Does Post-Disaster Recovery Funding Promote Mitigation in Small Businesses?

Sua Kim
University of Utah

Divya Chandrasekhar
University of Utah

Publication Date: 2022


Small businesses play an important role in the local economy, but they are highly vulnerable to disasters and small business owners are the least likely to mitigate against them. Small business recovery programs can break the cycle of vulnerability in small businesses by promoting mitigation before the next disaster. How do small business recovery programs use this opportunity? This study examines small business recovery programs offered after three recent disasters—Hurricane Sandy (2012), Hurricane Matthew (2016), and Hurricane Harvey (2017)—to assess the extent to which they promoted mitigation. Data was collected using archival analysis and in-depth interviews with key program officials in New York, New Jersey, North Carolina, and Texas and analyzed using thematic content analysis techniques. Study results show that small business recovery programs do not typically promote mitigation practices that increase the overall disaster resilience of small businesses. While the importance of mitigation is recognized across the federal, state, and local level agencies, there are also challenges at each level that make pursuing mitigation during recovery difficult. Coordinating across disaster and business support programs in non-disaster times, as well as cross-sectoral partnerships, can provide ways to work around these challenges and build business resilience to the next disaster.

Introduction and Literature Review

According to the U.S. Small Business Administration (SBA), small businesses employ more than half of all Americans and contribute almost twice as many job opportunities to the U.S. economy than larger businesses (Small Business Administration [SBA], 20201). Yet, despite their importance to the local economy, few studies have examined how small businesses fare after disasters or how they recover (Xiao et al., 20182; Xiao and Van Zandt, 20123). Disaster recovery research has given more attention to housing and household recovery (Comerio, 19984; Peacock et al., 20145), community-level recovery (Islam & Walkerden, 20146), and infrastructure development (Peacock et al., 20077; Lee et al., 20078; Matisziw & Murray, 20099) than to the factors and processes that drive small business recovery and promote their disaster resilience. This gap is particularly problematic given that, when compared to large and medium-sized businesses, small businesses tend to be more vulnerable to disasters (Dahlhamer & Tierney, 199810; Runyan, 200611; Sydnor et al., 201712). Small businesses are less prepared to withstand disasters, have less flexible capital flows, and have lower access to disaster resources because of the lack of financial literacy and other capacity issues (Runyan, 2006; Marshall et al., 201513).

The U.S. federal aid system attempts to address some of these issues by offering disaster aid through the Small Business Administration (SBA). However, this assistance is usually provided as a loan, not a grant, which could potentially increase the debt burden of resource-constrained small businesses during times when they can least afford it, such as after a devastating loss due to disaster (Davlasheridze & Geylani, 201714). Paperwork requirements in the form of credit histories or repayment ability add to the hassle and act as further barriers to business participation in small business recovery programs (Bartik et al., 202015; Tierney, 200716). Despite these challenges, small business recovery programs fill an important resource gap for small businesses recovering from disaster damage (Watson, 202117). They also have the potential to help small businesses become more resilient to disasters in the long term, although it’s not clear to what extent.

Post-disaster recovery can be an opportunity to consider improvements that reduce or mitigate against the impacts of future events. Research shows that businesses are more mitigation-minded immediately after a disaster than they are before one (Flynn, 200718; Xiao & Van Zandt, 2012). Their ability to undertake such action, however, depends on the limitations of their post-disaster financial capacity (Petak, 199819) and their knowledge of mitigative business practices such as purchasing insurance, conducting structural assessments, and planning for business continuity (Yoshida & Deyle, 200520; Eiser et al., 201221). Government recovery programs could help small businesses fill resource and knowledge gaps and build long-term disaster resilience by providing financial and technical assistance (Yoshida & Deyle, 2005).

This study attempts to shed more light on the resilience-building aspects of post-disaster small business recovery programs by examining the extent to which they promote mitigation, as well as the challenges and opportunities of pursuing mitigation using recovery funding. The findings of this research can help improve the ability of economic recovery programs to break the cycle of disaster vulnerability in small businesses and build long-term disaster resilience.

Research Design

Research Questions

The goal of this study is to understand the role of policy in promoting long-term resilience-building in small businesses. To this end, this study asks the following research questions: (a) to what extent do small business recovery aid programs promote mitigation practices, preparing businesses for the next disaster; and (b) what are the opportunities and challenges associated with promoting disaster mitigation for small business through recovery programming?

Study Site Description

This study examines small business recovery programs that operated at the federal, state, and local levels in the states of New York, New Jersey, North Carolina, and Texas after three recent disasters (Hurricane Sandy in 2012, Hurricane Matthew in 2016, and Hurricane Harvey in 2017). Case studies were selected to reflect a mix of urban and rural communities and a range of political-economic conditions.

