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SBA Debt Relief Program — explained

The second stimulus extended this program to cover an additional three to eight months of payments.

The SBA Debt Relief Program is a temporary program meant to help businesses struggling during the coronavirus outbreak. It was started with the first round of stimulus and extended in December 2020 with the second coronavirus aid package. It automatically covers interest, principal repayments and fees for most SBA loan programs for six months — including new loans.

If you expect your business to be able to handle full repayments when they're due, this program could make standard SBA loans a viable alternative to other SBA COVID-19 loan programs. Standard SBA loans have fewer restrictions on who qualifies and how you use the funds — though the rates and fees are higher. And the second round of stimulus temporarily reduced fees and upped SBA guarantees.

What businesses are eligible for the SBA Debt Relief Program?

Businesses with the following types of SBA loans are eligible for the SBA Debt Relief Program:

  • 7(a) loans
  • 7(a) small loans
  • Express loans
  • Export Express loans
  • Export Working Capital loans
  • International Trade loans
  • Veterans Advantage loans
  • CAPLines
  • 504 loans
  • Microloans

This includes businesses that are currently in repayment and any new loans disbursed between March 27, 2020 and September 30, 2021.

Does the SBA Debt Relief program apply to disaster loans?

Disaster loan programs for businesses that were affected by the coronavirus outbreak are not eligible for the SBA Debt Relief Program. That's because they already come with payment relief built in.

Economic Injury Disaster Loans (EIDLs) come with the option to postpone repayments until 2022. Previously, EIDLs allowed applicants to apply for up to a $10,000 advance in the form of a grant that didn't have to be repaid. Currently, it's offering targeted $5,000 advances, which will first be available to small businesses that have been hurt the most.

Paycheck Protection Program (PPP) loans come with six months of deferred repayments and are eligible for up to 100% forgiveness. However, other types of disaster loans may be eligible for deferment.

What is the SBA Debt Relief Program?

The SBA Debt Relief Program covers interest, principal repayments and any associated fees for qualifying SBA loans. It's a coronavirus assistance program that Congress created when it passed the Coronavirus Aid, Relief and Economic Security (CARES) Act in March 2020. It was extended and with the second stimulus act passed in December 2020.

How the first round of SBA Debt Relief worked

All businesses get an initial six months of debt relief, starting with the passage of the CARES Act in March 2020. When it kicked in depended on your repayment status or when you took out the loan:

  • Loans in repayment. Debt relief kicked in with repayments due after March 27, 2020, when the CARES Act passed and ended on September 27, 2020.
  • Loans in deferment. Debt relief started when your deferment period was over and the next repayment was due.
  • New loans. For loans disbursed between March 27, 2020 and September 27, 2020, debt relief kicked in when your first repayment was due.

How the second round of SBA Debt Relief works

This time around, the length of time the SBA covers your repayments and fees depends on when you received the loan, the type of loan you have and your business's industry.

Loans that in repayment before the CARES Act

The SBA will pay at least three months of monthly payments on interest, principal and fees on all loans that were in repayment before March 27, 2020. These three months begin with your next payment due on or after February 1, 2021.

Businesses with SBA Community Advantage loans, microloans or any business in an eligible industry will receive eight months of debt relief. This also begins with the next repayment due on or after February 1, 2021.

Industries eligible for eight months of SBA Debt Relief

Businesses in the following industries can receive eight months of SBA Debt Relief, regardless of your repayment status in March 2020.

  • Educational services
  • Arts, entertainment and recreation
  • Accommodation and food services
  • Mining, oil and gas extraction
  • Apparel manufacturing
  • Clothing and clothing accessories stores
  • Sporting goods, hobby, book and music stores
  • Air transportation
  • Transit and ground passenger transportation
  • Scenic and sightseeing transportation
  • Publishing industries, except online publishing
  • Motion picture and sound recording industries
  • Broadcasting, except online broadcasting
  • Rental and leasing services
  • Personal and laundry services

Loans that were in deferment before the CARES Act

Loans that were in deferment before the CARES Act will also receive at least three months of SBA Debt Relief, with Community Advantage, microloans and eligible industries receive eight months of relief. This second round of debt relief begins either with the next payment due after your initial deferment period, or after your first payment due past the initial six months of deferment, starting on or after February 1, 2021.

