Federal Reserve Sandy Report

Superstorm Sandy: Update from Businesses in Affected Areas
Federal Reserve Bank of New York
As part of our ongoing efforts to understand the concerns of communities in our region, the New York Feds Outreach Team recently reached out to businesses in areas affected by Superstorm Sandy. We asked them about the storms impact and progress with their recovery efforts. In total, we heard from 950 firms located in FEMA-declared disaster areas in New Jersey, New York City, the Hudson Valley, and coastal counties in Connecticut. Of these firms, 40 percent reported being financially affected by the storm, either positively or negatively. The key takeaways for the affected firms include: About a third of the affected firms incurred financial losses. Half of the firms covered storm-related financing needs with personal resources while others increased debt levels. A third of the affected firms had no insurance, and only a few had business disruption or
flood insurance.
One year later, 9 in 10 of the affected firms report persisting financing needs, mostly of $100k or less, to cover operating expenses or to reposition their business.
Firm responses were collected online between October 10, 2013 and December 31, 2013. Please note that these results likely underrepresent the storms impact and cannot be said to be statistically representative since the experiences of firms that were closed as a result of the storm could not be captured.
Outline of the presentation that follows: 1. Overview: map and proportion of firms affected by Sandy 2. Characteristics of surveyed firms in the disaster areas: how are they performing and what are their credit needs 3. Focus on firms reporting financial losses 4. Focus on firms reporting financial gains
Acknowledgements The New York Feds Outreach Team acknowledges and thanks the Wharton Risk Management and Decision Processes Center of the University of Pennsylvania for their help in developing the Superstorm Sandy questionnaire.
FIRMS IN COUNTIES AFFECTED BY SUPERSTORM SANDY, 1 YEAR LATER

Was your business financially affected by Superstorm Sandy?
NY CT
8%
Net financial gain
59%
Not affected
33%
Net financial losses
NJ
950
et financial loss N
respondents located in FEMA-declared disaster areas
et financial gain N
ot affected N
N = 843
* Results should not be interpreted as a statistical representation of small businesses in FEMA-declared disaster areas. Rather, they should be viewed as suggestive and analyzed with awareness of potential methodological biases.
FRBNY Superstorm Sandy: Update from Businesses in Affected Areas | April 2014
HOW ARE FIRMS PERFORMING?1 YEAR LATER

PROFITABILITY, % OF FIRMS KEY BUSINESS CHALLENGES, % OF FIRMS CHANGE IN EMPLOYEES, % OF FIRMS
36%
Operating at a profit
39% 25%
Breaking even
58%
47%
rising costs
57%
uneven cash flow
Operating at a loss
21%
22%
43%
N = 898
credit availability
Decreased
Unchanged
Increased
N = 915
N = 853
WHAT ARE FIRMS CREDIT NEEDS?1 YEAR LATER

CREDIT BEHAVIOR, % OF FIRMS REASON FOR SEEKING CREDIT, % OF FIRMS
Sufficient
47%
19%
23%
16%
Discouraged
Approved
Expand business
N = 285
15%
Day-to-day operations Capital Investments
17%
65%
17%
Did not apply
34%
Applied
18%
Not approved
AMOUNT OF CREDIT SOUGHT, % OF FIRMS
Debt Averse
25%
29%
33%
12%
Other
Less than $25,000
N = 285
13%
$25,001 $100,000 $100,000$500,000 Greater than $500,000
N = 950
FIRMS REPORTING LOSSES: IMMEDIATE AFTERMATH
33% of firms reported net financial losses
SIZE OF LOSSES, % OF FIRMS
1 in 2
used personal resources to meet immediate needs
2 in 5
44% 34% 22%

Less than $25,000
N = 272
increased debt levels to meet financing needs
$25,001 $100,000
Greater than $100,000
SOURCE OF LOSSES, % OF FIRMS
FINANCING NEEDS, % OF FIRMS
59% 43% 29% 34% 23% 11%

Decreased customer demand/customer evacuation
N = 273
10%
Repositioning business to meet changing customer demand
9%
Emergency one time investment No need
Utility or service disruption
Damage to/loss of assets
Meeting operating expenses

N = 270
Making capital investments
FIRMS REPORTING LOSSES: INSURANCE COVERAGE

INSURANCE HELD AT TIME OF STORM,% OF FIRMS LOSSES RECOVERED THROUGH INSURANCE, % OF FIRMS
Property insurance
54%
None
65%
Business disruption insurance
30%
Some
14%
73% 11%
had property insurance

