The Small Business Administration is expected to increase the cap on EIDL Loans to the full $2M sometime relatively soon. At the beginning of the pandemic the cap was $150K, then in March of 2021, it was raised to $500K.
Prior to the pandemic, the EIDL always had a $2M Cap. Officials were worried about running out of funds, so the cap was lowered temporarily.
Not every business will qualify for the increased amount. Part of qualifying for the increase is based on your 2019 revenues, less your cost of goods solds, minus any EIDL Loans already received. You may also need to show your 2020 financial statements and demonstrate a loss in order to qualify for the increase.
Another interesting fact is that borrowers may be able to use this new money to pay off other commercial debt including credit cards and other government backed debt. In prior offerings, these actions were strictly forbidden.
There’s plenty of funds left in the program. As of August 19, 2021, there was an additional $108B available, but that might vanish quickly.
The new administration has already signalled their desire to remove the excess funds currently sitting in the EIDL Advance Grant Program and use them to fund the new $1.1T infrastructure deal.
The same could happen to the rest of the regular EIDL money. Given that the program was already scheduled to sunset at the end of this year, I would suggest getting your application in at the earliest possible moment if you want the increased funding.
There will probably be a mad dash to get in given the existing needs in the community. Also, the available funds could vanish overnight with the stroke of a pen.
Let me leave you with this.
I’m taking a minute looking into the future, and worrying about our overall economy.
Before all of this began we were expecting a real estate recession, but this new one would be much different than the last. The ’06 nightmare was a residential real estate meltdown. This would be commercial.
Most commercial properties that have a retail component are having difficulties. Given the Amazon Effect and the fact that it’s hard to find tenants that will actually pay their rent, landlords are having problems paying their mortgages.
When they can’t pay their mortgages, the banks foreclose. When enough loans go badly, the banks are taken over by the FDIC. In other words, commercial real estate prices will drop significantly with all of the excess properties being dumped on the market at bargain basement prices.
Of course, these issues are only exacerbated by the remote work situations that many companies have adopted. All of that unused office space is going to need to be repurposed, causing even more problems with property owners not being able to pay their bills.
Most of my real estate investors are getting out of their bad deals now, stockpiling cash, and waiting a couple years to buy properties once the prices have gone down.
Also, we’re in an inflationary period. All you need to do is fill up your tank or buy a piece of wood at the local hardware store to see this with your own eyes.
When prices inflate, consumers don’t have the additional money necessary to buy discretionary income goods and services like travel and entertainment. If inflation isn’t controlled, these industries could have a difficult time in the near future.
Business travel is probably a thing of the past. Why would anyone fly anywhere for a meeting when they can have that meeting for free on Zoom?
Other industries like pleasure travel and restaurants will also have some difficulties in the short term. The numbers on the delta variant continue to rise and people will slow down their spending habits in these areas if the virus isn’t controlled.
The question becomes whether or not the federal government will continue pumping money into the economy. They cut off the additional unemployment benefits last week which will certainly affect overall consumer spending.
Of course, the problem with the federal deficits will sooner or later catch up to us. It would be one thing if the economy was expanding, but with last year being dominated by C-19, that obviously didn’t happen.
Sooner or later, you need to balance the books. Meanwhile, the stock market continues to climb.
I don’t want to ring the alarm bell quite yet. There are any number of things that could happen to either forestall or eliminate any number of these issues, but I want you to know that they’re out there.
As usual with situations like this, what you’ll need to get through it is cash. The only thing still available that doesn’t need to be repaid in the stimulus package is the Employee Retention Credit. If you haven’t taken advantage of this yet, please sign up for our program today.
We need to be prepared, planning for any eventuality. Like it or not, that’s the job.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need help with Employee Retention Credits, PPP Loan Forgiveness, Payroll Service, or Bookkeeping and Tax Work, please contact us today. I’m here and I remain,
Accounting Solutions Ltd.
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