This is a little complicated so let's take a look at an example. Say you had an SBA loan that was already in deferment for six months on March 27, 2020. The first round of SBA Debt Relief would have kicked in on September 27, 2020, set to expire on March 27, 2021. The second round of SBA Debt Relief would start on the payment after March 27, 2021.

Loans issued after the CARES Act

Loans issued after the CARES Act was passed don't get another round of debt relief. But the second stimulus package expanded that initial six months of relief to include loans approved between February 1, 2021 and September 30, 2021. However, loans issued between September 28, 2020 and January 31, 2021 don't receive SBA Debt Relief at all.

SBA Debt Relief limitations

The second round of debt relief won't cover all costs for all borrowers. This round of funding caps debt relief at $9,000 in interest, principal and fee payments per month. If you pay more than $9,000 each month toward an SBA loan your lender will add the remaining cost to your loan as interest, which you can pay at the end of your loan term.

Do I need to apply for the SBA Debt Relief Program?

No, this program automatically enrolls all eligible SBA loans. If your provider has continued collecting repayments after February 27, 2021, reach out. Legally, they're required to either return the repayment or apply it to your loan balance in addition to the debt relief payment the government is providing.

4 alternative debt relief options for businesses

You don't need to qualify for automatic debt relief to get help with your loans. Consider these other options.

  • Refinance with a disaster loan. Refinancing with an EIDL could make your current debts more affordable. EIDL rates are fixed at 3.75% for small businesses and 2.75% for nonprofits, and come with deferment and terms as long as 30 years.
  • Request deferment. Most business loan providers are offering deferment to customers who are struggling to make repayments.
  • Negotiate a new repayment plan. If you're not sure when your business will be able to afford regular repayments, talk to your servicer about extending your term or lowering your rate.
  • Refinance for a longer term. Businesses that can qualify for a new loan, but want lower repayments on their existing loan can take out a new one to pay off their current debts. This option is generally better for established businesses that have been relatively unaffected by COVID-19, but want to cut back on expenses as a precaution.

USDA debt relief

The US Department of Agriculture (USDA) will USDA-issued and USDA-backed loans to socially disadvantaged farmers and ranchers as part of the American Rescue Plan Act. The stimulus bill defines socially disadvantaged groups those that have been subject to racial or ethnic prejudice. Eligible farmers and ranchers can qualify for up to 120% forgiveness, based on their loan's balance as of January 1, 2021.

Refinance by taking out a new business loan

Name Product Filter Values Loan amount APR Requirements

Fora Financial business loans
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$5,000 – $500,000
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Lendio business loans
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Lendio business loans
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National Funding business loans
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National Funding business loans
$5,000 – $500,000
4% to 8%
Be in business at least one year and make at least $150,000 in annual sales. Other loan types have additional requirements.
Working capital loans and equipment financing, some high-risk industries may be eligible.

Fundbox lines of credit
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$1,000 – $150,000
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Bitty Advance business cash advances
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Bitty Advance business cash advances
$2,000 – $25,000
Not applicable
$5,000 monthly bank revenue, 6+ months in business, business bank account open 3+ months, 450+ credit score
With APRs in the triple digits, this is best saved as a last resort.
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Bottom line

The SBA Debt Relief Program automatically covers repayments on current SBA loans and could potentially make new SBA loans more affordable if you need financing to reopen your business.

But you'll still need to meet the SBA's strict requirements, and you might not receive your funds for months. Learn about your other financing options during the coronavirus outbreak by visiting our guide to business loans during COVID-19.

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