The Unexpected Covid Repercussion in 2023
The repercussions of 2020 persist. In our industry, we've observed an unusually high number of businesses closing down in the past nine months. What seems to be the shared factor? All of them received EIDL and/or PPP loans during the peak of the Covid crisis. These loans were intended to sustain businesses and preserve employment during the shutdown and its aftermath. What is the problem then?
The EIDL loan payments had been deferred until June 2023. Although these payments were originally manageable based on pre-2020 revenue, some companies have not been able to regain their previous financial standing. As a result, the current payment amount has become challenging to afford.
Companies were misled into believing that their cash flow was secure due to the substantial loans or grants they received. Consequently, they began spending more without generating additional revenue. They postponed dealing with the consequences, hoping that their income would catch up with their increased expenses. Unfortunately, this did not happen, leaving them financially strained and dependent on whatever credit they have left. Ultimately, they are facing the possibility of shutting down their operations.
While many companies are experiencing a harsh reality this year, your company doesn't have to suffer the same fate. If your company received any financial assistance during Covid, compare your expenses to pre-2020 revenue. If you notice that your expenses have exceeded your revenue, take immediate action to reduce costs before it's too late.