Journal of Applied Business and Economics

The Economic Impacts of a

Hurricane Disaster Bridge Loan Program in Southern Louisiana:
The Aftermath of Hurricanes Katrina and Rita

K. Mark Weaver
Louisiana State University

George S. Vozikis
California State University, Fresno

This paper examined the impact and success of the state of Louisiana Bridge Loan Program on
affected businesses based on a survey of firms which were awarded Bridge Loans following
Hurricanes Katrina and Rita in 2005 and 2006. We evaluated the economic impact of the
program by assessing sales revenue and employment number changes, along with certain self-
reported measures of the program’s effectiveness. We documented what some companies used
these funds for and the instances where they may have used them inappropriately. Finally, we
take a look at crisis management and how it can be applied in times of disaster for better results
in the future.

INTRODUCTION

Hurricane Katrina struck Louisiana’s coast on August 29, 2005, claiming the lives of 1,464
Louisiana residents. Hurricane Rita followed three weeks later on September 24, 2005. The
storms initially evacuated and displaced 1.3 million Louisianians, destroyed more than 200,000
homes, 10 hospitals and 200 square miles of Louisiana marshland. The storms also completely
destroyed 40 schools, damaged another 835 schools and flooded more that 16,000 businesses.
About 179,000 jobs were lost in the New Orleans area alone. Louisiana’s estimated property
losses total more than $100 billion (Louisiana Recovery Authority, 2006). Hector Barreto, SBA
Administrator declared that: “Through my visits with small business owners in the Gulf Coast it
has become clear that the unprecedented scope and magnitude of these twin disasters requires a
more creative response beyond our traditional disaster loan program” (Federal Reserve Bank of
Dallas, 2006). Sean O’Keefe, Louisiana State University Chancellor added: “In order for the
state to fully recover, the goals for rebuilding must have a strategic, sustainable vision for long-
term progress. A focus on economic development will prove to be a critical aspect of recover.
Supporting small businesses…will be critical elements for moving ahead….Population changes
need to be addressed, and the state’s highway system must adapt to serve those cities that have
Journal of Applied Business and Economics

undergone rapid growth. Each of these challenges, and more, are in desperate need of visionary
public policy alternatives and creative public administration solutions.” (O’Keefe, 2007)
The goal of this paper is to determine how effective the state of Louisiana’s Bridge Loan
Program was in the wake of Hurricanes Katrina and Rita. The Bridge Loan program began
shortly after the hurricanes hit, and was designed to provide affected small businesses (those
between 2-100 employees) with the necessary cash flows to meet payment obligations and to
assist them in repair and re-investment expenses. The loan was structured as a six-month
interest-free loan with the state paying the interest. The ultimate objective was to smoothen out
the recovery process for credit-worthy and productive businesses at a time when borrowing and
liquidity might have been hard to secure. The Louisiana Economic Development (LED) agency
administered the program via selected private financial institutions that originated and serviced
the loans.

SUMMARY STATISTICS

The data used in this report were obtained through a survey of 132 loan recipients throughout
southern Louisiana. A copy of the survey and a sampling report are included in the Appendix
section. This study report begins by providing a broad demographic overview of the businesses
sampled and the type of the data collected. For the various revenue brackets, endpoints were
chosen so that roughly 25% of the sample data could be categorized within any given subset.
Additionally, ranges were chosen when the data were grouped by percentage changes and
probability estimates, in order to provide a more straightforward interpretation of the results. For
the employment number brackets, the subcategories mirror those found in “A Report on the
Impact of Hurricanes Katrina and Rita on Louisiana Businesses: 2005Q2 - 2006Q4” (Terrell
and Bilbo, 2007), to allow for accurate comparisons. There were many survey respondents that
left certain questions blank and consequently the frequency distributions do not add to the total
number of firms surveyed (N=132), and the calculated percentages reflect only portions of the
answers to the question. It is important to keep these missing values in mind as a caveat for
interpretation.
When assessing the Bridge Loan program’s effectiveness in relation to its goals, there are
really two questions that need to be answered: Did any businesses go under despite receiving
financing, and secondly, did businesses that did receive financing recover quicker than those
which did not? Of the 130 businesses that responded to the survey, only 2 reported that they are
not currently operating. Both reported that between 2005 and 2006 they had zero employees,
suggesting they were forced to shut down at least temporarily. However, one of those two firms
reported having a projected opening in the next twelve months, whereas the other reported a
projected employee base of zero. Nevertheless, assuming only the latter firm failed out of 132
respondents, the contrast to the business failure rates between Southeast and Southwest
Louisiana were astounding, namely 28.31% and 18.63% respectively for 2006Q4 (Terrell and
Bilbo, 2007).
Of the 132 businesses sampled, the average firm had approximately 9.01 employees and
approximately $1,154,346.80 annually in revenues before Hurricanes Katrina and Rita hit. As
averages tend to be misleading, Tables 1 and 2 present bracketed frequency tables for both
annual revenues and number of employees prior to receiving the Bridge Loan.
Journal of Applied Business and Economics

TABLE 1
ANNUAL REVENUES PRIOR TO LOAN

Annual Revenue prior to loan Frequency (% of total)

< $300,000 24 (22.6%)
$300,000 - $649,999 27 (25.5%)
$650,000 - $1,449,999 28 (26.4%)
> $1,449,999 27 (25.5%)

TABLE 2
EMPLOYMENT PRIOR TO LOAN

Number of Employees prior to the loan Frequency (% of total)

1–5 59 (49.2%)
6 – 10 36 (30.0%)
11 – 50 24 (20.0%)
> 50 1 (0.8%)

Between the years 2005 and 2006, a little over half of the businesses saw revenues decrease by
an average of 37.98%. From 2006 to 2007, 76.4% of the businesses expected to see revenues
increase.1 With the Bridge Loan’s inception in late 2005, and assuming an effectiveness time lag,
it is safe to assume that this recovery comeback was in some measure attributable to the loan. Of
course, people’s migration patterns during and after the hurricanes might have impacted these
numbers along with other factors, and consequently making it hard to truly gauge the loan’s
long-term effects. Table 3 presents the frequencies for various revenue changes.

TABLE 3
ANNUAL PERCENTAGE CHANGES IN REVENUES AFTER THE LOAN

Frequency (% of total)
2005 to 2006
< 0% 56 (53.3%)
0 - 50% 40 (38.1%)
51 - 100% 3 (2.9%)
> 100% 6 (5.7%)
2006 to 2007
< 0% 25 (23.6%)
0 - 50% 66 (62.3%)
51 - 100% 8 (7.5%)
> 100% 7 (6.6%)
2005 to 2007
< 0% 42 (40.0%)
0 - 50% 43 (41.1%)
51 - 100% 14 (13.3%)
> 100% 6 (5.7%)
Journal of Applied Business and Economics

Similarly, Table 4 provides a frequency tabulation of annual percentage changes in the number
of employees for the same period.

TABLE 4
ANNUAL PERCENTAGE CHANGES IN EMPLOYMENT AFTER THE LOAN

Frequency (% of total)
2005 to 2006
< 0% 29 (24.6%)
0 - 50% 60 (50.8%)
51 - 100% 11 (9.3%)
> 100% 18 (15.3%)
2006 to 2007
< 0% 3 (2.5%)
0 - 50% 90 (75.6%)
51 - 100% 12 (10.1%)
> 100% 14 (11.8%)
2005 to 2007
< 0% 16 (13.9%)
0 - 50% 48 (41.7%)
51 - 100% 26 (22.6%)
> 100% 25 (21.7%)

These percent changes in revenue/employee growth between 2006 and 2007 represent the
average recovery rates for these firms. Average employment growth for the selected businesses
appears to have remained relatively constant, despite the obvious revenue disruptions.
Given that the Bridge Loans were available to both the Southeast and the Southwest, we
attempted to gain a more nuanced view of the loans’ effects by examining any differences in
growth rates between the two regions. Unfortunately, a large proportion (42.4%) of the
respondents did not report their zip code, making it virtually impossible to make any significant
comparisons. It appears that the vast majority of the data were collected from Southeastern
Louisiana business owners, but we cannot ascertain with confidence. (For detailed frequency
listings of the regions, see the Appendix A-2).
The two questions from the survey that seem to be particularly crucial in assessing the Bridge
Loan Program’s impact were questions 9 and 12. Question 9 asked “What are the chances that
you would be in business today had you not received financing?” whereas question 12 asked,
“What are the chances that you will be forced to move or relocate your business in the next 12
months?” Higher values for both imply a less effective loan impact, and lower values imply a
more effective loan impact, assuming of course that the Bridge Loan Program’s goals were one,
keeping firms in business and two, keeping them from having to relocate.
Tables 5 and 6 below present bracketed frequencies for these two variables.
Journal of Applied Business and Economics

