Small businesses should re-evaluate business plans before reopening
Sept. 10, 2017 at 10 p.m.
Updated Sept. 11, 2017 at 6 a.m.
Business owners who sustained substantial loss from Hurricane Harvey should treat reopening their business like starting up for the first time.
Whether the business owner gets funds through the Small Business Administration, a bank loan or their savings, reopening will take planning and capital. Lack of these is the reason behind the majority of small businesses that fail, said Joe Humphreys, University of Houston-Victoria Small Business Development Center executive director.
"It's like starting all over again," he said. "They may not have the same employees. They may change product lines and may change location."
If a business reopens six months after they closed, their customer base has gone elsewhere, Humphreys said.
Owners should create a plan and revisit their business model to make sure it still works in the new environment they'll be opening in.
"Your market could change because of the storm," he said. "The people you're used to doing business with may not be there either."
Business owners need to look at all facets of their business plan including finance, marketing and management, Humphreys said.
"How many of your employees will you lose and keep?" he said. "The marketing - who are you going to be selling to?"
For example, if a restaurant shuts down, people used to eating there will find other places to go.
"They've got to earn that customer back," he said.
The SBDC is partnering with the SBA to help business owners through the process of applying for a SBA disaster loan.
"A business owner, if they don't know how to put together their profit losses or balance sheets, we'll help them put that together so they have something to take to the SBA," he said.
Any business owners needing to be advised can also visit the SBDC for free consultation.
When a business owner applies for Federal Emergency Management Agency assistance, there will be a section for the SBA. FEMA does not provide financial assistance to businesses, but all home and business owners are eligible to apply for an SBA disaster loan in a disaster declared county.
After someone applies, their application is processed at the SBA's loan center in Dallas and personnel to verify losses will visit the location to document the damages, said John Frederick, SBA public information officer. Sustained damage determines the amount of the loan. Business owners don't have to accept the loan.
Loan officers will ask for accounts receivable and payable to determine if the business or homeowner will be able to pay back the loan, Frederick said.
The SBA offers three types of loans, including one for business physical damage, one for loss of business capital and one for home damage.
Interest rates for the loans start at 3.305 percent for businesses and 1.75 percent for homeowners and renters, Frederick said. Anyone receiving a loan in Harvey affected areas won't have to make a payment for 11 months, he said.
It's important that homeowners and renters still apply for an SBA loan even if they don't want to accept it, Frederick said, because it's part of the FEMA assistance process.
"If they don't fill out an application they've told the SBA, FEMA and state that they don't need help," he said