New SBA Loans Payment Free

Mar 15

Last spring, when the CARES Act was first passed, the Small Business Administration automatically paid for 6 months of payment and interest on all 7(a), 504, and Microloans that were in servicing status and any disbursed prior to September 27 of 2020. It was most definitely a bit of good news for these borrowers! Since then, the pandemic has continued to wreak havoc on our nation and economy and additional funds have been secured for business owners.

The Consolidated Appropriations Act of 2021 addresses owners with SBA 7a, 504, and Microloans in Section 325- Extension of the Debt Relief Program. Starting in February 2021, all borrowers with covered loans will get an additional 3 months of payments. Certain borrowers who are in hard-hit industries, such as restaurants, recreation, education, and lodging are eligible for an additional 5 months of payments at the end of the 3- month period. This is considered a grant- NOT income and no expenses are off the table. However, no monthly payment can be in excess of $9,000.

Amounts that are in excess of $9,000 may be deferred to the end of the loan period. The SBA is supposed to provide lenders with a list of the covered loans that qualify for this deferment by March 1, 2021 and a notice will be sent to all eligible borrowers within 30 days.

As far as 7(a) loans specifically, the loan guarantee increases to 90%. There is a prospective repeal provision which beings on October 21, 2021 for loans over $150,000- the guaranteed then becomes 75% and less than $150,000 it is 85%. Fees for both 7(a) and 504 loans are temporarily waived. (The .5% SBA participation fee and the 1.5% CDC processing fee.) There are also enhanced low-interest financing rules in place for 504 loans to give borrowers some additional monthly relief with a lower payment.

If a borrower of a covered loan is approved before September 30, 2021, they may be eligible for 6 months of payments. This is great for new business owners!

All of this can help to provide some “breathing room” for owners that have these SBA loans. Please check with your lender to make sure you are getting all the help you and your small business are entitled to during these times.