Small Business Debt Relief Program

Topics: Coronavirus (COVID-19)

Small businesses continue to search for ways to survive as the coronavirus pandemic persists across the country. It may be some time before many small business owners can open their doors and welcome in a steady flow of customers again. The federal government has recognized the challenges facing these companies, and have responded with the creation of the Coronavirus Aid, Relief, and Economic Stimulus (CARES) Act to help lessen the impact.

The CARES Act: Debt Relief for Small Business Owners is Here

The Small Business Administration was granted $7 billion in disaster relief loans in the wake of the COVID-19 crisis. One of the major components of the CARES Act is the Small Business Debt Relief Program, which includes $17 billion to provide immediate relief to small businesses through non-disaster SBA loans, in particular, 7(a) loans, 504 and microloans. The relief is also available to existing and new borrowers who take out one of these types of loans within six months of March 27, 2020, the date the CARES Act was signed into law.

The Small Business Debt Relief Program also encourages financial institutions to extend the duration of existing loans beyond current limits, as well as allow lenders to offer temporary extensions on certain reporting requirements for new and existing borrowers. Additionally, throughout the six-month debt relief period, small businesses may also apply for Paycheck Protection Program (PPP) loans. However, the SBA payment relief will not apply to a PPP loan.

FAQs about the Small Business Debt Relief Program

Let’s look at some of the most frequently asked questions regarding the Small Business Debt Relief Program.

Who is eligible for the Small Business Debt Relief Program?

Small businesses that currently have 7(a), 504 or microloans or those who obtain one of those types of loans prior to September 27, 2020 are eligible for the debt relief program. Small business owners can check their eligibility by contacting their lender to find out if they qualify. Debt relief will be provided automatically to eligible businesses with no additional action needed. Disaster loans from the SBA are not eligible.

What does the program cover?

The Small Business Debt Relief Program covers:
  • Existing borrowers: Covers loan payments for new and existing 7(a), 504 and microloans including the principal, interest and fees for six months
  • New borrowers: Covers loan payments including principal, interest and fees if the borrower applies for and receives a 7(a), 504 and microloans prior to September 27, 2020

How does a business know if it is eligible for a 7(a), 504 or microloan?

Each type of loan has different requirements, but in general, to be considered for an SBA loan, a business must meet specific size standards, be based in the United States, have a sound business purpose and will have the ability to repay the loan. The SBA has more details about the requirements available on their website.

Does the Small Business Debt Relief Program apply to other types of small business loans outlined in the CARES Act?

The Paycheck Protection Program (PPP), Economic Injury Disaster Loans (EIDL) and Emergency Economic Injury Grants (EEIG) are the other vital components of the CARES Act that offer support for small businesses. The debt relief program does not apply to these programs. However, small businesses can apply for a PPP loan while receiving debt relief. To apply for a PPP loan, click here to view a list of active lenders, or click here to view a sample application.

How does a small business owner know which loan program is right for their needs?

The 7(a) loan program is the SBA’s core program for providing financial support to small business owners. It offers up to $5 million to borrowers who do not have credit from another lender. Click here to learn more about the different types of 7(a) loans available.

504 loans can be obtained through the SBA’s community partners, known as Certified Development Companies (CDC). The loans offer up to $5.5 million to approved businesses and are a good option for those needing to purchase machinery, buildings or real estate. Check out this helpful fact sheet to learn more.

The microloan program provides direct loans and grants eligible to nonprofit microlenders of up to $50,000. The loans are offered from mission-based lenders who can also provide business counseling. For more information about microloans, click here.

AmTrust is Here for Our Small Business Insured

AmTrust offers our support to our small business policyholders as well as our appointed agents during these uncertain times. We’ve created a library of resources regarding the coronavirus to help you stay informed, safe and healthy. For more information about our small business insurance solutions, please contact us today.

This material is for informational purposes only and is not legal, tax or business advice. Neither AmTrust Financial Services, Inc. nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is accurate, appropriate or suitable for any specific business, tax or legal purpose. Readers seeking resolution of specific questions should consult their business, tax and/or legal advisors. Coverages may vary by location. Contact your local RSM for more information.

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