TABLE 5
PROBABILITY OF CONTINUOUS OPERATION WITHOUT FINANCING

Probability of Operations without Frequency (% of total)

Financing
< 25% 18 (15.1%)
25 - 49% 7 (5.9%)
50 - 74% 36 (30.3%)
> 75% 58 (48.7%)

TABLE 6
PROBABILITY OF FORCED RELOCATION WITHOUT FINANCING

Probability of Forced Relocation Frequency (% of total)

< 25% 90 (74.4%)
25 - 49% 4 (3.3%)
50 - 74% 13 (10.7%)
> 75% 14 (11.6%)

The number of businesses that shrank in terms of revenue growth and the number that grew
overall in revenues are presented in Table 7 in the form of a cross-tabulation of net employment
growth and net revenue growth between the years 2005-2007. (For more details see Appendix A-
3).

TABLE 7
GROWTH RATES, 2005-2007

% Change in Revenue (’05 -

% Change in Employment Number (’05 to ’07)
’07)
51 -
< 0% 0 - 50% > 100% Totals
100%
< 0% 13 15 3 8 39
0 - 50% 3 17 13 7 40
51 - 100% 0 5 4 4 13
> 100% 0 0 3 2 5
Totals 16 37 23 21 97

Of the firms which responded to both questions, only 13 reported having decreased both
revenues and a having experienced a smaller employee base in 2007 compared with 2005, while
2 firms actually claimed to have doubled both revenues and number of employees.
According to a report by the Louisiana Recovery Authority, businesses in Southeast
Louisiana, which were heavily affected by Hurricane Katrina were more likely to fail than in
other parts of the state. The state as a whole had an overall business failure rate of 20.87% from
the 2005Q2 to 2006Q4, while the Southeast region of the state had a failure rate of 28.31%
(Louisiana Recovery Authority, 2006). Orleans Parish had the biggest business loss as a result of
Journal of Applied Business and Economics

the hurricanes, but showed the strongest growth in the fourth quarter of 2006. In fact, by the first
quarter of 2007, the state was only 505 employers shy of the pre-storm levels. This represented a
significant increase statewide from the initial loss of 5,178 employers immediately following the
Hurricanes and also showed progress over 2006Q4. The report also revealed that the state as a
whole had an overall business failure rate of 22.75% from 2005Q2 to 2007Q1, while the
Southeast and Southwest regions had failure rates of 29.83% and 19.84% respectively.
Although these facts clearly indicated upward trends in the state overall, the story is really a
tale of two recoveries. It is clear that while there was growth to be seen in many of the recovery
parishes, there continued to be serious losses to the economies of the regions that had been
affected the most. Parishes like Calcasieu and St. Tammany experienced the typical hurricane
recovery in the shape of a “V” curve, i.e., an extreme downturn in the weeks immediately
following the storms and then a steep economic bounce as construction and other rebuilding
commenced (Terrell and Bilbo, 2007). These businesses continued to face extreme challenges as
they attempted to rebuild and contribute to the economic recovery of their communities.

Effects by Business Revenue Size

The size of annual pre-loan revenues were not strongly associated with most of the variables,
including questions 9 and 12, namely, “What are the chances that you would be in business
today had you not received financing?” and “What are the chances that you will be forced to
move or relocate your business in the next 12 months?” respectively, or with the largest segment
of the two-year growth rates in terms of both employment and revenues. However, within the
businesses with annual pre-loan revenues of less than $300,000, 54.2% of them saw net revenues
between 2005 and 2007 decrease and 62.5% of them did not anticipate a job opening for their
business for the current year. This suggests that these businesses were still recovering. Both of
these numbers were larger than the sample averages of 40% and 46.2%, respectively. Table 8
documents this pattern in net revenues.

