- The National Restaurant Association sent a letter to Isabella Casillas Guzman, administrator of the U.S. Small Business Administration, Monday to wipe out accrued interest and lower interest rates on COVID-19 Economic Injury Disaster Loans.
- The NRA also urged the SBA to establish special repayment plans for borrowers in hard-hit industries, asking the agency to erase 20 years of EIDL obligations for businesses that agree to, and then meet, a 10-year payment plan.
- An August NRA survey indicates many operators fear they cannot repay their EIDLs as costs rise, economic growth slows and anti-inflationary monetary policies squeeze businesses.
The NRA’s August 2022 business conditions survey found that two-thirds of restaurant operators took on new debt during the pandemic, with 48% of surveyed operators contracting EIDLs.
Nine percent of operators with EIDL obligations said they had fully paid off the loans, and only one-third have begun to repay the loans. Of the remaining operators, a vast majority said they didn’t think they would be able to repay their loans, with only 23% saying they’d be able to make scheduled payments once the deferral period for the loans ends.
On the basis of that operator concern, the NRA asked the SBA to waive all interest that accrued on EIDLs during the 30-month deferral period and lower overall interest rates on the loans from 3.75% to 1%.
“An inflexible EIDL repayment process will likely trigger a second wave of closures,” Sean Kennedy, NRA’s EVP of public affairs, wrote in the letter to the SBA.
But a reduction in interest rates and other forms of debt relief may be at odds with the broader policy pursued by macroeconomic authorities. On Sept. 21, Chairman of the Federal Reserve Jerome Powell announced the Fed would raise the federal funds rate by another 0.75%, in part to slow economic activity, raise unemployment and slow year-over-year inflation.
Interest rate increases, along with squeezed consumer purchasing power, seem set to trigger deflation in housing prices, and changes in other major markets. This may make it politically difficult for the SBA to undertake a similar approach to forgiveness that it displayed for Paycheck Protection Program loans, more than 10 million of which were forgiven. Loans made under EIDL cannot be forgiven, according to the SBA’s website. As of press time, the SBA did not respond to Restaurant Dive’s request for comment regarding its power or desire to undertake the actions requested by the NRA.