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Disaster Recovery for Small Business

Disaster Relief

This article explains the help available for small businesses after a disaster.

Small businesses might need help getting back on track when a disaster happens in Texas. This can be hard because they may still have responsibilities to vendors, customers, and suppliers. Talk to your insurance company and landlord if a disaster affects your business. You can also apply for loans and grants from agencies like the Small Business Administration and the Federal Emergency Management Agency.

Business Property Insurance

If you have casualty insurance on property and equipment used in
your business, contact your insurance company or agent as soon as possible to notify them of losses to your covered business property. Photograph or videotape the damage to your business and space where it operates and damage to your records, inventory, equipment, and any other loss.

Commercial Lease

In writing, notify the landlord as soon as possible if your leased property is damaged and your business shuts down due to a disaster. Review your lease to determine whether it terminates or if there is a provision for rent reduction during a business interruption. If your lease doesn’t provide for a temporary rent reduction, try negotiating with your landlord.

Contractual Obligations

As a small business owner, you may have ongoing business obligations to vendors,
suppliers, and customers while your business operations are interrupted. Whether your obligations may be suspended or terminated depends on the terms of the contract between you and those with whom you do business. Start by reviewing the contract.

Federal Income Tax

Business owners who suffer damage or loss to their property or business due to a natural
disaster are eligible for special federal income tax provisions. These provisions fall into two categories: casualty loss deductions and deferral of casualty gains. The IRS has workbooks for businesses (Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook) to help you compile a list of your business equipment and prove the market value of items for insurance and casualty loss claims. See Disaster Assistance and Emergency Relief for Individuals and Businesses by the IRS.

Employee Pay and Health Benefits

Texas employees must receive their regularly scheduled paychecks. If the business closes and an employee is involuntarily terminated or laid off, they must receive their last paycheck within six days of the termination or layoff. A business shutdown may trigger the cancellation of employee group health insurance coverage. Employers must send notices to former employees advising them of their right to health insurance conversion under a federal law known as “COBRA.”

Federal Disaster Unemployment Assistance (DUA)

DUA is a federal program that provides financial help to those who become unemployed due to a federally declared disaster.

DUA covers the self-employed, including small business owners, owners of farms and ranches, and others not eligible for unemployment insurance. You must apply within 30 days of the date of the disaster declaration. DUA is available for up to 26 weeks. You have the right to appeal the denial of benefits. Apply at Disaster Unemployment Assistance.

You must prove self-employment by providing:

  1. Federal income tax form 1040,
  2. Schedule C, F, or SE federal income tax returns for the most recent tax year, and
  3. Proof of the existence of the business.

SBA Loan Abatement

Existing SBA loan payments are automatically abated for one year if the business is in
the declared disaster zones. You will get a notice directly from the lender. If your business is in a county adjacent to a declared disaster zone, apply for a nine-month abatement.

Federal Emergency Management Agency (FEMA)

Following a federal disaster declaration, business owners and residents in the affected areas can begin the disaster application process by registering online with FEMA at or calling 800-621-FEMA (3362). Register with FEMA before applying with Small Business Administration (SBA). Short deadlines apply to both FEMA and SBA.

Disaster Assistance from the Small Business Administration

If you are affected by a federally-declared disaster, you may be eligible for disaster assistance from the SBA. For information and applications for SBA assistance, go to Disaster Loan Assistance. Farmers and ranchers with disaster-related losses may be eligible for assistance from the U.S. Department of Agriculture Disaster Assistance Programs.


If your business is failing as a result of disaster, business bankruptcy is one alternative. Whether bankruptcy is the right choice depends on many factors, including whether you or others may also be personally liable for business debts. Talk to a lawyer for advice on whether business bankruptcy is right for you.

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