When the bills are piling up faster than the deposits, most owners ask the same question: is there any help out there for me? The honest answer is that it depends on what kind of business you have and what specific debt you’re dealing with. Let me break it down.
Most of the federal help for small businesses during the pandemic took the form of SBA loans and grants. The best known was the Paycheck Protection Program, a loan that could effectively become a grant if certain criteria were met. For businesses that do not need a PPP loan, but are struggling because of the coronavirus, the SBA also offered debt relief to owners who already had an SBA loan. Whether you qualify for it comes down to two things: whether you have the right kind of loan, and the size of your business.
Before going further, one point matters a great deal if you are reading this in 2026. The relief affects ONLY SBA loans issued BEFORE September 27, 2020. If you got your loan AFTER that date, you don’t qualify. At the time, a business without one of these loans could apply for one and still be eligible, as long as it received the loan before that deadline. That door is closed now.
Will Continue to Make Payments for Six Months
So what does the program actually do? The SBA pays the principal, interest, and fees on your SBA 7(a), 504 and Microloans for six months. Loans which are in regular servicing as of March 1, 2020 will have the payments made automatically for the next six monthly payments. If you have already started making payments on a covered loan, the SBA will begin by making payments on the next payment due, and will continue to make payments for six months. If your loan is in deferment status, the SBA will begin to make payments on the next payment due after your deferment status ends, and will continue to make payments for six months. For example, you have an existing 7(a) loan and you entered forbearance in March because of COVID-19. SBA will start paying your next six regular payments once your forbearance ends.
However, if you have a Paycheck Protection Program (PPP) loan, don’t count on this debt relief. The PPP doesn’t qualify. A lot of owners assume it is enough to just get PPP and forget about their other business loans. Wrong. Paycheck Protection Program (PPP) is a totally separate issue.
Eligible for Relief
So who’s eligible? Start with the loan itself. Any current SBA 7(a), 504 and Microloan is eligible, assuming the borrower is eligible and as long as the loan was made before September 27th. If you are servicing a loan that is NOT through the SBA, you don’t qualify. If you have a loan type in that scope, you are already eligible for relief. The other condition that has to be met for eligibility is business size.
In general, qualifying businesses must have fewer than 500 employees. Private nonprofits and 501(c)(19) veterans organizations also qualify. Some small businesses with more than 500 employees also qualify, if their number of employees or revenue is within the SBA size standards for their industry. Ask your lender about it. They’ll know.
Do you need to apply? No. You do not need to do anything to get this relief. Lenders have been notified by SBA. You do not need to contact them, and they have been told to stop collecting payment. If you have questions, ask your lender.
The Interest Accrues
Here’s the catch that trips people up: interest. Unfortunately, the interest accrues. That doesn’t stop. Under the CARES Act, the SBA must make the payments to the lender within 30 days of the date the first payment under the loan agreement is due. Interest continues to accrue as the loan agreement provides. Borrowers will continue to receive the standard 1201 monthly payment notice from the lender showing that the payment is deferred and no payment is due. Borrowers may continue to make payments during this period. Payments will be applied to the outstanding balance as usual. Keep paying as normal if you can.
A word about autopay. Autopay automatically withdraws the loan payment from your checking account each month. Many borrowers prefer the convenience, but it creates a problem here. If you had autopay set up before, your autopay will be stopped during the deferment period. You can contact your lender to resume the automatic payments once the deferment period is over. What happens at the end of the six-month period? You will need to resume your regular scheduled payments.
So, the bottom line. If you held a 7(a), 504 or Microloan disbursed before Sept. 27, 2020, and your business fit the SBA’s size standards, you were entitled to six months of payments made on your behalf, automatically. Then, after six months, your payments resume. Interest continues to accrue as normal, on schedule. That’s six months of interest and principal AND any other fees you may have on the loan. That’s a lot of savings. The risk is that you may not be able to resume paying after six months, so plan for that day before it arrives. And if your loan came later, or it isn’t an SBA loan, this program was never going to be the answer for you. Again, the goal here is for you to stay afloat. If you are unsure about your status, speak to your lender.