TABLE 8
PERCENT CHANGES IN ’05 TO ’07 REVENUES BY ANNUAL PRE-LOAN
REVENUES

Annual Revenue, pre-loan % Change in Annual Revenue (’05 to ’07)

< 0% 0 - 50% 51 - 100% > 100%
< $300,000 54.2% 29.2% 8.3% 8.3%
$300,000 - $649,999 23.1% 50.0% 19.2% 7.7%
$650,000 - $1,449,999 46.4% 39.3% 7.1% 7.1%
> $1,449,999 37.0% 44.4% 18.5% -
Total 40.0% 41.0% 13.3% 5.7%

Another interesting trend worth pointing out involves job creation. As noted previously,
employment growth seemed to remain relatively steady within the sampled businesses. One
group however, firms with annual pre-loan revenues between $300,000 and $650,000, seems to
have experienced particularly strong employment growth over the years 2005 to 2007, as
evidenced by Table 9.
Journal of Applied Business and Economics

TABLE 9
AVERAGE EMPLOYMENT GROWTH BY ANNUAL PRE-LOAN REVENUES

Mean % of Firms with Change in the

Annual Revenue, pre-loan N
Number of Employees, 2005-2007
< $300,000 22 55.61%
$300,000 - $649,999 26 127.60%
$650,000 - $1,449,999 28 39.63%
> $1,449,999 22 65.70%
Totals 98 72.41%

This evidence of job growth is even further supported by Table 10, which displays the average
number of employees for the various pre-loan revenue brackets for the period before the loan
(2005) and after the loan (2007).
Based on this information, the overall percentage change in employment for the average firm
was roughly +33% between the years 2005 and 2007. From 2005-2006, employment grew by
15.65%. These figures are in contrast to the net loss in employment of roughly 1% found in
Southeast Louisiana between 2005 and 2006 and reported in The Report on the Impact of
Hurricanes Katrina and Rita on Louisiana Businesses: 2005Q2 - 2006Q4 (Terrell and Bilbo,
2007). However, they are roughly in line with the report’s employment figures for Southeast
Louisiana for the same period.2

TABLE 10
AVERAGE EMPLOYMENT BY ANNUAL PRE-LOAN REVENUES, 2005-2007

Mean Number of Mean Number of

Annual Revenue, pre-loan
Employees 2005 Employees 2007
< $300,000 3.78 5.13
$300,000 - $649,999 5.31 9.26
$650,000 - $1,449,999 8.50 11.29
> $1,449,999 18.63 22.75
Totals 9.01 11.99

Effects by Business Employee Size

The effects of both hurricanes and the Bridge Loans are more apparent when viewing the data
through the lens of employment numbers. The first thing to point out is that businesses with
fewer than 6 employees comprised a little over half of the group that saw revenues decrease for
the period between 2005 and 2007. This number is in line with the losses experienced by the
<$300,000 annual revenue segment, again implying that recovery might have been taking longer
for the smallest businesses. Table 11 shows the revenue percentage changes broken down by pre-
loan employment brackets.
Journal of Applied Business and Economics

TABLE 11
CHANGES IN ANNUAL REVENUE (2005-2007) BY PRE-LOAN EMPLOYMENT SIZE

Number of Employees, pre-loan % Change in Annual Revenue (’05 to ’07)

< 0% 0 - 50% 51 - 100% > 100%
1–5 51.2% 43.9% 46.2% 60.0%
6 – 10 24.4% 31.7% 23.1% 40.0%
11 – 50 22.0% 24.4% 30.8% -
> 50 2.4% - - -
Totals 100% 100% 100% 100%

A relatively stronger pattern emerges when looking at the Probability of Operation without the
loan measure and the Probability of Relocation without the loan measure (questions 9 and 12),
namely, “What are the chances that you would be in business today had you not received
financing?” and “What are the chances that you will be forced to move or relocate your business
in the next 12 months?” respectively. Responses to these questions document the perceived
positive impact of the loan and the probability of a forced move within the next 12 months,
respectively. It turns out that business with fewer than 6 employees prior to the Bridge Loan
make up a majority of the group reporting that, without the loan, there is a less than 50% chance
they would continue to be in operation. This would suggest that they had losses but inventory,
equipment and other typical loan needs were low enough that they may have been able to start
again without the loan, but the loan surely made it easier for them to start all over again.
The findings relating to these two important issues for all pre-loan employment categories are
provided in Table 12 below.