Data, Methods, and Procedures

Phase 1: Archival Research

Search Process. We conducted an online search for post-disaster small business recovery programs created after the Hurricane Sandy, Hurricane Matthew, and Hurricane Harvey in New York, New Jersey, North Carolina, and Texas. Documents related to small business recovery programs offered by the city, county, state, and federal levels were obtained from the websites of various government agencies, as well as state action plans that allocate U.S. Housing and Urban Development (HUD) Community Development Block Grant Disaster (CDBG-DR) funds for each disaster. A total of 72 programs were identified through this search process. The list of programs was validated in Phase 2 during key informant interviews to ensure that most if not all programs had been recorded.

Categorizing programs. For each program, we manually reviewed program documents for mitigation-specific keywords developed from the literature (see Table 1). We then used thematic content analysis techniques to identify program type (grant, loan, and technical assistance), funding source (federal, non-federal, and mixed), and whether programs included mitigation as an eligible or required use of funds. Analysis results are described using descriptive statistics.

Table 1. Mitigation-Related Business Actions

Action Keywords Citation
Structural Actions Elevation Gutrich & Hitzhusen, 2004
Reconstruction Dodo et al., 2005
Retrofit Egbelakin et al., 2011
Insurance Disaster Insurance Kunreuther, 2006; Mills, 2007
Flood insurance mitigation Fan & Davlasheridze, 2016
Business continuity plan Blos et al., 2010
Mitigative business practices Property acquisition Mobley et al., 2020
Working capital enhancement Dyckman, 2011
Digital media on improving accountability and community relationships Adila et al., 2017
Cash flow stability Zocco, 2021
Financial counseling (including credit) Chandra et al., 2016

Phase 2: Key Informant Interviews

Sample size and participants. We used snowball sampling methods to identify nine key informants from federal, state, and city government agencies and nonprofits. Many of those programs were similar to programs offered after the hurricanes. Initial participants were identified using existing reports, websites of different agencies, and references from contacts of the two principal investigators in the case study communities.

Data collection. Key informant interviews were conducted after receiving informed consent. This research was approved by the University of Utah Institutional Review Board. Interviews were semi-structured and open-ended and conducted via Zoom due to the ongoing COVID-19 pandemic. Interviews covered topics such as the roles agency officials and participants might have in developing and/or administrating disaster recovery programs, the value placed on mitigation for future disaster risk management, the importance of pursuing mitigation using recovery funds (and actions taken in this regard), and the challenges and opportunities of pursuing mitigation within the constraints of recovery programming. Interviews lasted approximately 50-60 minutes each and were video-recorded for notes-taking purposes and transcribed for coding and analysis.

Data analysis. Interview transcriptions were coded by the lead author using three-step thematic content analysis techniques (Boyatzis, 199822; Saldana, 200923). The first precoding step involved identifying “codable moments,” which are significant passages related to the subject matter (here, the pursuit of mitigation actions). In the second step, a codebook is developed based on the precoding review and through team discussion. In the final step, interview transcripts are coded based on the codebook. The codebook is updated as needed in this third step with emergent themes.

Interview transcriptions were content analyzed for the following themes: (a) the importance of pursuing mitigation using recovery programs; (b) challenges faced in this pursuit; and (c) opportunities for incorporating mitigation-focused elements into recovery support for small businesses. Findings have been reported in a narrative style with personal identifiers removed to preserve confidentiality.

Researcher Positionality, Reciprocity, and Other Ethical Considerations

Researcher Positionality. The project team approached this study from the perspective that mitigation should be pursued through recovery programs in order to build long-term small business resilience. Interview questions were accordingly designed to probe into the successes, failures, constraints, and opportunities for program administrators to pursue this long-term resilience goal.

Other ethical considerations. The study was undertaken during the height of the COVID-19 pandemic which required the research team to be more careful about overburdening specific study informants with interview demands while they were implementing post-pandemic recovery programs.

Reciprocity. The study team firmly believes in the concept of reciprocity. Findings of the study will be shared with all agencies indicated in the Dissemination of Findings section of this report.


Focus on Mitigation in Small Business Recovery Programs

We identified a total of 72 small business recovery programs, including 29 programs (40%) established after Hurricane Sandy in the state of New York and New Jersey, 30 programs (42%) after Hurricane Matthew in the state of North Carolina, and 13 programs (18%) after Hurricane Harvey in the state of Texas (Table 2).

