COVID Relief: You Could Get Partial Forgiveness, Increased SBA Guarantee, & More On 7(a) Loans & Microloans
The $900 billion COVID-19 relief package signed into law on December 27, 2020, included $284 billion in new funding for the Paycheck Protection Program (PPP), the forgivable federal loan program established in March 2020 as part of the initial pandemic aid package known as the CARES Act.
While the renewal of the Paycheck Protection Program was the portion of the relief bill that received the most attention, another portion of this bill included changes to the SBA’s 7(a) program as a whole (technically, the PPP falls under the 7(a) program) as well as the SBA’s 504 Microloan program. These changes include new forgiveness rules, reduced fees, and more.
Read on for further details on this SBA 7a loan forgiveness initiative.
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New SBA Loan Rules For COVID Relief
This latest pandemic relief package makes the following changes to the SBA’s 7(a) and 504 Microloan programs.
- New and existing 7(a) and 504 Microloans from the SBA will get three months of forgiveness of principal and interest payments, capped at $9,000/month.
- Businesses in industries identified as particularly hard-hit by COVID (foodservice, hotels/accommodation, education, arts & entertainment, laundry services, personal care services) will get an additional five months of forgiveness of principal and interest payments (also capped at $9,000/month) for a grand total of eight months of principal and interest payment forgiveness.
- The SBA is increasing its loan guarantee from 85% to 90% to make its loan products more attractive to lenders.
How To Qualify For The New SBA Loan Rules
In order to get three months’ worth of forgiveness of principal and interest payments for your SBA 7(a) loan or 504 microloan, you don’t have to meet any qualifications beyond the qualifications necessary to receive the loans themselves.
In order to get the full eight months’ worth of forgiveness of principal and interest payments for these loans, your business will need to be in one of the industries identified by the SBA as particularly impacted by the coronavirus pandemic, such as food service, accommodation, education, arts & entertainment, and personal care services.
Where To Apply For An SBA 7(a) Loan Or Microloan
SBA 7(a) loans and 504 Microloans are not provided by the SBA itself, but rather through private lenders that participate in these SBA programs. Thankfully, the SBA itself puts out an annual list of the lenders that have distributed the most SBA-backed funds to qualifying businesses. Our article detailing the top 10 SBA lenders is drawn from this list, and I’d encourage you to read this article before deciding which lending institution to seek an SBA loan from.
More About Funding For COVID Relief
Sadly, our global COVID nightmare has now entered its second calendar year.
For those small business owners continuing to persevere in the face of these unprecedented headwinds, our COVID-19 resource hub is an invaluable collection of pandemic-related information. And if you’re interested in obtaining a PPP loan for COVID relief, check out our piece explaining the rules and requirements of the latest round of PPP loans along with our article detailing our favorite 7 lenders offering PPP loans guaranteed by the SBA.