TABLE 12
PROBABILITY OF CONTINUING OPERATIONS WITHOUT THE LOAN BY PRE-
LOAN EMPLOYMENT SIZE

Number of Employees, pre-loan Chances of Operation Without Financing

< 50% > 50%
1–5 13 44
6 – 10 6 28
11 – 50 5 18
> 50 1 -

A similar pattern emerges when we break down the probability of a forced relocation by
employment numbers. For those reporting a greater than 50% chance of a forced move within the
next 12 months, over half are businesses with fewer than 6 employees. These figures are
presented in Table 13.
Journal of Applied Business and Economics

TABLE 13
PROBABILITY OF FORCED RELOCATION WITHOUT THE LOAN BY PRE-LOAN
EMPLOYMENT SIZE

Number of Employees, pre-loan Probability of Forced Relocation

< 50% > 50%
1–5 44 14
6 – 10 29 6
11 – 50 16 5
> 50 - 1

However, the emerging situation is not as dire as it seems because most businesses with 1-5
employees (77%) thought they had a greater than 50% chance of remaining in operation without
the loan, as well as a less than 50% chance of being forced to relocate. Thus, being a smaller
business does not necessarily seal your fate in terms of a forced relocation and does not
necessarily eliminate your chances of being in business without the state’s assistance in the form
of a loan.
In summary the key findings of the study were:
• The majority (53.3%) of the businesses sampled saw revenues shrink between 2005 and 2006,
but an even larger majority (76.4%) expected revenues to increase between 2006 and 2007.
• When asked for an estimate of the probability their business would be operating in the absence
of the Bridge Loan, only 21% reported a low probability of less than 50 percent that they
intended to reopen with or without the loan, with firms with fewer than 6 employees representing
over half of this group.
• Employment growth was relatively strong for the sample of the firms surveyed. Only 13.9%
of the sampled businesses projected a net decrease in the number of employees from 2005 to
2007, but at the same time 44.4% of this same group anticipated having an open position within
the next 12 months. The average change in employment overall was +33%.
• A large portion of the sample (40%) experienced a net decrease in revenues between 2005 and
2007, with over half of these recovering businesses having fewer than 6 employees. Overall
however, approximately 57% of the businesses grew in both employment and revenue between
2005 and 2007.
• Only 22.3% of respondents reported a strong probability (>50% chance) of having to move or
relocate their business within the next 12 months, again, with over half of this business subgroup
having fewer than 6 employees.
• The state as a whole had an overall business failure rate of 22.75% from 2005Q2 to 2007Q1,
while the Southeast and Southwest regions had failure rates of 29.83% and 19.84% respectively.
• Most of the small businesses receiving these loans used them in a beneficial way for their
company and the communities surrounding them, but there have been some cases of
misappropriations of funds.
• It was determined that a sound crisis management plan in place is one effective way that
some of these small firms could have avoided many setbacks during their recovery.
Journal of Applied Business and Economics

RECOMMENDATIONS

This study’s survey included questions regarding how the Bridge Loan proceeds had been
used. Most of the businesses basically gave the same answer by stating that they had used the
loan proceeds to pay for critical operating expenses, diversify their business offerings, and
provide critical services to the communities they served. Additionally these funds were used for
repairs or to replenish their inventory stock and serve their customers.
Although the Bridge Loan’s intention was to help small businesses to thrive and reach their
pre-hurricane sale levels as soon as possible, some loan recipients that either had no chance of
repayment or had unethical intentions as to the use of the funds were among the ones who
benefited from the Bridge Loan program. This situation raised serious concerns about the
effectiveness of the SBA and other lenders to weed out the non-deserving businesses from the
Program. As of February 1, 2007 the SBA had 44 open investigations directly related to the 2005
Gulf Coast hurricanes loan funds. The number of the Bridge loans for Hurricanes Katrina and
Rita that were in some stage of delinquent status as of that date were: charged off: 10;
delinquent: 171; in liquidation: 2; past due: 654 (Terrell and Bilbo, 2007). The most common
allegations involved:

• Unauthorized use of loan proceeds

• Material false statements in the application process
• False/Counterfeit supporting documentation
• False assertions regarding residence in affected areas at time of disaster.

