SBA Debt Relief for 7(a), 504, and Microloans

One of the main SBA debt relief programs is the initial debt relief assistance for existing SBA 7(a), 504 and microloans. This program was authorized by the CARES Act in March 2020.

Here’s an overview of how it works:

- -

• The SBA will automatically pay the principal, interest, and fees on these loans for 6 months. This relief covers loans that were fully disbursed prior to September 27, 2020.
• Borrowers do not need to apply for this assistance. The payments are automatically made by the SBA.
• This relief applies to loans that were in “regular servicing” status on March 27, 2020. It does not apply to Paycheck Protection Program (PPP) loans or Economic Injury Disaster Loans (EIDL).
• After the initial 6 months, borrowers are responsible for resuming payments on the loans if they are able.

This temporary debt relief program has been a lifeline for many small businesses struggling with cash flow during the pandemic. It provided an automatic 6-month grace period to focus on keeping their business afloat instead of making loan payments.

The debt relief was originally only for loans fully disbursed prior to September 27, 2020. However, in December 2020, the Economic Aid to Hard-Hit Small Businesses, Non-Profits and Venues Act expanded eligibility. Under the new provisions, all 7(a), 504 and microloans approved by September 27, 2020 now qualify for the debt relief, even if not fully disbursed by that date.

COVID-19 Economic Injury Disaster Loan (EIDL)

Another option for small businesses impacted by COVID-19 is the SBA’s Economic Injury Disaster Loan (EIDL) program. These low-interest federal disaster loans are intended to provide working capital funds to help small businesses survive the temporary loss of revenue during the pandemic.

Here are some key details on the COVID-19 EIDL program:

- -

• EIDL loans have an interest rate of 3.75% fixed for small businesses and 2.75% for nonprofits.
• The loans can be repaid over 30 years.
• Loan amounts are determined based on the amount of economic injury, up to a maximum of $2 million.
• Proceeds from an EIDL loan can be used for working capital, normal operating expenses, and to pay off obligations that cannot be met due to the pandemic.

In addition to the loan funds, the EIDL program also offers an Emergency EIDL Grant. This provides an advance of up to $10,000 to small businesses within days of applying for an EIDL loan. The advance does not need to be repaid, even if the loan application is later denied.

Restaurant Revitalization Fund

The Restaurant Revitalization Fund (RRF) provided targeted debt relief to restaurants and other food businesses impacted by COVID-19. This $28.6 billion program was established by the American Rescue Plan Act in March 2021.

The RRF offered restaurants grants equal to their pandemic-related revenue loss, up to $10 million per business. For the first 21 days, the SBA focused awarding grants to small businesses owned by women, veterans, and socially and economically disadvantaged groups.