Small Business Recovery in the Wake of Katrina What's the outlook for small businesses in the Gulf area now that recovery has begun? There's both good and bad news.

For entrepreneurs hit hard by the devastating aftermath ofHurricane Katrina, there are more dark clouds ahead. For theflexible and creative among them, however, there's the glimmerof a potential silver lining--and the hope of blue skiesbeyond.

The bad news is, damage is total in many areas, running into thetens or even hundreds of billions of dollars--there aredemographics to back up assertions that the scale of HurricaneKatrina's destruction dwarfs any other disaster on record inAmerica. Recovery agencies, and even the SBA, have been swampedwith requests for disaster loans.

The good news is, limits on disaster lending for smallbusinesses may very well be set aside because of the scale of thedisaster. And for some businesses willing and able to stick it outand to think on their feet--and to be generous with the elbowgrease--there may be serendipitous opportunities.

Michael Lampton is a public information officer for theSBA's Disaster Assistance division in Fort Worth, Texas, whichprocesses federal, low-interest disaster loans for businesses withfewer than 500 employees. According to Lampton, the first step forsmall-business owners seeking SBA disaster recovery loans is tocontact the Federal Emergency Management Agency (FEMA) throughits website or at(800) 621-3362, the same number given to all the Katrina evacuees.Intake staff at FEMA handle the SBA disaster center's triage,making referrals by FEMA case number from one central source.

By close of business Thursday, the SBA disaster loan processingcenter had received 52,329 referrals from the Louisiana area alone,a figure representing roughly half the number of all smallbusinesses in the New Orleans area. "They're callingwanting to know how they can access our services," saysLampton. "We've been inundated."

SBA spokesperson Mike Stamler says that according to the 2002U.S. Business Census, the annual payroll for small businesses inthe most stricken metropolitan statistical areas of Biloxi,Mississippi, Mobile, Alabama, and New Orleans exceeded $11.7billion. And that's just payroll alone, a figure thatdoesn't begin to take in tangibles like facilities, inventory,machinery and equipment.

Exact numbers of those affected will take some time todetermine, but demographics dictate that small businesses in themetropolitan statistical areas mentioned above were decimated byHurricane Katrina. On average, in the affected areas, about 75percent of the small businesses were non-employer firms, such assole proprietorships. Of the remaining small businesses, about 80percent of them had fewer than 20 employees.

In Biloxi, Mississippi, according to the 2002 census, smallbusinesses employed a total of 54,029 people. In Mobile, Alabama,107,586 people worked at small businesses. And in New Orleans,there were 80,311 non-employer firms and 25,107 firms with 500 orfewer employees. Of those businesses, 21,565 had fewer than 20employees. A total of 273,651 New Orleans-area residents worked forsmall businesses, generating a total annual small-business payrollof $7.75 billion in the Big Easy alone.

Among the stories of businesses reduced to wires and rubble andwhole industries snuffed out, tales of entrepreneurial miracleshave emerged in news reports, including researchers whose vitalsamples were somehow saved and resilient employers who had oneemployee willing to open their unflooded home to displaced fellowstaffers so the company could stay in business.

What's Next?

Unfortunately, in many areas, total evacuation meant totalshutdown for businesses both large and small. And while engineersponder the safety and practicality of rebuilding much of NewOrleans, entrepreneurs are huddled in distant shelters, wrestlingwith the big questions.

To relocate or not to relocate? Would my business flourishsomewhere else? Should I rebuild my business? Can I improve on itand do it smarter? Even if my employees return to the area, will myclients come back? Could this happen to me again? And mostpressing, perhaps: Will the government lend me money to help mewith those answers?

Getting a clear reply to that last question could take longerthan usual, says the SBA's Lampton.

After assessing the damage and receiving related paperwork,decisions are generally available within seven to 16 days. In thecase of lost documentation, it's possible to fall back onthings like tax returns from the IRS. However, other informationsources usually called upon in the loan process may simply beunavailable for affected businesses. In the case of such a severedisaster as the flooding in the wake of Hurricane Katrina, Lamptonsays. "We're going to run into things that don'tusually impede the process."