In spite of these few “bad apples” it seems that most small businesses agreed that some form of
crisis management approach would probably be the best option from now on to deal with
disasters. However, it is quite difficult for management to think about learning something from a
crisis and pinpoint the right crisis response that could be useful in future planning. An
organizational crisis is defined as “a low-probability, high-impact event that threatens the
viability of the organization and is characterized by ambiguity of cause, effect, and means of
resolution, as well as by a belief that decisions must be made swiftly (Pearson and Clair, 1998).
Crisis management involves a systematic attempt by managers to prevent crises from occurring
and to manage them successfully when they do take place. It begins long before a crisis occurs
and continues long after recovery (Pearson et al., 1997).
But what form of crisis management would work when FEMA the largest and most
specialized organization in crisis management charged with contingency planning for disasters
failed so miserably in the wake of Katina? The uniqueness of disaster events and their apparent
unpredictability constrains our ability to learn from our experience with disasters. In fact, there
is clear evidence that problems with our disaster management and response systems reoccur,
incident after incident (Donahue & Tuohy, 2006). This can be very frustrating in the
development of sound solutions and the management of uncertainty seems to be an oxymoron.
Although in the case of Hurricanes Katrina and Rita “hindsight is 20/20” and nothing can be
done about it now, businesses can learn from this tragedy and develop their own crisis
management plan for similar situations in the future. Contingency planning is commonly the
purview of agencies that are expected to deal with the unexpected, most obviously, emergency
response organizations such as FEMA and the military. Yet other civic, community, and
financial organizations that are outside the realm of disaster management might find themselves
Journal of Applied Business and Economics

in harm’s way during a disaster and can also derive profound benefits from identifying and
adopting key principles and practices that will allow them to operate effectively when disaster
does strike and are compelled or called to act (Donahue & O’Keefe, 2007).
The main road to recovery after a disaster is some form of crisis management and prior
contingency planning by the businesses and government support groups. Creative contingency
planning along with resiliency and commitment to positive outcomes will lead to an enhanced
probability of a speedy recovery.
According to a report by the National Federation of Independent Business (NFIB) based on
some real business experiences and responses to the hurricane disaster, there are five major
lessons that business owners in Louisiana and elsewhere can take away from this tragedy and can
serve as a blueprint for contingency planning for crisis management (Christens, 2005):
1. Form a disaster plan
For one advertising agency located on the Mississippi coast, this meant having
communication with all employees. In the days before the storm, Shirley Godwin owner of
the Godwin Group had his 80 employees submit all their contact information for a central
phone tree, which was then distributed to everyone. “Updating the phone tree was the most
important thing we did…we had to assume people wouldn’t be able to use traditional means
of communicating. email wouldn’t work, because people didn’t have power. Cell phones
might not work, because certain towers were down. We asked for numbers for everywhere
anyone could be reached—your cell phone, your child’s cell phone, your parents’ house, etc.
And then we made sure everyone had every number. The main thing the hurricane
reinforced is what we already knew: It all starts with good communication.”
2. Take Care of Employees
Eddie Maloney, one of the owners of a Mississippi based retail store named Cowboy
Maloney’s Electric City did not use the hurricanes as an excuse to miss payroll. Despite the
chaos around them and lack of electricity, they managed to make use of a generator to get
paychecks on time to their employees knowing that they would need every dime to get
through the following weeks and months. “The main thing you worry about in one of these
deals is your associates. We didn’t have anybody hurt, and we feel good about that. You’ve
got to make sure you take care of people.”
3. Anticipate Customer Needs
Horne LLP is an accounting firm with six offices operating along the coast of Louisiana,
Mississippi, and Alabama. In the aftermath of Katrina, the firm began a new service which
consisted of helping clients file complicated business-interruption claims. Horne also helped
its competitors by offering office space and utilities to a displaced New Orleans firm. Even
while power and phone lines were down, marketing director Shawn McGregor kept the
company website updated with his laptop and a power converter for his van.
4. Collaborate With other Businesses
For example, a pharmacy was left with no power. It had to find a way to sustain service for
its customers most of who were transplant patients who faced organ rejection and even death
if they went a day without medication. Delivery services were naturally out, so the owner
used a generator to keep computers running and partnered with other pharmacies in the area.
To get medicines to the Gulf Coast, he joined forces with another pharmacy to deliver goods
to areas that had lost mail service. “We met people at the Wal-Mart parking lot at noon and
Chick-Fil-A at 3pm. Armada Health Care, our purchasing group, drove us 165 gallons of
Journal of Applied Business and Economics

