Skip to main content

Managing Disaster Recovery for Your Small Business

Originally written by Paul Thares, former SDSU Extension Community Vitality Field Specialist.

What do you do when your small business is hit by a disaster such as a flood, tornado, fire or other natural disaster? Many times, with the day to day work of operating a business, we sometimes forget about what we have in our disaster plan. Or perhaps we have neglected to create a disaster plan, hoping that disaster won’t happen to us or our business. If you have been hit by disaster and do not have a disaster plan in place, you are not alone. The Federal Emergency Management Agency (FEMA) estimates that 75% of small businesses to do not have a disaster plan in place.

Unfortunately, according to FEMA, 40-60 percent of small businesses close permanently after a disaster. Among businesses that are closed for at least five days, 90 percent fail within a year. You do not want your business to be one of the casualties of a disaster. There are some things you can do once a natural disaster has struck. In the event of a disaster, be sure that you are your staff are safe. 

Connect to local resources.

In the event of a disaster, know how to contact your county or tribal emergency managers. You can find contact information for emergency managers online. The Red Cross is also another resource for immediate assistance as well as recovery. In South Dakota, we have two Red Cross offices. Find local Facebook groups or pages they may have been set up to coordinate assistance. You might also call 211. In times of disaster, 211 works with the emergency management team to offer support and place for dissemination of information. At this time, 211 is active in the following South Dakota counties: Beadle, Bon Homme, Brookings, Brown, Butte, Clay, Custer, Fall River, Hughes, Lake, Lawrence, Lincoln, McCook, Meade, Minnehaha, Pennington, Stanley, Turner, and Yankton.

Contact your insurance agent.

As soon as you are able, contact your insurance agent. You will want to do this before cleaning damage for an estimate. Many insurance companies do have quick-response teams; however many businesses may not be covered by natural disasters. For example, most standard business insurance policies do not cover flood damage and the loss of income that can result.

Document damaged materials.

If your business cleanup does include removing water-damaged merchandise, flooring, insulation, and additional items, photograph everything before you move it and then keep it all. The damaged materials are evidence that may be needed for any insurance or natural disaster relief purposes.

Notify your lender about your situation.

Proactively call any financial institution where you have credit to them know about your emergency situation. Many times a lending agency will work with you to defer payments and waive fees until your business is back on its feet.

Locate financial assistance. Financial assistance may be available through the Small Business Administration Office of Disaster Assistance. This agency provides low interest disaster loans to businesses of all sizes, to repair or replace real estate, personal property, machinery & equipment, inventory and business assets that have been damaged or destroyed in a declared disaster. SBA’s disaster loans are the primary form of federal assistance for the repair and rebuilding of non-farm, private sector disaster losses. You can find more information on their website.

The United States Department of Agriculture also provides a loan program to help eligible farmers and ranchers rebuild from after suffering losses due to flooding, droughts, and other natural disasters.

You may qualify for assistance through FEMA, but don’t count on FEMA for quick help. Federal aid should become available for businesses in a federally declared disaster area, but that process can move very slowly, especially at a time when many claims are being filed. While FEMA may eventually provide money to rebuild, it may take quite a bit of time. For a business owner, your private insurance or an SBA loan will be your best chance at receiving money fast.

In addition for financial relief for your business, remember that everyone needs a roof over their heads, which means mortgage or rent payments. Take care of your home first because help with that can make or break your business. The Department of Housing and Urban Development, or FHA, in many cases, will delay foreclosure, waive late fees and even allow you to defer mortgage payments. You will also want to contact your mortgage service provider as soon as possible to explain your situation. Often, the lender will be willing to work with you to figure something out, especially in a large-scale event.

Communicate with your customers.

Communicate and let your customers and clients know what’s happening. Share when you expect to be open for business or any modified hours or change in location. Be honest about how the disaster has affected your business and share as much as you can about your plan to deal with your business recovery. Your customers will want to know how you are doing and you want them to know you will be able to serve them in the future.

Create a plan.

Once the dust settles, or the flood waters go away, get that plan created! If you do not have a business disaster response plan in place, now is the time to prepare one. This plan will outline how your business will respond to a disaster and make plans for how to keep filling and tracking orders or what to do if employees can't make it to work as well as many other issues. A good disaster plan means fewer days out of business, better communication with customers and a better settlement from your insurance company. Add it all up and your plan could be the reason your small business beats the odds. Many resources are available to assist you with creating your disaster response plan. These resources are a good place to start:

Please do not put off emergency preparations. It’s human nature to avoid doing something when it doesn’t seem urgent, but you never know when things might go wrong. Below is more information we think may be helpful.

Additional Resources


South Dakota Resources

Business Disaster Information