In 2020 and 2021, COVID-19 Economic Injury Disaster Loans were a lifeline for small businesses.
But now some small businesses are having trouble paying them off. And a Small Business Credit Survey report from the 12 Federal Reserve banks shows that small businesses that haven’t paid off COVID-19 Economic Injury Disaster Loans are in worse shape than other small businesses.
Dwayne Thomas, owner of events lighting company Greenlight Creative in Portland, Oregon, got a roughly $500,000 EIDL loan in 2020, when all events shut down, crippling his businesses.
EIDL loans were designed to help small businesses stay afloat during the COVID-19 pandemic. Most of these loans have a 30-year term with a 3.5% interest rate. With lower interest rates than typical loans, the loans were provided for working capital and other normal operating expenses.
This is probably heartless: but if your business was going to to under without massive loans, and you took said loan, well, congrats: the existence of the business which (from the article) can afford to pay it back is only there BECAUSE of the debt.
It’s not some boat anchor anyone but the owner undertook, and they did it for a good reason. Does it make your company worth less if you try to sell it? Sure, but how much is a bankrupt and dead company worth, again?
I’m generally NOT a ‘the free market will sort it all out’ type, but in this case, that feels like the correct thing to let happen.
I mean, isn’t this how CEOs and owners constantly justify their ridiculous salaries? Because they supposedly risk all the debt and liability?
Exactly, and if there’s a group of people that are more ‘wait no, not like that!’ than small business owners, I’ve yet to meet them.
I mean if you’re 60 and your business is having issues and you’re planning on retiring in a few years you’d think the rational thing would be to sell the damn business now, and retire a little early.
But small-business-brain goes ‘Well, if I take $500k in debt on, I’ll be able to make my business worth twice as much!’, which sounds great, until it doesn’t work out, and now it’s someone else’s fault that it happened.
Did the guy in this story SAY he did that? No, but I mean, it’s almost certainly at least part of what happened.
