Experts expect the number of new applications for unemployment benefits and federal disaster loans to increase dramatically in coming days and weeks. The jobless rate in the states ravaged by Hurricane Katrina are expected to spike to 25 percent or higher the Associated Press reports. The Small Business Administration (SBA) expects many small business owner, especially those without insurance or whose insurance will not cover all the damage to turn the federal government for help getting their companies running again.
“There’s no question that the recovery is going to be much longer and more painful for the 28 percent of the local population in the New Orleans area living below the poverty line,” Liz Ann Sonders, chief investment strategist at Charles Schwab told the Associated Press. “It’s going to be much harder for the local economy to recover in the absence of resources and insurance.”
Although it is too soon to know how many people will be left without jobs, current estimates range between 500,000 and 1 million in an area where poverty rates and unemployment already surpass the national average. In an effort to reduce the number of jobs lost, the Department of Labor created 10,000 temporary clean-up and recovery jobs in Mississippi with the announcement of a $50 million emergency grant.
Along with individuals, small businesses face the most precarious future. Many won’t reopen. For those who will try to continue operations or rebuild, the SBA offers two kinds of loans to business owners in federally declared disaster areas.
The first type of loan offered by the SBA is the physical disaster loan, which provides businesses of any size funds for repairing of replacing equipment, fixtures and inventory. Under this program businesses without insurance or suffering damage exceeding their insurance coverage can receive loans of up to $1.5 million.
The second type of loan is the economic injury disaster loan, which provides small businesses funds to help them survive the economic effects of disaster even if the business did not sustain any physical damage. Economic disaster loans of up to $1.5 million are available to those businesses that have suffered a substantial economic injury.
Small businesses may apply for both types of loans, however the aggregate loan amount is limited to $1.5 million. Interest on both type of loans is capped at 4 percent annually. Loan terms are determined individually on each case and can be up to 30 years. Businesses interested in applying for disaster loans should first register with the Federal Emergency Management Agency (FEMA) online or by calling 1-800-621-FEMA.
Accountants can assist clients affected by disaster by:
- Reconstructing lists of property damaged or lost using past tax returns.
- Calculating lost income, including operating expenses not incurred, projected net income, actual income earned and extraordinary expense for insurance purposes.
- Defending their calculations of lost income and property to insurance adjusters.
The American Institute of Certified Public Accountants (AICPA) has assembled a variety of links to help businesses and individuals begin the process of recovering from Hurricane Katrina and other natural disasters online at the Disaster Recovery and Business Continuity Web Site Links.
Note: Accountants and firms able to assist accountants with temporary office space, technology support or employment can contact the Mississippi Society of CPAs. No information on needs of accountants in Louisiana was available at press time. AccountingWEB will continue to provide updates as they become available.