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Puerto Rico Small Businesses and the 2017 Hurricanes

Federal Reserve Bank of New York
September 27, 2018

This was co-published with the Federal Reserve Bank of New York.

The Federal Reserve Bank of New York conducts an annual survey of Puerto Rico small businesses1 to provide stakeholders, including business leaders and policymakers, with relevant and timely information on this important economic sector. The 2018 survey was fielded from March through May 2018 and asked firms to report on their business experiences in 2017, including the impacts of hurricanes Irma and Maria. (See Puerto Rico Small Business Sector Trends for results on the entire small business sector.)

Seventy-seven percent of Puerto Rico small businesses self-identified as having incurred a loss directly from hurricanes Irma and Maria. The Puerto Rico Small Businesses and the 2017 Hurricanes report focuses on understanding those firms' challenges and responses to that impact.

Takeaways include:

  • 77% of small firms reported incurring a loss directly due to the hurricanes in 2017. The storms affected firms across the size, age, and revenue spectrums.
  • The financial impact of the hurricanes took various forms. The most frequently mentioned impacts were decreased revenues (71% of firms) and increased expenses (66%). Damage to firms’ assets and property was reported by a majority of firms (53%), and increased indebtedness was also common (48%).
  • A majority of affected firms held some type of insurance, but few were fully covered. Most held property insurance; wind, flood, and business disruption insurance were each held by just one in five firms. 37% of affected firms held no insurance. Unfortunately, only 4% of firms with insurance had losses that were fully covered; an additional 23% were partially covered by their insurance. Nearly one-third had claims pending at the time of the survey in early 2018, and the remainder were not covered or had not filed a claim.
  • Only 22% of affected firms applied for financing to address hurricane losses. Of these firms, most included government entities among their financing sources. Unlike the eased availability of credit for the sector more generally (75% of all applicants received full or partial funding), financing specifically to address hurricane damage was lower, with 65% of firms that applied receiving full or partial funding. Sample sizes are too small to statistically compare approval rates among lenders. Moreover, if a firm applied to more than one type of lender, we do not know which lender(s) approved the financing. Given these caveats, the data show 58% full or partial financing approval rates for firms that applied to a government entity, either alone or in addition to other lenders.
  • Firms used a combination of insurance and financing to cover hurricane losses with varying degrees of success. Firms using insurance or financing in order to cover hurricane losses most often had funding shortfalls. Only 6% of affected firms may be characterized as having their insurance claims and/or financing applications fully met. 38% of affected firms received partial funding or outright denial of claims and applications. 19% of affected firms had pending insurance claims or applications at the time of the survey.
  • Demand for financing continues. Most affected firms that applied for financing in the aftermath of the hurricanes still seek additional financing to restore business operations. Micro-loans of $50,000 or less are in demand.
  • Business confidence is high for 2018. Most surviving firms—those open or only temporarily closed in 2017–are highly confident that they will be open for business in 2018.
  • Entrepreneurial energy for 2018 is high among surviving firms. A majority of affected firms plan to update their offerings, with new or different goods or services in 2018. One-third of affected firms plan to restructure their business processes. And over one-quarter of affected firms plan to expand their business outside Puerto Rico.


1 Small businesses have fewer than 500 paid full- or part-time employees.
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