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An SBA Lender Describes Loan Programs for COVID-19 Debt Relief

SBA Lender Describes Loan Programs for COVID-19 Debt Relief

The COVID-19 pandemic has placed significant financial strain on many small businesses across the country. To provide relief, the Small Business Administration (SBA) has implemented various debt relief programs and lending options. As an SBA lender, I want to describe some of these key programs that small business owners can utilize during this difficult time.

SBA Debt Relief

One of the most beneficial SBA initiatives is the automatic COVID-19 debt relief program[1]. This provides struggling borrowers with automatic deferments on their SBA loan payments. Essentially, borrowers do not need to pay principal, interest, or fees on qualifying loans for an initial period until March 2023.

This covers most 7(a), 504, microloans, and also Economic Injury Disaster Loan (EIDL) program loans. It allows business owners to retain some cash flow and focus more on keeping operations running. The SBA debt relief has already aided over 900,000 borrowers with over $62 billion in loans.

However, it is vital to note that interest still accrues during the deferment period. So when payments resume, the overall balance may be higher and loans take longer to pay off. Borrowers can voluntarily continue making payments to mitigate interest charges if they have the means.

Paycheck Protection Program

Another substantial SBA lending initiative is the Paycheck Protection Program (PPP), which issues potentially forgivable loans to cover payroll and other expenses during the pandemic[2]. Qualifying small businesses and nonprofits can receive low-interest private loans through approved PPP lenders, backed by the SBA.

If borrowers spend at least 60% on payroll over their covered period, the loans can be entirely forgiven. This allows employers to retain employees and provides vital capital exactly when small businesses need it most. Over $800 billion in PPP loans supported jobs for 81 million employees across two rounds of funding.

While the initial PPP program ended in 2021, the subsequent COVID-19 Economic Injury Disaster Loan (EIDL) program still offers similar working capital loans up to $2 million. These can carry 30-year terms with very affordable 3.75% fixed interest rates. So small business owners still have solid lending options to counter the pandemic’s economic impacts.

Shuttered Venue Operators Grant

A more specialized SBA lending program called the Shuttered Venue Operators (SVO) Grant provides emergency aid for eligible live venues, theaters, museums, zoos and more that lost significant revenue due to the pandemic. This program issues grants equal to 45% of gross earned revenue, up to a maximum of $10 million.

Grant funds can cover expenses like payroll, rent, utilities, personal protective equipment (PPE) and more. Over $13 billion in vital economic relief has gone to venues in all 50 states and territories to date. The SVO Grant program stopped accepting new applications in 2021 but continues processing existing applicants. So eligible businesses that have not yet applied likely cannot obtain these SBA grants now.

Restaurant Revitalization Fund

Similarly, the Restaurant Revitalization Fund (RRF) offered $28.6 billion in direct relief grants to food/drink establishments who lost substantial revenue. Qualifying restaurants, bars, food trucks, bakeries, caterers and more could receive funding equal to their pandemic-related revenue loss, up to $10 million per business. RRF grants covered costs like payroll, vendor payments, PPE, cleaning supplies and other operating expenses.

This SBA program funded over 100,000 applicants before depleting appropriated funds in 2021. While not currently accepting applications, the RRF still has billions left to distribute if Congress approves additional funding. So eligible food businesses could potentially obtain grants in a revived RRF program. Until then, other SBA loan programs can provide necessary working capital.

Reaching Underserved Groups

A key priority across SBA lending initiatives has been effectively reaching underserved communities like minority-, veteran- and women-owned businesses. For example, approximately 40% of RRF and PPP funding has gone toward these groups so far. The SBA has partnered with Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) to improve outreach and access as well.

Recent reforms allow sole proprietors, independent contractors and self-employed individuals to receive more PPP loans and EIDL advances too. So the SBA strives to ensure its COVID-19 debt relief programs assist disadvantaged groups proportionally amid the ongoing economic recovery.

Applying for SBA Loan Programs

Small business owners interested in SBA lending programs should visit www.sba.gov to explore options and eligibility requirements. Most initiatives like the COVID-19 EIDL or PPP loans involve submitting applications through approved SBA lenders. So borrowers need to connect with participating banks, credit unions or other financial institutions offering the desired loans or grants.

The SBA website provides tools to locate nearby lenders based on your city or zip code. Key details needed for applications often include:

  • Business identification info such as EIN, NAICS code, number of employees.
  • Gross revenues for the past year.
  • Any pandemic-related economic losses.
  • How much funding you need and how it will be used.
  • Supporting tax/financial statements.

Having these prepared can help streamline the application process. Be sure to also research application deadlines for any active SBA programs to qualify for funding offers.

Other Considerations

When weighing SBA loan programs amid the COVID-19 crisis, also consider less conventional options like crowdfunding campaigns. Sites like GoFundMe or Kickstarter may provide quicker funding to cover short-term cash flow gaps while awaiting loan approval. Renting out unused space through platforms like Peerspace can likewise generate side revenue during the pandemic.

Small business owners should also evaluate cybersecurity risks with remote work expanding exponentially. Review IT systems, online protections, and insurance safeguards in case of potential data breaches or ransomware attacks. The SBA provides useful disaster preparedness resources covering these concerns too.

And remember to prioritize employee and customer health/safety above all else. Follow CDC workplace guidelines, establish flexible leave policies, and communicate transparently about challenges and plans ahead. Unprecedented times call for compassionate leadership along with prudent financial decisions.

In Closing

The COVID-19 pandemic poses complex difficulties and uncertainties for small business owners nationwide. Yet through SBA debt relief programs, the Paycheck Protection Program, the EIDL loan initiative and more, substantial support exists to counter the crisis’ economic impacts. Lenders like myself want to help borrowers identify and obtain the funding they need to not just survive, but recover stronger than ever.

While daunting obstacles remain on the road ahead, the resilience and tenacity of America’s entrepreneurs inspires tremendous hope as well. We will get through this by supporting each other. And one day we will look back with pride at all we achieved in the face of such adversity.

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