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STRATEGY

For Companies Hit by Katrina, Many Challenges Remain

Half of New Orleans business owners say recovery efforts are making little or no progress.
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A full year after Hurricane Katrina, most small businesses in New Orleans are still struggling to get back on their feet, according to a new study.

While the number of businesses that have reopened in Orleans Parish is up 12% since December 2005, the number that have disconnected their phones is also up 12% -- a likely sign that those businesses have closed.

Of more than 1,400 business owners surveyed in June, 50% described recovery efforts as making "little or no progress," according to the study released earlier this month by researchers at Louisiana State University and Tulane University.

Those surveyed continue to cite a lack of basic utilities and communications as the biggest obstacles they face -- on top of dealing with property damage, lengthy insurance assessments, and a dearth of both employees and customers.

Across the region, as many as 125,000 small and midsize businesses were disrupted by the storm, according to the U.S. Chamber of Commerce.

Nina Lam, an LSU environmental studies professor who conducted the study, said the results showed business owners were still deciding whether or not they should reopen in the area.

In the 12 months since the storm slammed into the Gulf Coast on Aug. 29, 2005, about 27% of local businesses had disconnected their phones, while another 30% were "still looking at what is going on," Lam said.

To date, the Small Business Administration has approved 22,780 low-interest disaster loans worth more than $2.5 billion for local small businesses, with just 743 loan application left to process, according to Carol Chastang of the SBA's Office of Disaster Assistance.

Yet, only about 13,234 of those loans, worth some $518 million, have been converted into cash by owners, Chastang said.

Echoing the LSU and Tulane researchers, Chastang said many owners aren't cashing in their loans because they're having second thoughts about staying in the region.

In total, the federal government has provided more than $110 billion in resources to the Gulf Coast region, including funding for relocation, rental assistance, housing, and infrastructure repair, according to the White House.

On Tuesday, President Bush toured parts of Mississippi hit by the storm. He is expected to visit New Orleans on Wednesday to mark the one-year anniversary, making it the president's 13th official visit the area since September 2005.
 
Bush, who faced sharp criticism for his initial response to the storm, sought to downplay the anniversary during a White House press conference last week, noting that a "one-year anniversary is just that, because it's going to require a long time to help these people rebuild."

With the anniversary approaching, Democrats have seized the opportunity to renew criticism of the Bush administration's response and recovery efforts thus far. Sen. John Kerry (D-Mass.), the top Democrat on the Senate Committee on Small Business and Entrepreneurship, called Bush's remarks last week "indicative of this administration's approach to the disaster response from day one."

"We've got the money and the brains in this country to get the Gulf Coast back on its feet and it's inexcusable that President Bush hasn't brought the right people together to make it happen," Kerry said in a statement.

For Laura Drumm, a spokeswoman for Second Wind, a coalition of local business owners based in New Orleans, the availability of short-term, low-interest federal loans isn't the problem.

"Most of us are ready for business, but we don't have any customers," said Drumm, who also owns and operates the Tabasco Country Store. She said the government needs to provide long-term grants to keep businesses viable until employees, residents, and tourists return. "We're suffering from a broader economic loss now."

In New Orleans alone, only about half of the roughly 450,000 residents who lived in the city before the storm have since returned, according to city officials.

To lure people back, most of the public funding is being channeled into housing, letting small-business owners --  the region's biggest employers -- fend for themselves, Drumm said. Without jobs, she added, residents will not return.

"Small businesses were hit hardest by the storm," Drumm said, "and they need to play a much larger role in the recovery process."

Last updated: Aug 28, 2006




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