The working paper “After the Storm: How Emergency Liquidity Helps Small Businesses Following Natural Disasters,” where researchers examine SBA data from 2005 to 2017 and perform causal analyses, found that disaster loans decrease chances an impacted business closes by 13 percentage points. These effects are persistent as firms that received a disaster loan are 20 percentage points less likely to have exited 7 years after the disaster. Disaster loans reduce the share of debt that is reported delinquent by 34 percentage points and reduce the number of days the firm is late in paying on its contracts (including leases, utilities, etc.) by 35 days. These results suggest that without a disaster loan, firms are unable to sufficiently recover from a disaster to fulfill their obligations and have a higher chance of bankruptcy. This study also found that businesses receiving disaster loans contribute to local investment and increase employment by 18 percentage points while younger firms increase employment by 28 percentage points. The impact on employer firms is even more pronounced with a 45 percentage points increase in employment. Lastly, impacted businesses with disaster loans had increased firm revenues and attracted additional investment and capital from the private sector. This study also showed that the effect of each of these economic impacts were stronger for younger firms, firms in more vulnerable, disadvantaged neighborhoods, and firms in neighborhoods that were struggling prior to the disaster.