gas from New Jersey. And Novartis Pharmaceuticals called from Dallas and said: ‘I know
you need gas; what else do you need?’”
5. Focus on Your Recovery
A makeup and wardrobe consultant had her home demolished leaving her without a mailing
list, catalog, Web site or any product line. Instead of dwelling on what she lost, she began
studying her options and decided to move back to her hometown where contracts there
helped her buy a house, revise her mailing list, and spread the word that she was back in
business. The word FOCUS is the key factor for a complete recovery.

CONCLUDING REMARKS

This report documented the impact of Louisiana’s Bridge Loan Program on recipient
businesses. Looking at the big picture that the data portrayed, we can conclude that, in spite
some problems, the Bridge Loan overall worked relatively well. Because of the positive impacts
of the Bridge Loan, most businesses in the sample reported both revenues and employment
increases from 2005-2007. Although the majority of businesses surveyed reported that they
would still be operating even if they had not received financial assistance, it is probably true that
the revenue and employment numbers would not have been as good in the absence of the loan. It
only takes a quick review of the summary of the responses to question 11 on the impacts of the
loan in Appendix A-6 to see that this is indeed most likely the case. This is especially true for
small businesses which appeared to be in a more sensitive and vulnerable economic situation
after the hurricanes. These smaller businesses with fewer than 6 employees seemed to have
particularly benefited from the quick financing, since they represent over half of the group
reporting a less than 50% chance of remaining open without the loan. It does not appear that
most would have shut down permanently, but it is quite possible that many would have had to do
so at least temporarily. Thus, the Bridge loan allowed the businesses to experience a quicker
recovery phase.
Some valuable ideas and suggestions by the survey respondents for a better administration of
the Bridge loan program are provided in Appendix A-6. The suggestion that was repeated most
often was that “the loan should have a longer term, longer interest free periods and/or lower
interest rates to help with the added costs of the storms”. Strong concern with “red tape” and the
long time it took in some cases to conclude the loan transaction should be considered as needing
a closer examination as well. As in every emergency program, a better dissemination of
information about the loans and an overall quicker process were typical suggestions.
It is important to note however, that these results pointing toward a generally positive impact
of the Bridge loan program should not be considered as a panacea to be replicated during any
similar disaster crisis management program, because the loan eligibility criteria for the Bridge
Loan program might have been biased favoring those businesses that were already in a good
position to withstand the economic impact created by the storms. Individual banks were given
large discretion in determining the recipients’ loan eligibility and thus we cannot draw a
definitive conclusion on this matter.
With respect to future planning, the terms of the loan, the clear identification of those who
need it most, alternative uses of the loans, and a more sophisticated tracking method should be
considered in order to undertake a better and more precise analysis of the impacts of the Bridge
loan program. Overall, the program did provide firms with a soft landing, helped them bring
more people back to work quicker, and overall assisted them in moving forward without having
Journal of Applied Business and Economics

to shut down even temporarily. From the state’s perspective, the quick employment recovery
meant more wages, more tax revenues, and more spending all of which added value to the state
economy.

ENDNOTES

1. Throughout the report, all 2007 figures constitute projected figures.

2. Employment in Southeastern LA grew by 11.1% between 2005 and 2006, according to
the report.

REFERENCES

Christens, S. (2005). “Five Things Katrina Taught Small Business.” National Federation of
Independent Business. http://www.nfib.com/object/IO_25515.html. [accessed June 10, 2008].

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