By Paul N. Gada, CCH Financial Planning Toolkit Staff Writer
Disaster can strike a community at any time. Whether it is due to natural causes, like Hurricane Katrina, or unnatural causes, like a terrorist attack, the end result is the same. A disaster leaves destruction in its wake, with devastated survivors left to pick up the pieces.
No matter how bad things get, however, a disaster always strikes a small business owner hardest. In addition to personal losses, a small business owner often loses the business itself. These casualty losses translate into lost business investments, lost income and a severely decreased ability to recover from the disaster. If employees are involved, their future also will depend on the small business owner's ability to get the business back on its feet.
Hopefully when a disaster strikes your business, you are prepared to deal with the situation. Before that fateful day, you should have spent some time planning and developing a contingency plan for your business. You also should have researched the various types of insurance out there and invested in enough to help you recover.
If you are unfortunate enough to have suffered from a disaster recently and even more unfortunate enough to fall short on recovery resources, don't worry. All is not lost. In addition to various state and local economic development programs, the federal government offers relief to disaster victims, including small business owners, through various sources. These sources include:
- the U.S. Small Business Administration (SBA)
- the Federal Emergency Management Agency (FEMA)
- the Internal Revenue Service (IRS)
- the U.S. Department of Agriculture (USDA)
- the Department of Housing and Urban Development (HUD)
The top three sources are examined below.
SBA -- The SBA plays a major role in providing disaster relief. Its disaster loan program is the primary form of federal assistance for private sector disaster losses. The three types of SBA loans available are:
- Home disaster loans -- Loans are provided to homeowners or renters to repair or replace disaster damages to real estate or personal property.
- Business physical disaster loans -- Businesses of any size may receive loans to repair or replace damaged business property, including real estate, machinery, equipment, inventory and supplies. Non-profit organizations are also eligible for this relief.
- Economic injury disaster loans -- Low-interest loans for working capital are available to assist small businesses and agricultural cooperatives through the disaster recovery period. The only catch is that the loan applicant must not have any credit available elsewhere, except from government sources.
Shortly after the announcement of presidential disaster declarations in Alabama, Louisiana and Mississippi, SBA Administrator Hector V. Barreto voiced the SBA’s commitment to help small businesses recover from the destruction caused by Katrina.
"Our hearts go out to the victims of Hurricane Katrina. The U.S. Small Business Administration is ready to assist those hurt by this powerful storm. As a result of President Bush’s declaration of a federal disaster we will be swift in our efforts, along with our partners at the Federal Emergency Management Agency, to help people rebuild their lives. SBA officials will be in the affected cities and communities very soon to begin offering our assistance."
"SBA has always had a strong commitment to disaster victims. To show our continued commitment to hurricane victims, SBA will have loan officers in every federal/state disaster recovery center that is opened. SBA is also prepared to provide help in other states in the eastern half of the country where this powerful storm may also lead to disaster area declarations. We’ve been there before, and we’re ready to provide recovery aid again," Barreto said.
The SBA web site (http://www.sba.gov/disaster_recov/) provides more information on how to get help. Their web site also provides advice on what to do before a natural disaster hits.
FEMA -- This federal agency reports directly to the president and coordinates the efforts of other federal agencies in a number of emergency management related activities. In addition to providing disaster assistance information, the FEMA web site (www.fema.gov) provides useful contact information and links to help you deal with disasters before and after they happen.
IRS -- Although we cover this topic extensively elsewhere, it bears repeating that the IRS is designed to sometimes give back, not just always take, your money. Of course, the IRS doesn't do this out of the goodness of its heart, assuming it has one. Instead, Congress has passed a number of amendments to the tax code that provide breaks to disaster victims.
An important example is the tax election that allows a taxpayer in a presidentially declared disaster area to claim disaster losses in the tax year before the year of loss. This allows some quick relief by recognizing the losses earlier rather than later.
In addition, the IRS recently announced that taxpayers in the presidentially declared disaster areas struck by Hurricane Katrina will receive special relief in the form of additional time for completing certain tax-related acts. Taxpayers in the designated areas will have until October 31, 2005, to file tax returns and submit tax payments. This relief extends the normal September 15th due date for payment of estimated taxes and filing of calendar-year corporate returns with automatic extensions. The IRS will abate the late filing or late payment penalties that would otherwise apply. In addition, the Federal Tax Deposit (FTD) penalty waiver period for employment and excise tax deposits will be August 29-September 23, 2005. Taxpayers should mark the Disaster Designation, "Hurricane Katrina," in red on relief-related forms.
The disaster areas designated for individual relief include the 31 Louisiana parishes of Acadia, Ascension, Assumption, Calcasieu, Cameron, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Pointe Coupee, Plaquemines, St. Bernard, St. Charles, St. Helena, St. James, St. John, St. Mary, St. Martin, St. Tammany, Tangipahoa, Terrebonne, Vermilion, Washington, West Baton Rouge and West Feliciana; the 15 Mississippi counties of Amite, Forrest, George, Greene, Hancock, Harrison, Jackson, Lamar, Marion, Pearl River, Perry, Pike, Stone, Walthall and Wilkinson; and the three Alabama counties of Baldwin, Mobile and Washington.
So if you are a small business owner (or any person) located along the Gulf Coast, don't lose hope. There are many resources available to help you put the pieces of your life and business back together again. The only thing that you need supply is the willingness and determination to try.
Added to the news on September 2, 2005.
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