Creating a Business Emergency Plan in 8 Steps
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Editor’s note: At Lantern, we strive to help you make financial decisions with confidence. To do this, we occasionally feature content that includes information about our partners and their products or services. We do not provide, endorse, or guarantee any third-party product, service, information or recommendations—and our opinions are our own.
Natural hazards, such as hurricanes, tornadoes, floods, earthquakes, and pandemics Human-caused hazards, such as acts of violence/terrorism and accidents Technology-related hazards, such as equipment, software, or systems malfunctions
1. Create a Business Emergency Plan Committee
2. Assess Risks and Threats
Natural disasters, which can include floods, hurricanes, earthquakes, tornadoes, and pandemics Human-caused hazards, like shooters, other acts of violence and/or terrorism and accidents Technology-related crises, such as equipment, software, or systems malfunctions
3. Conduct Impact Analysis
4. Create a Plan Draft
Make sure the plan is comprehensive. Try to think each scenario through so you don’t leave out any important considerations. Create a plan that’s easy to understand. Communication can be difficult during a time of crisis, so keep things simple. Be sure the steps are straightforward. Try to minimize ambiguity and keep it clear exactly what needs to be done in what order. Assign roles. Clarify now who in the company will handle which tasks so that no one is in doubt during a time of crisis. Note important information, like where any emergency equipment and/or backup business records will be stored. List (and update) the types of business insurance you have that are relevant to the emergency, as well as contact info for the insurance companies and policy numbers.
5. Test the Plan
6. Make Improvements
7. Distribute the Plan and Train Your Team
8. Plans for Emergency Funding
Types of Emergency Funding
SBA EIDL. The Small Business Administration (SBA) offers Economic Injury Disaster Loans (EIDL) with the aim of helping small businesses with financial challenges resulting from a disaster. Right now the EIDL program is focusing on COVID-19 Economic Injury Disaster Loans. Business owners can borrow up to six months’ worth of working capital. On the plus side, these loans offer low interest rates and long terms: The fixed loan rates are 3.75% for businesses, and loan terms are 30 years. On the negative side, the application process may be lengthy and there are restrictions on what you can use the loan for. Business Line of Credit. If you want to be prepared for an emergency that may or may not happen, you might want to consider this form of funding. Much like a credit card, a line of credit makes a certain amount of funding available for you to draw on at will. If you don’t draw on it, you won’t need to pay it back. If you do draw some out, you’ll be charged interest only on that amount. Pluses here include the fact that you don’t have to pay interest on what you don’t use and once the line is set up, you can draw on it quickly in case of emergency. As for negatives, once you draw on the money, interest rates and fees may be high; some lenders may charge maintenance fees; and if you haven’t set a line of credit up in advance, it may be more difficult to do so during an emergency.
Alternatives to Emergency Loans
Online loans often come with more flexibility in the amount that can be borrowed, the loan term, and the qualifications required. Online loans typically involve less paperwork and can be processed more quickly. It’s easier to compare online loans, thanks to web-based comparison tools. Borrowers with high risk levels may be able to qualify more easily with online lenders. Online loans may be more expensive in terms of interest. There’s usually limited in-person interaction involved in an online loan. Some online lenders may not be well-established yet. (In fact, some may be small businesses themselves.)
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