12%
Most
Flood insurance
7%
had flood insurance
41%
Other type of insurance
10%
All
2%
had business disruption insurance
No insurance
29%
Business did not suffer any losses
13%
N = 273
N = 198
FIRMS REPORTING LOSSES: 1 YEAR LATER
44% 47%
applied for credit in the first half of 2013, and
86% 39%
report still needing financing, and
were approved
plan to apply for credit in the first half of 2014
FINANCING AMOUNT, % OF FIRMS
43% 26% 31%
41% 30% 26% 16% 8%

Other No need
31%
Less than $25,000

N = 143
$25,001 $100,000

N = 143
Making risk reduction investments
FIRMS REPORTING GAINS: IMMEDIATE AFTERMATH
8% of firms reported net financial gains
1 in 4
firms was in construction sector
2 in 3
saw revenues increase as a result of the storm
2 in 5
addressed immediate needs through business earnings
SIZE OF GAINS, % OF FIRMS
38%
34%
41% 28% 29% 14% 5%

Emergency one time investment
3%
Repositioning business to meet changing customer demand No need
Less than $25,000

N = 61
$25,001 $100,000

N = 63
Temporarily expanding business
FIRMS REPORTING GAINS: 1 YEAR LATER
28% 44%
applied for credit in the first half of 2013, and
92% 45%
report still needing financing, and
were approved
plan to apply for credit in the first half of 2014
FINANCING AMOUNT, % OF FIRMS
17%
46%
37%
35%
32%
30%
35% 24% 11%
Less than $25,000

N = 24
$25,001 $100,000

N = 37
Making risk reduction investments
Other
No need

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Federal Reserve Sandy Report

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Superstorm Sandy: Update from Businesses in Affected Areas

Federal Reserve Bank of New York

FIRMS IN COUNTIES AFFECTED BY SUPERSTORM SANDY, 1 YEAR LATER

Net financial gain

Net financial losses

respondents located in FEMA-declared disaster areas

HOW ARE FIRMS PERFORMING?1 YEAR LATER

uneven cash flow

WHAT ARE FIRMS CREDIT NEEDS?1 YEAR LATER

Did not apply

AMOUNT OF CREDIT SOUGHT, % OF FIRMS

FIRMS REPORTING LOSSES: IMMEDIATE AFTERMATH

33% of firms reported net financial losses

SIZE OF LOSSES, % OF FIRMS

used personal resources to meet immediate needs

44% 34% 22%

increased debt levels to meet financing needs

Greater than $100,000

SOURCE OF LOSSES, % OF FIRMS

FINANCING NEEDS, % OF FIRMS

59% 43% 29% 34% 23% 11%

Utility or service disruption

Damage to/loss of assets

Meeting operating expenses

Making capital investments

FIRMS REPORTING LOSSES: INSURANCE COVERAGE

Business disruption insurance

had property insurance

had flood insurance

had business disruption insurance

Business did not suffer any losses

FIRMS REPORTING LOSSES: 1 YEAR LATER

applied for credit in the first half of 2013, and

report still needing financing, and

plan to apply for credit in the first half of 2014

FINANCING AMOUNT, % OF FIRMS

FINANCING NEEDS, % OF FIRMS

43% 26% 31%

41% 30% 26% 16% 8%

Less than $25,000

Greater than $100,000

Meeting operating expenses

Repositioning business to meet changing customer demand

Making capital investments

Making risk reduction investments

FIRMS REPORTING GAINS: IMMEDIATE AFTERMATH

8% of firms reported net financial gains

firms was in construction sector

saw revenues increase as a result of the storm

addressed immediate needs through business earnings

SIZE OF GAINS, % OF FIRMS

FINANCING NEEDS, % OF FIRMS

41% 28% 29% 14% 5%

Less than $25,000

Greater than $100,000

Meeting operating expenses

Temporarily expanding business

FIRMS REPORTING GAINS: 1 YEAR LATER

applied for credit in the first half of 2013, and

report still needing financing, and

plan to apply for credit in the first half of 2014

FINANCING AMOUNT, % OF FIRMS

FINANCING NEEDS, % OF FIRMS

35% 24% 11%