The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act includes several important provisions offering relief to small businesses. AWD has previously provided guidance on the Paycheck Protection Program (“PPP”), which offers Small Business Administration (“SBA”) backed loans to qualifying small businesses to assist with payroll and certain operating costs. A PPP loan may be forgiven in full or in part if the borrowers meet certain criteria. In addition to the PPP, the CARES Act provides relief for SBA borrowers who have a more traditional SBA loan, as discussed in this communication.
Section 1112 of the CARES Act, entitled “Subsidy for Certain Loan Payments” provides substantial SBA loan relief to businesses with existing or new loans under the SBA’s traditional 7(a), 504, and microloan SBA loan programs (defined as a “Covered Loan”). Loans under the new Paycheck Protection Plan or Economic Injury Disaster Loans are not Covered Loans and are not eligible for subsidies under this provision of the CARES Act (separate relief and deferment periods are available under the terms of those program).
If a business has an existing Covered Loan in regular servicing status, the SBA will pay the principal and interest on such loan for a period of six months, beginning with the next payment due. If a current Covered Loan is currently in deferment, the SBA will pay principal and interest for six months beginning on the next payment due date after the deferment period ends. Additionally, any new Covered Loans taken out before September 27, 2020 will be eligible to have the SBA make principal and interest payments for six months, beginning on the first payment due date.
Debt relief should be automatic under this provision, but borrowers are encouraged to reach out to your lender with any questions.
Can AWD LAW help me?
AWD LAW is here to answer your questions. This summary is intended to serve as general information for interested persons, but it is not legal advice for any specific situation. AWD LAW attorneys are available to answer fact-specific questions for our clients. Our number is (928) 774-1478.