The Long-Term Impact of Disaster Loans: The Case of Small Businesses after Hurricane Katrina

The US government provided $2.6 billion of small business administration (SBA) disaster loans to individuals and businesses in Mississippi after Hurricane Katrina in 2005. However, existing literature has not fully explored the firm-level effects of post-disaster loan aid, specifically, the effect on small businesses. The objective of this article is to examine whether SBA disaster loans played a significant role in the performance of small businesses after Hurricane Katrina. Data from a sample of 287 small businesses in Mississippi that were operating before Hurricane Katrina and still operating in 2013 were used in the analysis. Two hypotheses were tested: (1) small business owners that received SBA disaster loans have higher revenue change compared to before Katrina than those who did not receive the loan; (2) small business owners that received SBA disaster loans perceived their businesses to have higher revenue than before Katrina. Receiving a SBA disaster loan played a positive and statistically significant role in determining the actual revenue change and owners’ perception of revenue.