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Small businesses want grants to aid Sandy recovery

Published on NewsOK Modified: December 5, 2012 at 6:09 pm •  Published: December 5, 2012

"We're back to square one," Mullin says. "When you build a store, it takes you almost 15 years to pay off the debt on it."

As reluctant as small businesses may be about taking out debt to pay for their recovery, loans aren't always desirable for lenders either.

Loans aren't a good option for businesses with an uncertain future — especially those that serve neighborhoods where scores of homes were destroyed. It's not always certain how they'd make the money to pay back the loans.

"These are businesses that live hand to mouth and the loss of their inventory and facilities and also their customers in the area they serve is devastating," says Kathryn Wylde, president of the Partnership for New York City, an economic development organization which contributed $500,000 to the pool of grants in the city. "There's no way to loan them money till you figure out where they're going to be and where their customers are going to come from."

Loans are problematic for other reasons. SBA loans are intended to cover uninsured losses. But many companies decimated by Sandy still don't know the extent of their losses, and how much will be covered by insurance.



Loan money tends to be more readily available than grants. Investors are willing to back loans because they expect to get their money back. But grants are generally given with no expectation of repayment. Some of the grant money currently available for small business to help recover from Sandy came from grants given after the Sept. 11 terror attacks and that companies decided on their own to repay, Wylde says.

Another reason government grants are hard to come by is the fact that lawmakers would have to approve them — something they may be reluctant to do when budgets are already strained.

Making small business depend on loans is a mistake, says Jeffrey Robinson, a professor of entrepreneurship at Rutgers University in New Jersey.

"A loan is not going to be good for a business that's already deeply in debt," Robinson says. "A loan is not going to be good for a startup or for someone who has been in business for the last year or two — having a loan at that stage, you probably already have some loans, and so that may not be a good move for them."

He says a widely held belief that market forces should determine which companies succeed or fail is a primary factor behind the emphasis on loans rather than grants. That's wrong, given the dire straits many businesses are in after Sandy, Robinson, says.

"The market has already been significantly altered by a catastrophic event that can allow the economic spiral downward to continue," he says. "You're going to be in a worse situation than in the beginning."

Another danger: Small businesses that can't operate because they have no cash coming in are at risk of collapsing — sending workers to the unemployment line and weakening the economy, Robinson says. "The state should chip in at some point for the very reason that (small business) is a huge tax revenue producer."

Some public officials including the speaker of New York's state Assembly, Sheldon Silver, also believe there should be more grants.

"So many (small businesses) were hit so hard by Hurricane Sandy and are facing enormous costs due to damage," Silver says. "In partnership with local business organizations, I have been calling for support including disaster recovery grants, for our small businesses."

But the fact that grants are scarce now doesn't mean they won't be available in the future. It has taken months, even years, for grant money to be found and distributed after past disasters. In March 2003 — a year and a half after the Sept. 11 attacks — grants were still being given to small businesses. More than half a billion dollars in grants were approved in the post 9/11 effort.

It can take time for officials to realize how great the need is. Grant money helped save small businesses in New Orleans after Hurricane Katrina in 2005 although then-Louisiana Gov. Kathleen Blanco didn't launch the Business Recovery Grant & Loan Program until January 2007.

"They were able to save a bunch of businesses ... they realized they had a lot to lose if they didn't get it right," Robinson says.

Raising money for grants can be a painstaking process, as chamber of commerce officials in Westerly, R.I., are finding after Sandy. Of the 41 businesses on Misquamicut Beach in Westerly, between 30 and 35 have had devastating losses, says Lisa Konicki, the executive director of the Greater Westerly-Pawcatuck Area Chamber of Commerce. The chamber has sponsored or publicized a series of events like dinners, concerts and T-shirt sales to bring in money for grants.

Konicki is hoping to raise between $300,000 and $400,000 by the spring to help these businesses, most of which are closed for the off-season, open in time for the summer.

Misquamicut Beach business owners hit hard by Sandy are grateful for what the chamber of commerce is doing, but they think government officials need to do more.

"I feel like they really don't know what they're doing," says Sally Sorenson, whose family restaurant, the Windjammer Surf Bar, lost parts of its roof and had collapsed walls and other damage. "It's been such a long time since we've had a disaster of this magnitude that they are really chasing their tails."