If you are even considering financing your business right now, be aware of the SBA program ending soon. We encourage our clients to move quickly to take advantage of the Small Business Administration (SBA) Debt Relief program.
Ultimately, this SBA program provides a great incentive for potential borrowers. Considering purchasing or refinancing? The SBA debt relief, coupled with particularly low interest rates, are added incentives.
Due to funding availability, the SBA is offering three months of debt relief for new loans, which are fully disbursed by September 30, 2021. This relief comes in the form of minimized loan payments. For those whose mortgages are $9,000 or less, the SBA will cover those payments, whether they include principal or interest. For those with mortgages of larger than $9,000, the SBA will contribute $9,000 to the mortgage payments. Borrowers will be responsible for the remainder of the amount for the three months.
How Does this Debt Relief Work?
• New loans must close and disburse by September 30th: This means that the loan has to fully close and the money has to be used to pay off the seller or the note holder by that date. Therefore, these loans cannot be used for large construction projects or even an ambitious PIP. However, in some cases, some working capital for minor renovations can be included in the loan. There is no wiggle room, as the SBA program ending is a set date and is non-negotiable.
• Applying is automatic. If your SBA guaranteed loan closes prior to September 30th, the SBA subsidy takes over the payments for three months. The SBA will directly pay your lender during this time. Even better, there are no additional applications to fill out. As a result, you will never be responsible for these payments and you will see the balances of your loan decrease each month in the statements.
• Why This Program Now? The SBA (and the Federal government) want to encourage economic growth, which includes commercial lending and borrowing. Historically low interest rates are a great incentive for business loans in general. Wise business owners can take advantage of these low rates, and the time of no payments.
Other Aspects of this SBA Debt Relief Program:
• What kind of borrowers should apply? Borrowers need to show credit-worthiness and strong management skills. Because of the quick turnaround (this program closes soon), borrowers should be able to show that they are able to pay back the loan. If you are refinancing a note, it should be in good standing. Borrowers will need to have filed 2020 taxes (or an extension) and should be ready to submit absolutely up to the minute financials. The underwriting of a client’s file needs to show ability to pay, strong management skills and a thoughtful, effective response to COVID-19.
• This program is different from the Paycheck Protection Program and the Economic Injury Disaster Loan. Those programs are also available to certain borrowers. But the three months of no loan payments are a different program. Borrowers who have PPP loans should organize their documents to show what the status of their forgiveness is. In addition, lenders will deal individually with EIDL loans.
• What does the relief include? Loan payments, interest payments and other associated fees.
Read more about other aspects of finding funding in today’s climate here: