CNN
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At Teddy and the Bully Bar restaurant near downtown Washington, DC, business hasn’t been the same since the pandemic hit.
“It’s very challenging,” said owner Alan Popowski. “I’m still going to climb the mountain for quite some time. Probably for the rest of my life.”
The pandemic has closed two of Popovski’s four restaurants in the area. He said the government loan saved the remaining two. But with city centers struggling to bring back passenger and foot traffic, he said revenue was still down more than 45% and they were struggling to stay open.
To make matters worse, now is the time to start paying back those loans.
“We just managed to pay the landlord back,” Popowski said. “It’s really a feeling that you’re just a hamster on a wheel.”
At the start of the pandemic, as business ground to a halt, about 3.8 million small business owners took out economic injury disaster loans (known as EIDL loans) from the federal government, averaging $100,000 per loan, according to the Small Business Administration. Unlike some other pandemic programs, this 30-year loan, carrying a 3.75% interest rate for businesses, was intended to be repaid.
After more than two years in arrears, the first EIDL loan monthly payments are due. About 2.6 million businesses across the country will owe money by the end of January.
Popowski said he owes roughly $780,000 to the federal government, and began receiving monthly bills of more than $3,700 in October.
“We can’t afford anything, but all we’re doing is paying the interest right now,” he said. “We didn’t push the principal.”
a new one Survey The National Federation of Independent Business found that only 36% of its small business members have reached their pre-pandemic sales level, while 31% of businesses are still below 75% of their pre-crisis sales.
Coming out of the pandemic, small businesses have faced tough hurdles like staff shortages, supply chain issues and inflation.
Now add a potential recession, just as these EIDL loans come due
“The challenge is immense for many of them and they have to navigate many headwinds,” said Holly Wade, executive director of the NFIB Research Center. “It’s just one more expense that they have to deal with and some small business owners, unfortunately, are going to struggle with meeting those obligations.”
Lisa Klein, who owns and operates an outpatient physical therapy practice with offices in Virginia and Washington, D.C., said her practice is still trying to bounce back after Covid-19, which is putting some patients away or forcing them to make last-minute purchases. . cancellation
“The cost of everything has gone up,” Klein said. “The whole business is still suffering, and that’s just adding insult to injury.”
Klein took out a $200,000 EIDL loan at the start of the pandemic but paid back half of it a year later when interest began to rise. The SBA estimates that businesses accrue between $32 billion and $34 billion in interest during the 30-month deferral period.
He is now paying about $1,000 a month, with a total balance of just under $80,000.
“It’s like you’re swimming and trying to get your head above water, and you just keep getting hit by something else,” Klein said. “But we have no choice, because if we don’t pay it, it’s going to collect more interest.”
According to the SBA, struggling businesses can file a hardship declaration and make partial payments of 10% of regular monthly payments with a minimum of $25 for six months. But interest will continue to rise, forcing owners like Klein to weigh short-term protection against a bigger bill.
Borrowers are still responsible for repaying the loan even if their business closes, unless the loan is filed in bankruptcy, according to the SBA. For EIDL loans over $200,000, a personal guarantee is required for individuals who own 20% or more of the business.
Popowski said he considered closing Teddy and The Bully Bear but was motivated to keep fighting by the memory of his father and co-founder Melvin, who died in 2014, just a year after the restaurant opened.
“I feel them saying keep pushing, Alan, keep pushing,” he said. “I think they are the wind beneath my wings.”
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