Why are SBA Loans a Bad Idea?

Why are SBA Loans a Bad Idea?

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[jlara]

An SBA loan is not the problem, paying only the minimum payment on any loan is the problem. Also, taking on debt that you can't afford is a problem.... but it's not the SBA loan in and of itself thats a problem. So no, SBA loans are not a bad idea if you have a plan.... no debt is a problem if you have a plan on how to use it and pay it back. If you have a business, you're going to take on some type of debt, you just have too unless you have a ton of cash sitting in your bank account that you can use to finance your business. But usually thats not the case. You're going to have to take loans out somewhere at sometime unless you're seeling equity in your business.

[carloswithac]

This was an irritating call. Just her lack of order.

[TheWatchman]

She's buying time and that move wasn't a bad one. She did a balance transfer with a lower interest rate and a lower monthly payment. She may even have room to improve her life if she's disciplined and plays her cards right.

[Josh-fwyt]

Those SBA loans have covenants that say you can’t use the proceeds to refinance existing debt. If she’s not able to demonstrate appropriate usage of the money, she may be in trouble. Surprised Dave didn’t mention that.

[sw]

Dave was more upset with her because she didn't follow his typical advice and live like a homeless person for 2 years to pay off the credit card debt. IF this woman does the right thing and hammer the loan with extra payments to pay off the loan as fast as possible she'll be ahead of the game. 4% interest? Nice! Just stop telling people " I got an SBA loan" to pay off my credit card debt.

[chaimgluck]

It's actually illegal to pay off other debt with the SBA loan

[Carlos-shiu]

“I don’t know how to do that”. You get a frickin job lol

[ericboxer]

The ELDI loans is once in a lifetime debt....
3.75% fixed, 30 years, no payments for a year, and no recourse to the owner..no personal guarantee, the debt dies with the corporate structure in the event of liquidation...i own multiple businesses and grabbed as much as that as i could, great arbitrage opportunity.I get Dave's strategies are aimed at less sophisticated people financially.

[markyouneva]

I guarantee a good amount of the caller's credit card balance was interest charges accumulating at what appears to be a default rate of 29.xx% APR. She might have missed a some payments. It is true that she needs to increase her income and do so quickly, but we're in a pandemic with 20% REAL unemployment rate. Given these conditions, and given the fact that her debt was growing by $400 each month, I think he made a good financial decision to refinance it at 3.75% APR. The 30 year term doesn't matter as long as she pays it off ASAP, maybe in 2-5 years once the economy starts to improve and she can increase her income. We get it Dave, debt is bad and prolonging a debt situation isn't ideal, but this idea that everything has to fit into only two categories "good" or "bad" could be counter to what you're trying to teach people. Clearly, there are two separate issues here. If it were a medical situation, you first need to stop the bleeding/suture up (aka refinance the debt) then do the healing/recovery (aka increase income and pay down debt). If you tell someone they made a bad move when they actually did the best under the situation, you are not helping them build their self confidence with respect to proper financial planning and management.

[ruskie]

Getting the loan was a great idea. You can always pay off quicker if you want Steve.

[tymarls]

The title is misleading. This says nothing about SBA loans or analyzing them.

[lepakage]

So many people have done a wonderful job analyzing the video. I just wanted to speak to the numbers for some context.

29% and 3.75% are the annual rates of interest. 29% on $19, 000 credit card debt is interest only of $459/month. $19, 000 at 3.75% amortized over 30 years has a payment of $87.99 with $59.38 as an interest expense.

Let’s say the SBA loan had a 3% fee - that would still only be $570 which is basically only one month of interest! So, yes - Dave is right in that many people would pay the minimum and spend the excess. To assume everyone does this is wrong and not helpful. That $400 of interest saved can go a loooong way!

[OIPIO]

This call is so irritating, if you’re going to call in at least have some info ready. It sounds like to me she needs to get a real job on the side until being an artist proves to make a lot more money. Even driving Uber for a couple hours at night would be a great start not to mention she could promote her paintings or drawings to passengers. This being said she doesn’t seem to eager to pick up extra hours anywhere 🤷🏻‍♂️

[queen.kristal]

I have a feeling she is not making enough to pay this debt off

[oblivion]

Please have your numbers in order before calling dave ramsey show lol

[JASONMAKRIS]

The biggest problem is she violated the terms of the EIDL by not using it for what it was for.

[danawaldrop]

SBA loans are not supposed to be used for your personal expenses!

[zvaults]

Bit strange to call loan consolidation a scam and then describe the problem: the person who has the loan might make smaller payments.

We are talking about adults here. They can take some freakin’ responsibility and stick to a proper payment schedule. It is a lot better to have a (much) lower interest rate. That wasn’t stupid, that’s great.

[patrickOsully]

The figure of "99% of people won't do that" is false. People do learn and change. Even if she paid just $500 a month she'd be done with it less than 5 years. I know people who've had bad debt like credit cards and change their ways and get rid of it in a reasonable amount of time.

[judymckee]

Why don't she share her house? Cut her bills. Cook and refrigerate for 1 week.