Table 2. Programs by Type, Administration, and Funding Source

Superstorm Sandy Hurricane Matthew Hurricane Harvey Total Percentage
Loan 13 6 5 24 33
Grant 11 23 8 42 58
Technical assistance 5 1 0 6 8
Federal 4 6 3 13 18
State 13 3 1 17 23
Local 12 21 9 42 58
Funding source
Federal 11 8 5 24 33
Single 12 3 4 19 26
Multiple 6 19 4 29 40

Across the three hurricanes, grants were the most common type of program (42 out of 72, about 58%). Small business recovery programs from North Carolina after Hurricane Matthew accounted for nearly half of those grant programs we found (23 out of the 42). Loan-type programs accounted for 33% of all programs, with SBA Business Physical Disaster Loans and Economic Injury Disaster Loans programs having been offered after each hurricane event. Only six programs across all the disaster events were technical assistance programs, which help small businesses improve their operational practices (by stabilizing cash flow, for instance) and help them recover faster (Wiatt et al., 202124). Loan programs typically offered larger aid amounts than the grant programs and were offered consistently in all disasters, which indicates greater influence of loan programs on recovery, despite being fewer in number.

A majority of recovery programs were operated by local level agencies (approximately 58%), including 12 programs in New Jersey and New York after Hurricane Sandy, 21 programs in North Carolina after Hurricane Matthew, and 9 programs in Texas after Hurricane Harvey. Half of all the programs in North Carolina were operated by local, county, or city-level agencies whereas in New York and New Jersey, state agencies took the lead on small business recovery programming. Most programs, regardless of who operated them, were funded through federal sources. This funding was disbursed in three primary ways—directly through direct federal programs (such as SBA loans); secondarily through state agencies, (such as the CDBG-DR funds); or as a combination of funds from non-federal sources such as state, local, or nonprofit agencies. About 40% of all programs used a mix of federal and non-federal sources to fund them, with federal sources featuring most frequently in the mix. This result indicates the importance of federal funding to small business recovery programs in the United States.

This research also analyzed the programs’ focus on mitigation as an eligible use of recovery funds. Our findings shows that regardless of who funds or operates the recovery programs, they are less likely to promote mitigation (see Table 3). Most recovery programs (75%) did not list mitigation actions as either required or suggested activities in their program guidelines and instead focused solely on repair and restoration activities (“mitigation-not-mentioned”). An example of this focus was the Community Impact Lending Program in Texas, which allowed loans to be used to repair damaged businesses and compensate for economic loss, but did not mention any mitigation actions such as structural elevation or purchase of business interruption insurance as eligible fund uses.

Table 3. Programs Categorized by Focus on Mitigation

Superstorm Sandy Hurricane Matthew Hurricane Harvey Total Percentage of Programs
Mitigation not mentioned 22 20 12 54 75
Mitigation suggested 7 6 1 14 19
Mitigation required 0 4 0 4 5

Of the programs that did promote mitigation, 5% listed one or more of the activities shown in Table 1 as a required use of funds (“mitigation-required”) and 19% listed them as eligible but not required use of funds (“mitigation-suggested”). An example was a post-Harvey recovery program in Texas that listed elevating building utility systems—a common flood mitigation activity—as an eligible fund use. All four of the recovery programs that required businesses to use the funds for mitigative actions were developed in North Carolina after Hurricane Matthew. Three of those programs were grants and one offered technical assistance. All four programs were funded through a mix of federal and non-federal sources and operated by local organizations.

During the coding process, the study team found programs that used broad terms to define eligible uses (e.g., “insurance” as opposed to “flood insurance”) thus leaving the program intention open to interpretation. We chose to categorize these programs as mitigation promoting because they leave open the possibility that businesses could purchase disaster-specific insurance and therefore take mitigative action.

Challenges and Opportunities of Mitigation-Focused Recovery Programs

Our key informant interviews revealed that program officials were generally aware of mitigation as a topic, although different levels of government put different values on its necessity and importance. Federal level interviewees were most likely to emphasize the need to pursue mitigation using recovery programming to help businesses to stay open or reopen quickly in the next disaster. Federal officials were also quick, however, to acknowledge that the policy constraints under which existing federal programs operate make it unlikely that federal agencies can promote mitigation. For example, SBA programs have a clearly defined uses for funds and loan officers cannot deviate from them. Eligible SBA uses are “repair or replace disaster-damaged property owned by the business, including real estate, inventories, supplies, machinery and equipment.” (SBA, 202225). This emphasizes recovery over mitigation. While the SBA does offer an extra 20% on loan amounts for mitigation-specific use (termed mitigation loan option), this funding cannot be used to protect against any hazard other than the one experienced (so, for instance, a mitigation loan issued in the wake of a flood could only be used to mitigate against floods). Moreover, the SBA Physical Disaster Loan Fact Sheet outlines the uses of these funds to “cover the cost of improvements that will protect your property against future damage” (SBA, 2022). Examples of improvements include retaining walls, seawalls, sump pumps, etc.” (SBA, 2022). The net effect of this is that businesses are unable to use this dedicated mitigation funding to take an all-hazards approach or to use the funds for operations-type mitigation actions (e.g., to pay for financial counseling or purchase disaster insurance). This in turn, severely reduces a business’s ability to adequately mitigate against future disasters.

