- Economic Aid Act extends a debt relief program for SBA loans originally created under the CARES Act at the outset of the COVID-19 pandemic
- Qualifying borrowers can receive up to $9,000 a month in principal, interest, and fees on 7(a), 504, or Micrloans
- Relief period varies by loan type, and could be reduced if SBA determines that funding is insufficient
The U.S. Small Business Administration’s debt relief program is set to begin today after being extended in a $900 billion economic stimulus package approved in December.
Under the Economic Aid to Hard-Hit Small Businesses, Non-Profits and Venues Act (Economic Aid Act), Congress approved $3.5 billion in funding to cover the principal, interest, and any associated fees owed by borrowers on certain SBA loans. This debt relief was first provided for a period of six months under the CARES Act at the outset of the COVID-19 pandemic.
The debt relief was originally dependent on the loans being disbursed before Sept. 27, 2020, but the Economic Aid Act revisions expanded eligibility to companies whose loans were approved on or before that date, even if the funds weren’t fully disbursed. The legislation also authorizes additional relief beyond the six-month period for certain borrowers.
Debt relief is available for loans under the 7(a), 504, and Microloan programs, and all payments are capped at $9,000 a month. Lenders are required to submit borrower information to the SBA by the seventh day of each month, or the next business day, and the SBA will provide the funds by the 15th day of the month.
Potentially qualifying borrowers were recently informed of the debt relief option, which takes place automatically and does not require an application. Borrowers can also contact their lender for more information on the assistance.
The SBA issued guidance to lenders in the form of a 17-page notice on 7(a) and 504 loans and a six-page document on Microloans. Borrowers with qualifying loans approved by the SBA prior to the CARES Act can receive an additional three months of debt relief. Borrowers considered underserved can qualify for an additional five months of relief, including those with Microloans, loans under the Community Advantage Pilot Program, and businesses in sectors that have experienced severe losses under the pandemic, such as food service or personal care services.
Borrowers who take out a qualifying loan between Feb. 1 and Sept. 30 qualify for six months of debt relief. The new round of debt relief is not available to loans approved between Sept. 28, 2020 and Jan. 31, 2021, and lenders are prohibited from canceling and reissuing approved loans or refinancing existing loans to make the relief available to a borrower.
The debt relief periods may be shortened if the SBA determines the funding provided under the Economic Aid Act is insufficient to cover qualifying borrowers for the specified time.