims. Business owners have filed flood insurance claims, as well as business interruption insurance claims. This is a coverage which assists companies when revenue is lost to an unexpected shutdown. But the funding is only provided when damage has occurred to the business, which is not the case for all. A lack of power, or a lack of customers from poor transportation, does not qualify for the coverage. There are affected areas, such as Brooklyn’s Red Hook neighborhood, that were unable to even receive flood insurance. The area’s close proximity to water made it impossible, or financially unsound, to purchase flood insurance.
Robert Wyatt, President of messenger service Lightspeed Express, said he expected to get compensated for something only to find out he was denied.
“I’m not happy. Very not happy. Incredibly not happy,” he said to CNN. “I figured there’s probably an out for the insurance company, but I was hoping we’d be paid since the city had ordered everything to shut down, including the subways.”
Although there is a desperate need for assistance, not all residents want a business loan or faulty insurance coverage. While a disaster business loan might be the most direct form of funding, there are some residents who are simply moving forward and handling this alone. Some restaurant owners in New York are viewing the Hurricane as a learning block. Yes, they lost profit. Yes, business was stopped. But some view this as an opportunity to rebuild smarter.
Drew Nieporent, owner of three New York restaurants, said that although he lost an estimated $600,000 in revenue and $30,000 in spoiled food, there are lessons to be learned.
“We all want to be smart about this going forward. It’s a time of stocktaking, after reopening,” Nieporent told the NY Times. “There is no business as usual, going forward.”