Repayment on federal loans granted during the pandemic is set to begin.
Nearly 4 million small businesses and nonprofits nationwide received billions in government loans during the pandemic. The money was provided through the Federal Covid-19 Economic Injury Disaster Loan or EIDL program. The program provided emergency working capital in the form of low-interest disaster loans. The maximum amount granted was $2 million but the average loan approved was $100,000. Initial payments were deferred for 30 months but, as of Jan. 1, the period has ended for 1.6 million businesses who now have to start making loan payments.
The payments come at a time when many businesses haven't yet recovered and are still facing challenges including staffing shortages, inflation, and a looming recession.
"EIDL loans are a 30-year note, and it's a low-interest rate but still, you know, borrowing an excessive amount of money. It's basically having a mortgage on your business and it's difficult, " said Andrew Ullom, owner of Union Special Bread in Raleigh. Ullom took out a PPP loan and chose not to take an EIDL hoping to try to avoid more financial obligation in uncertain times. He said he understands how the repayment can be a hardship as so many businesses continue to struggle in the pandemic-induced economy.
"I think personally, we will be five years into the pandemic before we start to normalize a whole lot," Ullom said.
The SBA is offering accommodation plans for any businesses that have an EIDL loan due but are still experiencing short-term financial hardship.
They will allow businesses to make 10% of the regular monthly payment but interest will still accrue.