At Delancey Street, we hear this question often. Many small businesses asking about deferring an SBA loan right now remember the relief they got back in 2020. Most of that relief was the result of Section 1112 of the CARES Act, which was called ”Subsidy for Certain Loan Payments,” but which doesn’t get a lot of attention when compared to the Paycheck Protection Program. In contrast to the Paycheck Protection Program, which provided new loans, Section 1112 was about the loans businesses already had. The program that you’re probably thinking of from 2020 was not a deferment, and its timelines were specific to 2020. So the honest answer starts with what that relief actually was.
Six Months of Forgiven Payments
Here is how it worked. The SBA paid your loan principal, interest, and any associated fees for six months, starting with the next payment due, per Section 1112 of the CARES Act. The loans eligible for this program were 7(a) loans (including the Community Advantage Pilot Program), 504 loans and Microloans. If you’ve already got an eligible loan on deferment, the SBA picks up the payments starting on the first payment due after your deferment period. If you take out a new loan between March 27, 2020 and September 27, 2020, you also get the six months of payments. And the SBA will make those payments even if your loan has been resold to another lender on the secondary market. Paycheck Protection Program loans are subject to a different set of rules.
The payments the SBA made under Section 1112 are not deferments. They are forgiven and borrowers will not be asked to pay them later. The SBA has 30 days after the payment is due to make the payment. You don’t have to tell the lender or opt in, but you should contact the lender to confirm you’re eligible before skipping a payment.
There’s a section of the CARES Act designed to encourage lenders to pause payments or extend the deadline to pay for loans that meet certain criteria. The law also gives lenders temporary relief from federal rules that set an upper limit on how long these deferments or extensions can be. (This applies to deferments or extensions that happen within 1 year of the law going into effect.) It also extends the time to make site visits to distressed loans to not more than 60 days after a liquidation event unrelated to a payment default, and not more than 90 days after a payment default. The SBA can (at its discretion) extend the time for site visits related to liquidation events. It’s the six months of forgiven payments that came from Congress directing the SBA to pay.
Section 1112 provided immediate relief for small businesses who had existing SBA loans, as they dealt with the effects of temporary closures, furloughs, and the inability to pay other bills, such as rent and utilities. It sometimes allowed a business to bypass the need to apply for a new PPP or EIDL loan. Other times, it was a lifeline as the business waited for one of those loans or grants to close, since loan processing could be delayed while lenders caught up with new SBA guidance and a large volume of applications.
Asking the Question in 2026
None of that helps much if you are asking the question in 2026. The dates in Section 1112 are tied to the date the law was passed in 2020. New loans were only eligible if they were made between March 27, 2020 and September 27, 2020, and the waiver of the maximum maturity limits only applied to deferments and extensions made within a year after the law was enacted. A business today should not assume that a payment will be covered or forgiven. Whether your lender will agree to defer your payments or extend your maturity today is a question you need to ask your lender before you miss a payment.
Settle for Less
Delancey Street is a business debt settlement firm. For many of the owners we speak with, the SBA loan is just one part of the picture. Many also have merchant cash advances and, at times, multiple MCAs stacked on top of one another. Our senior advisors negotiate with funders and lenders, including on SBA loans, to settle for less than the amount owed. We do not offer another loan. We’re not a law firm. If bankruptcy (like Subchapter V) is the right move, we connect the owner with independent bankruptcy lawyers. There’s a free, confidential first consult, and if there’s a less expensive alternative, we let you know right away.
