SBA adjusts loan policy to help small businesses repay COVID-19 aid

TOPEKA, Kan. (WIBW) - The Small Business Administration has made a few policy changes in order to help small Kansas businesses repay loans meant to help them through the COVID-19 pandemic.

On Tuesday, March 15, the Small Business Administration says Administrator Isabella Casillas Guzman directed the Agency to provide more deferment of principal and interest payments for existing COVID Economic Injury Disaster Loan program borrowers. The move totals 30 months of deferment from the start date of all approved COVID EIDL loans.

According to the SBA, the extended deferment period will allow additional flexibility to small business owners impacted by the pandemic - especially those in hard-hit sectors managing the disruption of recent COVID variants, as well as supply chain and inflation challenges amid a growing economic recovery.

Since its creation, SBA said the COVID EIDL program, a federal disaster relief loan, has sent over $351 billion in relief to 3.9 million borrowers - including small businesses in historically underserved and disadvantaged communities.

“Though our small business owners continue to power a historic economic recovery under the Biden-Harris Administration, we must continue to do everything in our power to meet our small businesses where they are with resources to ensure they can recover and thrive,” said SBA Administrator Guzman. “This extended principal and interest deferment will provide financial relief to millions of small business owners – particularly those hardest-hit by the pandemic and related marketplace challenges – so they can continue to pivot, adapt, and grow.”

SBA said the deferment extension is effective for all COVID EIDL Loans approved in 2020, 2021 and 2022. Loans now have a total deferment of 30 months from the date of the Note. However, it said interest will continue to accrue on loans during deferment.

According to the Administration, borrowers are allowed to make partial or full payments during the deferment period but are not required to. It said it will not send monthly SBA Form 1201 payment notices, however, it will send regular payment reminders via email.

SBA said existing borrowers can find account balances and payment due dates in the SBA Capital Access Financial System. It said deferments could result in balloon payments. The deferment will not stop Preauthorized Debit or recurring payments on the loan. It said borrowers with an SBA established PAD are required to contact their servicing center to stop recurring payments during a deferment period.

After the deferment period ends, SBA said borrowers will be required to make regular principal and interest payments starting 30 months from the date of the Note.

Guzman also announced an increased COVID EIDL Cap, expansion of eligible use of funds and simplification of affiliation requirements. She said the SBA lifted the cap from $500,000 to $2 million and loan funds can be used for any normal operating expense. She also said the SBA allowed funds to be used to repay commercial debt and make payments on federal business debt.

In addition to policy enhancements, SBA said it has invested in enhanced processes and increased capital to improve customer service for applicants.

For more information, click HERE.