7(a), 504, and microloans
Initial debt relief assistance
As a part of the CARES Act, SBA is authorized to pay six months of principal, interest, and any associated fees that borrowers owe for all 7(a), 504, and Microloans reported in regular servicing status (excluding Paycheck Protection Program loans). This debt relief to borrowers was originally dependent on the loan being fully disbursed prior to September 27, 2020 and does not apply to loans made under the Economic Injury Disaster Loan program.
These original provisions were amended on December 27, 2020, through the Economic Aid to Hard-Hit Small Businesses, Non-Profits and Venues Act (Economic Aid Act). The Economic Aid Act revised the eligibility criteria for assistance to include all 7(a), 504, and Microloans approved up to September 27, 2020, even if not fully disbursed. All other provisions for initial debt relief remained the same.
Borrowers need not apply for this assistance. SBA provides this assistance automatically as provided below:
- For loans not on deferment, SBA will make monthly payments based on the next payment due on eligible loans for a total amount equivalent to no more than six months of installment payments.
- For loans currently on deferment, SBA will begin making monthly payments with the first payment due after the deferment period ends for a total amount equivalent to no more than six months of installment payments.
SBA has notified 7(a), 504, and Microloan lenders that it will pay these borrower loan payments. Lenders are to report to SBA periodically on the amounts due once a loan is fully disbursed. Payments collected after March 27, 2020 may be applied to the outstanding loan balance or returned to the borrower at the borrower’s discretion.
Additional debt relief assistance
The Economic Aid Act also authorized additional debt relief payments to 7(a), 504, and Microloan borrowers beyond the six-month period prescribed in the CARES Act. The level of assistance varies based on when the loan was approved and will begin on or after February 1, 2021. Please contact your lender for questions on the availability of this assistance for your SBA loan.
The initiatives described are limited to the level of available funding provided by Congress.
Disaster home and business loans
Existing SBA disaster loans approved prior to 2020 in regular servicing status as of March 1, 2020, received an automatic deferment of principal and interest payments through December 31, 2020. This initial deferment period was subsequently extended through March 31, 2021. An additional 12-month deferment of principal and interest payments will be automatically granted to these borrowers. Borrowers will resume their regular payment schedule with the payment immediately preceding March 31, 2022, unless the borrower voluntarily continues to make payments while on deferment. It is important to note that the interest will continue to accrue on the outstanding balance of the loan throughout the duration of the deferment.
What does an “automatic deferral” mean to borrowers?
- Interest will continue to accrue on the loan
- The automatic deferment will be reflected on the March 2021 monthly payment notice (SBA Form 1201)
- Borrowers will not receive monthly payment notices (SBA Form 1201) during the deferment period
- Borrowers will be contacted via the SBA’s automated dialing system using the telephone number associated with the SBA loan approximately one month before the automatic deferment ends. This correspondence will serve as a reminder to borrowers of their upcoming Next Installment Due date in place of the monthly payment notice (SBA Form 1201)
- Borrowers are strongly encouraged to create an account in SBA’s Capital Access Financial System (CAFS) to monitor their loan status. SBA provides instructions for borrowers on how to enroll in CAFs.
- The deferment will not stop any established Preauthorized Debit (PAD) or recurring payment on the loan. Borrowers with an SBA established PAD will have to contact their SBA servicing center to stop recurring payments during the deferment period. Borrowers that have established a PAD through Pay.Gov or any other bill pay service are responsible for terminating recurring payments during the deferment period.
- Borrowers preferring to continue making regular payments during the deferment period may continue remitting payments during the deferment period. SBA will apply those payments normally as if there was no deferment
- After the automatic deferment period ends, borrowers will be required to resume making regular principal and interest payments.
- For SBA disaster home and business loans covered under the previous Procedural Notices authorizing automatic deferments, borrowers will be required to resume making regular principal and interest payments after the automatic deferment period ends March 31, 2022.
- For eligible SBA disaster home and business loans approved in 2020, borrowers will be required to resume making regular principal and interest payments 12-months from their Next Installment Due Date pursuant to the terms of the Loan Authorization.
- Upon request, SBA will evaluate borrower circumstances on a case-by-case basis to determine the nature and extent of further relief that may be appropriate for each situation.
If you have questions about your current loan and whether or not your loan is automatically deferred, please contact your loan servicing office directly using the following information:
- Birmingham Disaster Loan Servicing Center:
- Phone: 800-736-6048
- Email: BirminghamDLSC@sba.gov
- El Paso Disaster Loan Servicing Center:
- Phone: 800-487-6019
- Email: ElPasoDLSC@sba.gov
7(a) and 504 loan guidance
- Procedural Notice 5000-823852
- Procedural Notice 5000-806780
- Procedural Notice 5000-20095
- Procedural Notice 5000-20093
- Procedural Notice 5000-20079
- Procedural Notice 5000-20058
- Procedural Notice 5000-20049
- Procedural Notice 5000-20041
- Procedural Notice 5000-20029
- Procedural Notice 5000-20023
- Procedural Notice 5000-20020