I am not surprised that the SBA has begun to approve and fund the larger EIDL loans up to $2 million. I do not have beef with the idea of issuing these loans to borrowers who have been hit hard by the pandemic. These businesses need the money to recover and survive.
However, I am concerned about the issuing of these loans to companies that have survived and even thrived during the pandemic. The lackadaisical approval of these loans is far from a surprise, as the SBA requires hardly any proof of economic injury to get these loans. It feels like the SBA, in extending the application deadline until the end of 2021, is acting like a corporate department rushing to spend their budget in the last quarter of the year, because they don’t want to look bad that they didn’t spend it.
Over the last few days, I have met and spoken with borrowers all across the country who have had their most profitable year in the history of their companies last year, and are now having large EIDL loans wired into their accounts. Some of you may be asking, if this is the case, why they are applying for more EIDL money. The simple answer is FOMO or “Fear Of Missing Out.” Passing up on $2M at 3.75% over 30 years seems like a silly thing to do when nearly everyone around you is getting the money and using it bring their businesses to the next level. Sure, it isn’t the “right” thing to do but it’s a lot easier not to feel guilty when everyone else around you is also taking advantage of it. If you don’t take advantage of this cheap money, your competitors may get a leg up on you.
I understand that every business had a slightly different approach to handling the pandemic because we had never seen anything like this before. For example: In my community, there are two popular restaurants beside each other that I liked to frequent. When the pandemic hit, one restaurant did everything in its power to stay open and keep everyone employed. Personal protective equipment was ordered, tents were put up outside for outdoor dining, and they had their restaurant put on every third-party delivery system that was available. They were determined to make it through this. On the other hand, the competing restaurant simply closed up, waited for the world to reopen, and was able to survive because of the aid they received from the government. I know that “fair” is not a term that could ever be applied to business or life, but I strongly admire those entrepreneurs who still have the drive and resolve to never accept defeat.
I’m not saying that businesses shouldn’t have had any relief from the government. There were many businesses who had a plan or savings in place for a tough season or two and continued to work hard and do everything they could to stay afloat and it still wasn’t enough. For them, programs like the PPP and EIDL were a lifeline. But as I see more and more people taking EIDL loans as a means to cheap money, and not necessarily because they need it, I question whether or not it was the right move to raise the EIDL cap. Inevitably, there will be a few businesses called out for fraud, but the odds of that being you are slim to none. The SBA doesn’t have the capacity to review every loan, and therefore many will continue to get away without repercussions for their actions.