Non-PPP forgivable loan assistance available for startups and other SMEs
The federal government has extended the repayable portion of two small business loan programs under the $ 900 billion stimulus bill enacted last week, throwing a potential lifeline even for businesses that may have failed. not be felt the impact of the pandemic.
The extensions allow the federal government to continue a program in which it makes monthly payments of principal and interest on behalf of companies that have or have recently taken out a loan under section 7 (a) or section 504 of the Small Business Administration (SBA). Businesses do not have to repay debt service assistance.
The loans have been around for some time, but last year, as part of the government’s first stimulus package adopted in March, the SBA was allowed to pay principal and interest to loan recipients for six months. The recipients had nothing to do; the SBA intervened automatically to make the payments. Some $ 8 billion has been authorized for the aid.
The intention was to provide quick help to businesses, but the program expired in September, leaving loan programs in place but without monthly payment assistance.
The $ 900 billion stimulus bill signed on December 27 revives monthly payment assistance, meaning that businesses that received a loan after the end of September, as well as new loan applicants, can expect to seeing the SBA take over their payments for several months.
The extension also includes rule changes. For businesses that already have a loan and are in a hard-hit industry such as food services, accommodation, retail, and other in-person services, up to eight months of assistance is available. For companies that are not in one of the targeted sectors, the duration is shortened. Total assistance is capped at $ 9,000 per month.
New loan recipients can receive up to six months of assistance with the monthly payment limit of $ 9,000.
Could benefit startups
7 (a) loans are capped at $ 5 million and are open to any small or medium-sized business (SME) with fewer than 500 employees or up to $ 7.5 million in annual revenue. Businesses can use the funds for working capital or to purchase inventory, equipment, or other business. Unlike the PPP, it is not necessary to show the revenue losses linked to the pandemic.
The loans are guaranteed by the federal government, so although participating lenders perform their standard due diligence, they can approve borrowers on more flexible terms than they would otherwise. The durations, between seven and 25 years, depend on the use of the product. Interest rates can be fixed or variable.
Section 504 loans are also guaranteed by the federal government and for a maximum of $ 5 million. The duration of the loans is between 10 and 20 years, with fixed interest rates. The proceeds can be used to purchase goods and equipment related to the business.
“Hundreds of thousands of organizations have benefited from the small business debt relief program,” said Representative Antonio Delgado (DN.Y.), who co-sponsored the bill to extend the program. “More entrepreneurs [will be able to] access loan repayments. “