Access to Capital
Post-Disaster Capital Access for Small Businesses in Los Angeles
By the Los Angeles Economic Development Corporation (LAEDC)
INTRODUCTION: CAPITAL AS YOUR BUSINESS LIFELINE AFTER DISASTER
Disasters strike without warning, often halting operations overnight and creating an immediate financial crisis.Small businesses are especially vulnerable during these moments, with fixed expenses such as rent and payroll continuing, while revenue declines. This pressure can wipe out years of effort in weeks, turning recovery into a race against time and leaving many at risk of permanent closure. This article offers guidance for small businesses seeking capital in the aftermath of a disaster.
UNDERSTANDING THE FINANCE LANDSCAPE POST-DISASTER
Key Terms You Should Know:
Financing Options
Traditional Loans are those from traditional banks and entities, and they typically require strong credit, collateral, and an established business history. This makes them difficult for many small businesses to access, particularly those with thin or low credit files, limited history, and/or limited traditional documentation.
Government-backed loans
Federal Government Disaster Loans, such as those offered by the Small Business Administration (SBA), are designed for emergencies, providing low interest rates, longer repayment horizons, and quick support for recovery.
State Government Disaster Loans may launch emergency relief programs, often through their Office of Emergency Services or Small Business Advocates (e.g., CalOSBA in California). These can include bridge loans, grant funds, or sector-specific support in light of a declared disaster.
Local Government Disaster Loans, such as cities and counties, may provide small business emergency grants or loans in light of a declared disaster.
Mission-driven loans, often provided by Community Development Financial Institutions (CDFIs), are designed to advance a social, economic, or environmental mission and frequently serve historically underserved borrowers. Common providers include CDFIs, credit unions, nonprofit loan funds, and community banks.
Grants are funds that do not need to be repaid, oftentimes offered during the immediate disaster crisis through local government, non-profit, or banking entities
- Pro–tip: Following a disaster, emergency grants are often launched by county or city governments, nonprofits, state agencies, and occasionally by private foundations or corporations. These funds are designed to move quickly and help small businesses cover urgent costs, such as rent, payroll, or restocking.
- Remember: They are time-sensitive so apply fast!
Forgivable Loans are loans that can be waived if certain conditions are met, essentially turning into a grant. These are structured like traditional loans, but if requirements such as using funds for pre-approved expenses are met, repayment may be fully or partially forgiven. Small businesses may see more of these programs after disasters, as they are designed to provide rapid relief while ensuring that funds are directed directly to recovery needs.
- Example: Similar to a small business forgiveness grant, the Public Service Loan Forgiveness (PSLF) program is another example of a forgivable loan. It is not for businesses, but it functions by forgiving a borrower’s remaining student loan debt after they meet specific conditions, such as working in a qualifying public service job for 10 years.
- Pro-Tip: Always check the specific forgiveness requirements and deadlines – missing documentation or misusing funds could turn a forgivable loan into standard debt.
Predatory Lenders target businesses in crisis with fast cash, hidden fees, and sky-high interest rates. Stick with trusted sources, such as government, non-profit, traditional banking, or CDFIs, for safe funding.
- Verify trusted lenders on the Venturize platform, which vets and lists small business-friendly options.
- Visit https://venturize.org/
- CAUTION: Always remember to avoid lenders who rush you, skip paperwork, or lack transparency.
Trusted and Reliable Small Business Support Organizations
Community Development Financial Institutions (CDFIs) are local, mission-driven lenders that help underserved small businesses, especially those that may not be served by traditional banks. After disasters, they offer flexible loans with a more personal, supportive approach.
- CDFI Finder Tool: To find your local CDFI lender, visit ofn.org/cdfi-locator
Business Support Organizations (such as LAEDC, SBDCs, SCORE, or chambers of commerce) are groups that provide hands-on support to help small businesses navigate financing options, prepare loans or grant applications, and connect with trusted lenders. Most of the time, these services are government or non-profit backed and offered at no cost to the business owner.
LAEDC Business Assistance Program (BAP): Provides free guidance to advise on individual business needs, including capital access questions.
- Key Resource: LAEDC Recovery Help
When it is safe to do so, take these critical steps right away. These actions will lay the groundwork for insurance claims, disaster loan applications, and other forms of aid.
Document All Damage Comprehensively
Photograph and Video Everything: Before any cleanup or repairs, thoroughly document all damage. Take clear, wide-angle shots and close-ups of damaged property, equipment, inventory, and furniture.
o Document effectively: Conduct a Video Walkthrough. A narrated video is highly recommended to capture the full scope and context of the loss, which is extremely useful for insurance adjusters and loan officers.
Register with Key Agencies Immediately
- FEMA: Register at DisasterAssistance.gov. This is often a mandatory first step to unlock access to other federal programs, including SBA loans.
- SBA: Start your application immediately at the SBA Disaster Loan Assistance portal. Applying early places, you in the system; there is no cost or obligation to accept a loan.
- State Agencies: Register with your state's emergency management office, such as CalOSBA in California, to access state-specific relief programs and grants.
Initiate the Insurance Process
- File Your Insurance Claim: Contact your insurance provider immediately and begin the claim process.
Keep copies of all communications, including the claim filing, adjuster’s notes, and your settlement or denial letter for your loan application. Funders need to know what insurance will cover before they can consider funding the remaining costs. File a claim and save copies of all communications.
- Create a Damaged Inventory List: Make a detailed, itemized list of all lost or damaged items. Include items such as inventory, supplies, computers, machinery, equipment, furniture, and fixtures. If possible, add the estimated value, purchase date, and original cost. This list supports both insurance claims and funder documentation and underwriting (for potential loans).
Far far away, behind the word mountains, far from the countries Vokalia and Consonantia, there live the blind texts. Separated they live in Bookmarksgrove right at the coast
Far far away, behind the word mountains, far from the countries Vokalia and Consonantia, there live the blind texts. Separated they live in Bookmarksgrove right at the coast