State-level program officials tended to focus on one of two topics. Officials in the emergency management field focused on the need to improve post-disaster recovery and mitigation planning with emphasis on economic recovery, although funding and regulatory issues were still noted as key constraints. For example, some informants discussed limitations of the Federal Emergency Management Agency Public Assistance Grants, which can be used for mitigation and recovery, but are only given to government and certain nonprofit organizations. The funds cannot be transferred or used to help privately owned businesses, however small. Others discussed how the FEMA Hazard Mitigation Grant Program, which expressly facilitates mitigation after a disaster and can fund private entities, requires cost match that many small local governments find burdensome. Informants also discussed the FEMA Building Resilience in Communities program, which reduces match burden for underserved communities, but which has also been criticized for inadvertently funding high-resource communities as the result of its eligibility criteria (Frank, 202126).

A second line of thinking for state officials, especially those concerned with economic development, was related to how disaster business recovery programs could be better linked to existing (non-disaster) small business development programs. Some officials described how they directed grant applicants to existing business development programs that offered free financial counseling or, in one case, to software that helped analyze and manage supply chains. While these programs are not intended for recovery use, coordinating recovery programming with state-funded non-recovery programs could circumvent the restrictions posed by federal programs.

Local officials interviewed for the study were the least agreed on the importance of pursuing mitigation through recovery, with some officials admitting they had not considered it at all, some not considering mitigation as part of recovery, and others expressing significant support for promoting mitigation using recovery resources. This finding connects with the findings of Phase 1, which also revealed mixed results for mitigation in local-level business recovery programs—local programs were least likely to mention mitigation but also the only programs that required business to use recovery funds for mitigation measures. More qualitative research on business recovery policy making could potentially help to explain the drivers of this wide disparity in local level resilience-building action.

Both state and local-level informants emphasized the need to better coordinate messaging on the importance of mitigation-focused recovery between all levels of government, as well as the need to partner with nonprofits to bypass government aid restrictions. These capacity-building measures were seen as having the potential to improve post-disaster recovery programs, which would eventually trickle down into the local business community.


Key Findings

Disaster recovery is a burden for most communities, but it also poses an opportunity to improve resilience in future events. This can be done by promoting mitigation for upcoming disasters during recovery from a recent event. Small business recovery programs have the potential to help small businesses fund and implement mitigation practices aimed at the next disasters, but they rarely do this. The main reasons for this oversight range from funding and policy constraints to differences in the extent to which mitigation is considered part of recovery by program administrators. A key opportunity for increasing the focus on mitigation funding for small businesses during recovery is to coordinate disaster recovery and regular economic development programs, which offer key resources for small business planning and which can improve business resilience overall.

Implications for Practice

This study indicates that federal and state-level agencies should pay more attention to communicating the importance of mitigation through recovery programs to local-level agencies. Help financing such programs would also be useful, considering the policy constraints on federal funding. Recovery administrators at all levels should interact more closely with economic development agencies to identify the potential of coordinating their actions to better serve small businesses.

Dissemination of Findings

Results of this study will be shared with all study participants; the local Utah emergency management and economic development community, with which the principal investigators regularly interact with; and with advocacy institutions, such as the Harvard University Asian American Pacific Islander COVID-19 Project that the team is connected with through other projects.


The main limitations of this study are attributed to the ongoing COVID-19 pandemic, which made it difficult to recruit key informants because of travel limitations and the pandemic-related work stress of the informants. The study was also constrained by the fact that it better captured programs offered after more recent disasters. Other events date back more than a decade, and so records may have been lost. This limits the generalizability of the study’s findings, particularly as they relate to actions by specific levels of government. Finally, this study used snowball sampling methods to identify potential interview participants, which may have resulted in the study overlooking key informants outside of the study participant network, and consequently affected its findings about the drivers of policy.

Future Research Directions

While this study focuses on programmatic action, more research needs to be conducted on business-level post-disaster resilience action. More attention also needs to be paid to how sociopolitical factors affect policymaking for small business recovery. Qualitative approaches would be especially preferred since they have the power to answer how and why questions better than quantitative approaches.


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Suggested Citation:

Kim, S & Chandrasekhar, D. (2022). Does Post-Disaster Recovery Funding Promote Mitigation in Small Businesses? (Natural Hazards Center Mitigation Matters Research Report Series, Report 14). Natural Hazards Center, University of Colorado Boulder.

Kim, S & Chandrasekhar, D. (2022). Does Post-Disaster Recovery Funding Promote Mitigation in Small Businesses? (Natural Hazards Center Mitigation Matters Research Report Series, Report 14). Natural Hazards Center, University of Colorado Boulder.