Your COVID-Affected Small Business Might Be Eligible For SBA Loan Debt Relief Via The CARES Act
The sudden impact of COVID-19 has had a major impact on the entire world. Governments have stepped in to prevent the spread of the coronavirus by shutting down restaurant dining rooms, closing retail shops, and issuing orders to keep consumers at home. For many small business owners, the future is uncertain. Will businesses be able to bounce back after closing their doors? How long will it take consumers to get back to their normal habits? And for small businesses with outstanding loans, there’s another big question: How can I still make my loan payments during and after the coronavirus pandemic?
The United States government has reacted to this economic uncertainty through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Under the CARES Act, there are a number of programs aimed to help small business owners weather the coronavirus storm. If you’ve obtained a loan backed by the Small Business Administration (SBA), one of these programs will be of particular interest to you. This program provides SBA loan debt relief to business owners affected by the coronavirus.
If you’re worried about making your SBA loan payments, keep reading. In this post, we’ll look at what the SBA is doing to help small business owners that have outstanding SBA loans.
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What Does The CARES Act Say About SBA Loan Debt Relief?
The CARES Act provides $17 billion for immediate debt relief for SBA loans. The principal, interest, and fees of specific types of SBA loans will be covered for six months. This applies to both current loans, as well as any new loan issued prior to September 27, 2020.
There is also relief available for borrowers that have received an SBA Disaster Loan. The SBA will automatically defer payments through December 31, 2020.
In addition to SBA loan debt relief, there are a number of other ways that small business owners can receive financial assistance, which we’ll discuss later in this post.
How To Qualify For Debt Relief On SBA Loans
It isn’t difficult at all to qualify for debt relief on SBA loans. You simply have to meet a few minor requirements.
The principal, interest, and fees will be automatically paid by the SBA for six months for these current loans:
Additionally, if your business is issued an SBA loan prior to September 27, 2020, the SBA will automatically pay principal, interest, and fees. SBA 7(a) loans, microloans, and 504 loans are eligible for automatic payments.
If you received an SBA Disaster Loan, there are relief options for you, too. Your loan payments will be automatically deferred by the SBA through December 31, 2020. This means that while your loan will continue to accrue interest, you are not required to make any payment until after December 31, 2020. Of course, if you’re still able to make your payments, you certainly may do so. However, if you’ve seen a significant drop in revenue or have been impacted in another way by the coronavirus, payments are not required.
One thing to note about the Disaster Loan deferrals is that preauthorized debits and recurring payments are not canceled by the SBA, so you will be responsible for canceling these payments. After December 31, you must resume regular payments toward the principal and interest of your loan.
To qualify for Disaster Loan debt relief, you must have a loan that is in “regular servicing” status on March 1. During the deferral period, you will continue to receive payment notices. These notices will note that the payment is deferred and there is no current amount due.
For more information on SBA loan debt relief, check out the SBA website.
Even if you receive debt relief for your SBA loan, there are a number of other options available to help your business through financial difficulties as a result of the coronavirus pandemic.
The Paycheck Protection Program is an initiative launched through the CARES Act to encourage businesses to keep their employees. Through this program, you can receive as much as $10 million to cover expenses including payroll, rent, utilities, and mortgage interest. If employers maintain their workforce for a period of eight weeks, loans will be forgiven. You can apply for the PPP program through a participating lender, or you can learn more from the SBA website.
Qualifying small businesses can also receive up to $10,000 through the SBA’s Economic Injury Disaster Loan advance. These funds are used to provide relief to small businesses, and funding can be received in just days. Funds are available to businesses with temporary financial difficulties. These advances do not have to be repaid.
The SBA is also providing fast relief through SBA Express Bridge Loans. If you’re currently working with an SBA Express Lender, you could receive up to $25,000 to help with revenue shortages. SBA Disaster Bridge Loans are also available to businesses that have applied for an Economic Injury Disaster Loan.
If you don’t have an SBA loan, you can check with your borrower to find out if there are any options available for you. Many lenders are helping small businesses by offering payment deferrals, additional funding, and other aid.
You can also check out Merchant Maverick’s COVID-19 hub for more resources, guides, and advice to help your business through these troubling times.