How Climate Disasters Are Threatening the Future of Small Businesses: What You Need to Know

The United States is filled with small businesses that are vital to our communities. However, when disasters caused by climate change occur—like hurricanes or wildfires—these local shops often suffer greatly. The challenges they face following such events can last for a long time.

“News stories tend to focus on the physical destruction,” says Kyle McCurry from Explore Asheville in North Carolina, which faced severe flooding from Hurricane Helene last fall. “But the economic toll on small businesses can be just as damaging, and it lingers.”

Small businesses are more at risk during climate events compared to larger companies. Shehryar Nabi of the Aspen Institute highlights that these shops often lack the resources to prepare for and recover from disasters. In a recent report, he details how limited funding and support can cripple small businesses after severe weather hits.

For instance, the economy in Asheville, known for its local artisans and breweries, took a hit after Hurricane Helene struck just before the busy fall tourist season. In 2023, visitors spent $2.9 billion there, but the hurricane caused revenue drops of up to 40% for some businesses.

Some shops, like TRVE Brewery and Vivian’s restaurant, still haven’t reopened months after the storm. New Origin Brewery, opened in 2021, experienced catastrophic damage when floodwaters pushed railroad cars into its building. “We maxed out our insurance but still faced huge losses,” co-founder Dan Juhnke explains. Their only option? Apply for a buyout program from FEMA to limit future risks.

As of now, around 85% of Asheville’s businesses have reopened, according to McCurry. This is better than the national average; after disasters, about 40% of small businesses don’t reopen at all, according to 2014 FEMA data. A Federal Reserve study showed that only 14% of small businesses received federal aid in 2021. This lack of assistance leaves many struggling to stay afloat.

Support is vital for survival, but it doesn’t always reach those who need it most, notes Nabi. Alternative funding from state and local sources often doesn’t fill the gap, leaving many small businesses without quick cash flow during tough times.

Pre-disaster planning can make a enormous difference. Benjamin Collier, a risk expert, stresses that understanding insurance coverage and having contingency plans shouldn’t feel like distractions—they’re essential steps for survival. Small business owners often shy away from acknowledging the risks, leading to dire consequences when disasters strike.

Nabi suggests promoting different types of insurance that automatically pay out after a disaster, so funds are available immediately. He emphasizes that greater investment in pre-disaster readiness could minimize the damage to businesses. Unfortunately, funding for preparation is substantially less than what is available for post-disaster recovery.

Pat Nye, who oversees small business development in Los Angeles, notes similar issues following recent wildfires. Unlike homeowners, small businesses don’t often receive discounts for enhancements that make their buildings more resilient. “There’s no incentive for businesses to upgrade,” he claims.

Kristen Fanarakis from the Milken Institute calls for a complete overhaul of how governments support small businesses during recovery. One idea she proposes is creating a “small business resilience czar” to streamline the assistance process and improve long-term support. “It’s about more than just the buildings—it’s about the entire economic framework supporting these businesses,” she asserts.

Adapting to climate challenges is critical. As communities face more frequent extreme weather events, ensuring the survival of small businesses should be a priority. In the end, these businesses are not only economic drivers; they’re often the heart of their communities.

For more insight into small business resilience, visit the Aspen Institute’s report on weather-related challenges.

This article originally appeared in Grist.

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