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Hey Newsies,
Today we’re looking at an article from the Associated Press (AP) reporting on the businesses that are still struggling to pay off loans taken out during the COVID pandemic. I’d love to hear your thoughts and experiences on this!
AP News: COVID-19 government disaster loans saved businesses, but saddled survivors with debt
The article states that small businesses that haven’t paid off the loans they took out during the COVID-19 pandemic may be in worse shape now than others. In 2020, the US Government’s Small Business Association (SBA) set up the Economic Injury Disaster Loans (EIDL) as one of the many programs to help struggling businesses. These are low interest loans, with a 30-year term and 3.5% interest rate, which could help businesses in need pay their operating expenses when income was low.
While these loans provided a much needed lifeline to businesses that would have otherwise closed down under the pressure of the time, four years later many are still struggling to pay off the loan and remain saddled with debt. This debt can be an immense strain on a business, both financially and mentally, feeling like an impossible task to pay off. Having an outstanding debt like this can also make a business be denied for other lines of credit.
In my shop, we were considering taking an EIDL loan, but we were hesitant to take on more debt, so we decided to wait a bit to figure things out and see what our options were. In the end, we didn’t take an EIDL loan, but received one of the SBA forgivable loans which would turn into a grant based on qualifying expenses. Luckily we were able to go through the forgiveness process and were approved, and ended up not having to pay back any of the money received. This money was absolutely part of what kept us going as a business, saving us and enabling us to stay in business through those difficult times. If we had taken out a regular loan, even at a low interest rate, it would have taken us a tremendous amount of time in order to pay it back, and we may absolutely have been like one of the subjects of this article and survey.
What’s your perspective:
- Did you take out any loans taken during the COVID pandemic? Why or why not?
- If you paid yours off: what strategies did you use to finish it?
- If you still have debt: how are you planning on paying it off? What effect is it having your business?
Can’t wait to hear your thoughts!
Pesso
This article is for informational purposes and does not constitute legal advice. For guidance or advice specific to your business, you should consult with a qualified legal professional.
Small Business Evangelist, Square
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We did take an EiDL loan- we have been paying it off since distribution. While we still have a loan we are not struggling to pay it off.
Co-Owner Amityville Apothecary
www.shopamityvilleapothecary.com
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Thanks for sharing, @DinaLRosenberg ! I'm so glad that you haven't been struggling to pay it back.
How far along are you in paying it back?
What strategies do you use to make sure your have enough to pay it on time?
Are you putting any extra towards it or just the minimum payments?
Is having it adding any stress or anything?
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I took your question as invitation to look at the SBA (hahaha).. we have around 44k left and we do pay extra monthly.
I'm in no rush to pay it off early as the interest is so low.
We have it come out on auto pay every month so we don't think about it.
It doesn't stress me out and frankly I don't even think about it.
Co-Owner Amityville Apothecary
www.shopamityvilleapothecary.com
Instagram | TikTok @AmityvilleApothecary
Podcast: Apothecary After Dark (YouTube & Spotify)
I'm so glad I could inspire you to check it out!
That's perfect that you're not in a rush, have it on auto, and that you don't think or stress about it. That sounds like a great deal and so happy to hear!
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I wish that we'd gotten a forgivable loan.... we took the EIDL and we've barely made a dent in the interest. We pay a round number each month so that more goes to the total owed but unfortunately that is only $7 per month. We definitely do not have the money to pay more per month or pay this off in a short amount of time. It sucks!! We took it because it was helpful to have the cash at the time.
Don't know what it will take for us to pay it off... the only thing I can assume would be if we can finally start operating another business full time that provides enough income, we could use more of the cash in this business to put towards it. We need to find a way to do that because we can't close the business or sell it in 8 years with it still there....
Arctic Heat
R&C Property Management
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That's so tough, @CareyJo -- loan interest can be absolutely brutal, and every dollar does help to slowly knock it away. I'm glad that it served it purpose, but I'm sorry that it's become somewhat of a burden. That does sound really frustrating and a bit disheartening.
I know you weren't the biggest fan of Profit First, but maybe a couple of the strategies from that book could help put aside some extra money, help cut down on expenses, or find new ways of bringing in a bit more that could help? Maybe @TheRealChipA or @Lovewell could share a bit of some of the top bits that worked for them?
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@Pesso ;
I filed the 1st round to get a PPP loan and did get an EIDL loan for about $7500.00. This was forgiven and I only got it to cover for 3 months of being shut down to help for Fixed costs. But my rent is about $6000 a month so I was in the hole and have been struggling since. Not to pay the loan off because it was forgiven but in general since those months would have helped with having more income being open than I received in the EIDL. What Business can afford $2500 a month income with over $6000 in rent per month. I tried for the 2nd round of loans but was told not eligible because we have no employees besides family members.
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Pocono Candle
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Thanks for sharing, @Candlestore -- I'm so glad that your loan was forgiven, but that's so tough that it didn't cover very much at all, and that you've been struggling so much overall. Dang, that's so tough that not having employees made you ineligible -- every business struggled and deserved some decent help.
Is that loss still affecting business today? What have you done to try to cover costs and make it through?
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