4. Enhancements To 7(a) Loans
The SBA’s 7(a) loan is designed to help small businesses thrive. Under the CARES Act, the SBA covered six months of payments on all loans existing as of March 27, 2020, and any new loans issued before September 27, 2020. Under the new law, these borrowers will receive an additional three months of payments from the administration, beginning in February 2021. Borrowers who take out new loans before October 1, 2021, will receive the first six months of principal and interest payments from the SBA. All payments provided for in the new stimulus law will be capped at $9,000 a month.
To help owners navigate the pandemic, the agency covered six months of payments on all existing loans and any new ones issued before September 27, 2020. Under the new law, relief will continue to be available to new borrowers who take out loans within six months, as the SBA will cover the first six months of principal and interest payments (capped at $9,000 a month) through September 2021. Starting in February 2021, existing borrowers receive three months of waived principal and interest payments, up to $9,000 per month.
New provisions to the 7(a) loan program include a guaranty increase to 90%, up from 75%. Borrowers will get three months of principal and interest payments on existing 7(a) loans, capped at $9,000 per month, starting in February 2021.
The law also provides for an additional five months of payments for existing borrowers (as of December 27, 2020) in industries hit hardest by the pandemic. These impacted industries include:
• Educational services
• Arts and entertainment
• Accommodation and food services
• Mining and logging
• Apparel and clothing
• Sporting goods, hobby companies,music stores
• Air transportation
• Ground transportation
• Sightseeing
• Publishing industries
• Motion picture and sound recording
• Broadcasting
• Rental and leasing
• Personal and laundry services
Small businesses are key to our nation’s path to economic recovery, and we need entrepreneurs to strengthen the backbone of our economy. Through the new Covid-19 relief bill, the SBA’s loan programs can continue to provide the financial relief that small business owners need to help them recover and, ultimately, thrive.
Mark Schmidt is CEO of Fund-Ex Solutions Group, an SBA Preferred Lender and one of only 14 non-bank lending companies licensed by the SBA to offer 7(a) loans and the Paycheck Protection Program. Visit fundexsolutions.com for more information.