• The National Restaurant Association says restaurateurs are facing higher-than-expected payments on their Economic Injury Disaster (EIDL) loans.
• The association called on the SBA to eliminate the accrued interest debt on the loans and to lower the interest rate from 3.75% to 1%.

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The National Restaurant Association is seeking federal relief for restaurant operators facing Economic Injury Disaster Loan (EIDL) repayments they can’t afford, as explained in a letter the association sent to the Small Business Administration (SBA) on September 26.

In the letter to SBA Administrator Isabella Guzman, Sean Kennedy, the association’s executive vice president for public affairs, said restaurants “are now starting to receive SBA repayment notices that are higher than expected following the automatic 30-month deferment period. A 3.8% interest rate means that a $100,000 loan has accrued almost $10,000 on top of the initial amount.”

An association survey found that almost 50 percent of restaurants received the loans, Kennedy wrote, “but less than 1 in 4 restaurant operators say they will be able to make scheduled principal and interest payments. Loan delinquency and default are major concerns across the industry.”

Kennedy called on the SBA to eliminate the accrued interest debt that incurred on the loans during the 30-month deferment period, “as deferment was a necessity—not an option—for most restaurant borrowers.”

The SBA should also lower the loans’ interest rate from 3.75% to 1%, putting the EIDL rate in line with rates for Paycheck Protection Program loans, the association said.

Finally, the letter asks the SBA to create “good borrower” relief for restaurants. This approach would encourage borrowers to “establish a repayment plan and make required payments for 10 years, with an SBA commitment to eliminate the remaining 20 years of EIDL obligation. This both encourages EIDL repayment and saves the SBA from two decades of loan servicing.”

Supply chain problems and inflation have put the restaurant industry “once again on unstable ground,” Kennedy wrote.

“Inflation continues to eat away at the average restaurant’s already small margins,” the letter states. “Even if a restaurant’s current sales recovered to its 2019 pre-pandemic levels, its additional costs would turn a 5% profit margin into a 12.3% loss.”