Attorney Explains: Will EIDL Loans be Forgiven?
Based on statistical data and anecdotal information of prevalent fraud, a majority of EIDL loans are likely to default. How will the SBA and Congress respond?
DISCLAIMER: please note that the information contained in this video is for educational and entertainment purposes only. You should always consult your own attorney and your own financial and tax advisors before making any legal or financial decisions. This video is not intended to and does not create any attorney-client relationship between the content creator and the viewer. The views and opinions expressed in this video belong solely to the creator and do not reflect those of his law firm or any of his business partners.
The complete EIDL playlist:
https://www.youtube.com/playlist?list=PLfDCjb-_0b5YmTKJ0QWdsPTspmbceQvKY
My attorney profile and contact information:
https://www.woh.com/attorneys/79/vitaliy-volpov/
My blog:
http://www.succeedrei.com
My real estate brokerage:
https://www.serenityrealestate518.com/
Facebook pages:
https://www.facebook.com/SucceedREI/
https://www.facebook.com/serenity518/
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According to the SBA reports from June 21, 2020, the SBA has issued approximately 1.77 million loans, totaling over $113 billion dollars. As of June 21, 2020, the SBA has also handed out approximately 3.7 million grants, totaling over $12 billion. The SBA is currently in the process of accepting new EIDL applications. It is expected to issue somewhere around 4 to 5 million loans total by the time it is all said and done.
With all of these loans being issued, the natural question that one might have is how many of these loans will actually be paid back? If historical data is any indicator, the answer is not many.
According to the Bureau of Labor Statistics, approximately 20% of all small businesses fail within the first two years of existence. That number rises to 45% within the first five years and to 65% within the first ten years. By the year 15 since their inception, only 25% of all businesses are still in business and by the year 25, that number drops to just 15-16%. And this is under normal economic conditions!
Of course, what we are currently experiencing is not normal. We are in an unprecedented economic crisis resulting from the government shut downs of many businesses across the nation. In fact, the businesses that are applying for the EIDL are by definition struggling and experiencing an "economic injury." As such, they are more likely rather than less likely to be in danger of failing.
If that is not bad enough, there are numerous anecdotal reports of wide-spread fraud and abuse of the EIDL program. People are applying for the grants and loans that have no business (no pun intended) of qualifying. Some people are inflating their employee numbers in order to obtain the maximum forgivable grants, while others are outright lying about their revenue and loss numbers and creating shell corporations just so that they can qualify for EIDL loans with no intention of paying them back.
Given these facts, there is a very strong likelihood that an overwhelming majority of the issued EIDL loans will never be repaid in full. I would not be surprised to see default rates over the course of 30 years reach into the 90% ranges. If this prediction proves to be accurate, this would mean that millions of loans will have defaulted.
Neither the SBA, nor any other agency in the United States has the resources and manpower to handle collection and enforcement of millions of unsecured loans. For this reason, I believe (and this is just my opinion and speculation at this point), that most of these loan defaults will go unaddressed. One possible scenario that we may see is Congressional action formally forgiving some or all of the loans. Another scenario may be that the loans will simply go unenforced.
Having said that, I am by no means condoning or suggesting that anyone should engage in fraudulent behavior or to apply for these loans with no intention of paying them back. Not only is that illegal and can result in jail time for the individual applicants, but it is also immoral. Those unscrupulous individuals who are falsifying their loan applications are collecting money that could be going to deserving applicants who could use it to keep their businesses alive, to employ workers, and to stimulate the economy.
Only time will tell. But, I think the EIDL program is bound to morph from debt-based assistance into quasi or fully forgivable assistance whether by action of Congress or by the practical difficulties associated with enforcement.
Видео Attorney Explains: Will EIDL Loans be Forgiven? канала Succeed REI
DISCLAIMER: please note that the information contained in this video is for educational and entertainment purposes only. You should always consult your own attorney and your own financial and tax advisors before making any legal or financial decisions. This video is not intended to and does not create any attorney-client relationship between the content creator and the viewer. The views and opinions expressed in this video belong solely to the creator and do not reflect those of his law firm or any of his business partners.
The complete EIDL playlist:
https://www.youtube.com/playlist?list=PLfDCjb-_0b5YmTKJ0QWdsPTspmbceQvKY
My attorney profile and contact information:
https://www.woh.com/attorneys/79/vitaliy-volpov/
My blog:
http://www.succeedrei.com
My real estate brokerage:
https://www.serenityrealestate518.com/
Facebook pages:
https://www.facebook.com/SucceedREI/
https://www.facebook.com/serenity518/
------------------------
According to the SBA reports from June 21, 2020, the SBA has issued approximately 1.77 million loans, totaling over $113 billion dollars. As of June 21, 2020, the SBA has also handed out approximately 3.7 million grants, totaling over $12 billion. The SBA is currently in the process of accepting new EIDL applications. It is expected to issue somewhere around 4 to 5 million loans total by the time it is all said and done.
With all of these loans being issued, the natural question that one might have is how many of these loans will actually be paid back? If historical data is any indicator, the answer is not many.
According to the Bureau of Labor Statistics, approximately 20% of all small businesses fail within the first two years of existence. That number rises to 45% within the first five years and to 65% within the first ten years. By the year 15 since their inception, only 25% of all businesses are still in business and by the year 25, that number drops to just 15-16%. And this is under normal economic conditions!
Of course, what we are currently experiencing is not normal. We are in an unprecedented economic crisis resulting from the government shut downs of many businesses across the nation. In fact, the businesses that are applying for the EIDL are by definition struggling and experiencing an "economic injury." As such, they are more likely rather than less likely to be in danger of failing.
If that is not bad enough, there are numerous anecdotal reports of wide-spread fraud and abuse of the EIDL program. People are applying for the grants and loans that have no business (no pun intended) of qualifying. Some people are inflating their employee numbers in order to obtain the maximum forgivable grants, while others are outright lying about their revenue and loss numbers and creating shell corporations just so that they can qualify for EIDL loans with no intention of paying them back.
Given these facts, there is a very strong likelihood that an overwhelming majority of the issued EIDL loans will never be repaid in full. I would not be surprised to see default rates over the course of 30 years reach into the 90% ranges. If this prediction proves to be accurate, this would mean that millions of loans will have defaulted.
Neither the SBA, nor any other agency in the United States has the resources and manpower to handle collection and enforcement of millions of unsecured loans. For this reason, I believe (and this is just my opinion and speculation at this point), that most of these loan defaults will go unaddressed. One possible scenario that we may see is Congressional action formally forgiving some or all of the loans. Another scenario may be that the loans will simply go unenforced.
Having said that, I am by no means condoning or suggesting that anyone should engage in fraudulent behavior or to apply for these loans with no intention of paying them back. Not only is that illegal and can result in jail time for the individual applicants, but it is also immoral. Those unscrupulous individuals who are falsifying their loan applications are collecting money that could be going to deserving applicants who could use it to keep their businesses alive, to employ workers, and to stimulate the economy.
Only time will tell. But, I think the EIDL program is bound to morph from debt-based assistance into quasi or fully forgivable assistance whether by action of Congress or by the practical difficulties associated with enforcement.
Видео Attorney Explains: Will EIDL Loans be Forgiven? канала Succeed REI
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