As of Friday, the SBA's loan processing center in ForthWorth, Texas, was gearing up for the massive task of preparing tolend. They'll be hiring between 400 and 700 employees to tripleor even quadruple the existing staff of 240 and speed up theprocess. But, as Lampton says, "It's so early--theyhaven't been able to get in to any damage assessmentyet."

In most disaster-lending situations, the agency can loan smallbusinesses up to $1.5 million. However, that sum can be waived inparticularly widespread disaster situations. After the September11, 2001, terrorist attack in New York, for example, the agencyreceived the legislative go-ahead to increase the lending limit to$10 million. By the end of last week, a similar move was expectedin the wake of Katrina, with loan ceilings expected by some to goeven higher.

Lampton's worked for the SBA's disaster loan divisionfor 13 years and has seen many disasters come and go--earthquakes,the four hurricanes in Florida last year and the attacks on theWorld Trade Center. But it never gets any easier, he says. "Itdoesn't matter what type of crisis it is," says Lampton."If they've lost it all, they've lost it. You feel forpeople, and you never become immune to it.

Thinking Ahead

While entrepreneurs mull their fates after the ravages ofKatrina and the SBA seeks to measure the economic losses, there arefans rooting for can-do American entrepreneurship at places likethe Caruth Institute for Entrepreneurship at Southern MethodistUniversity's Cox School of Business in Dallas.

Jerry F. White is the director of the Caruth Center. He sees theopportunities that started springing up with the first boat rentallast week as damage assessment and clean-up efforts got underway.In the face of a tragedy of such immense proportion, he'scareful to preface discussion of entrepreneurial opportunity withsympathy for the victims of Katrina's wrath. Nationwide, thatsame sympathy will be a saving grace for desperate entrepreneurs inthe affected area, he says.

Just determining to stick it out may turn the status quo on itsear--and earn a fledgling enterprise a fresh look from potentialclients, White says. "In the short run, everyone is going tohave phenomenal sympathy for you. People will buy from you justfrom admiration," says White. "You can tell them yourequipment is more modern, your people are better and [ask them fortheir business.]--it's compelling. If you take the opportunityto do good work and to get a good reputation in the massiverebuilding phase, you're going to have some satisfied newcustomers who didn't even know you existed two years ago.

"It's not about exploiting people; it's aboutjumping in and helping solve their problems," adds White."America is a very resilient place, and in times ofdestruction, entrepreneurs rise up and solve people's problemscheaper, faster and better than ever before. You'll have humantragedies where dreams are destroyed, but then you'll haveother situations where people have dreamed of helping people andbuilding a business, and those dreams will be fulfilled.There's an adage in Entrepreneurland that change producesopportunity. Entrepreneurs are opportunity-driven."

When Hurricane Katrina turned the Gulf Coast upside down andinside out, it changed the economic landscape, too, White says."Some who were minor competitors or didn't exist beforemay rise up and become very, very substantial players. On the otherhand, some competitors may decline or may not survive. The effortto rebuild is going to create a tremendous demand that has to besatisfied."

Think construction boom of a sweeping nature, White says. Onceit's been determined which areas can be rebuilt and restored tolivability, there'll be stores that have to be rebuilt,businesses that have to be rebuilt, homes that have to be rebuiltand filled with furnishings and appliances. Everything that wasinside hundreds of thousands of homes will have to be replaced.Pipes will be plumbed, and someday, sod will have to be laid. Thefleet of an estimated 250,000 cars lost to flooding will need to bereplaced.

And it's not like a Third World situation, where there arehardly any funds to do the rebuilding and replacing, White notes.There'll be insurance payments, government funding throughFEMA, small-business loans and individual savings--and the rebuiltbusinesses may well have modernizations that will suit their ownersvery well.

For the plucky entrepreneur, there may be chinks in the armor ofthe competition. Small business can sometimes make decisionsfaster, take a different tack on shorter notice, be more flexible.It could be a good time for the competent entrepreneur withauthentic skills to make a push for new business, White says:"Those who come to the table with viable people and goodproposals will get a hearing.

"The biggest opportunities are due to disruption ofcompetition," claims White. "There'll be a plethoraof smaller, newer companies that will rise up and take advantage ofthe opportunities if they are flexible, creative anddynamic."

Jackie Larson is a freelance writer in Ennis, Texas. She canbe reached at jk_larson@hotmail.com.