Loans, debt relief, and other economic programs to support entrepreneurs through the COVID-19 pandemic
- Hosted April 02, 2020
- By Justin Armstrong
Small businesses are perhaps the hardest hit by COVID-19, with many businesses experiencing an overwhelming decrease in revenue or the inability to remain open altogether.
Thankfully, government stimulus programs, in cooperation with lenders, are working to support small businesses through this difficult time. Depending on your situation, it may be possible to get help with your current debts and obligations and find new opportunities to get working capital for your business.
Here’s a quick overview of some of the new programs, but new updates are being released constantly so we also encourage you to check in regularly with the SBA to stay up to date.
Debt relief and managing your current obligations
If you have outstanding debts (such a loan, line of credit, or credit cards), and you’re having trouble making regular payments, reach out to your lender or debt servicer (the company that takes payments for your loans). These institutions know that many customers are experiencing unprecedented financial struggles, so talking with them is a great first step to understanding what debt relief and repayment options might be available.
When you reach out to your lender or debt servicer, it is helpful to understand what you can afford, as this will help the bank/servicer work with you quickly to find a solution. For example, if you are not able to make the full payment but you can continue to make regular partial payments, figure out how much these partial payments could be.
A quick note on student loans, specifically—payments for federally-held student loans have been automatically suspended through September 30, 2020, and interest will not be accrued during this time. Loans that are not held by the federal government are not automatically suspended, so you’ll still need to talk to your loan servicer if you have private student loans and cannot make regular payments.
Also, the U.S. Small Business Administration (SBA) is offering debt relief on existing 7(a) SBA loans by paying principal and interest for a period of 6 months. If you have one of these loans, your loan provider should be able to give you more information on this program and your eligibility. If you get a new 7(a) SBA loan before September 27 2020, that loan could also be eligible for debt relief.
Getting funds to support your business
The Small Business Administration (SBA) also offers disaster relief loans and other programs to support small businesses, and they’ve been working hard to get capital into the hands of small businesses during this time. Since new programs and updates on existing ones are being rolled out regularly, we encourage you to check regularly with the SBA and your state or local business department for updates.
Below, you’ll find a list of some of the programs currently offered by the SBA as of April 2. You can also find more information about these programs on the SBA website.
- Paycheck Protection Program - This is an emergency lending program that provides loan amounts up to $10 million, based on average payroll, to help small businesses cover payroll costs.
- Loans are long-term and low-interest.
- Qualifying businesses are eligible for loans of up to 250% of their monthly payroll costs (capped at $10MM).
- Loan payments are deferred for six months.
- The loan (in part or entirety) may be forgiven if the funds are used to cover specific costs. Check with your lender to learn more about this possibility.
- You can apply for these loans on the SBA website as well as with individual lenders.
- Economic Injury Disaster Loans
- Applications for these loans are open now, and you can start the process through the SBA website.
- The SBA offers loans to help small businesses through disasters.
- For the COVID-19 pandemic, small business owners in all U.S. states and territories are eligible to apply.
- The SBA Economic Injury Disaster Loan program offers loans for up to $2M.
- To keep monthly payments low, these loans have a low interest rate and long repayment terms (up to 30 years).
- In addition to loans, the SBA is offering Economic Injury Disaster Advance Loans for $10,000. These are advance loans that will not have to be repaid.
- Debt relief for 7(a) loans from the SBA
- 7(a) loans are the primary loan program offered by the SBA, and they’re available under normal circumstances as well as during disasters.
- As noted earlier, the SBA is paying principal and interest for existing 7(a) loans for a period of 6 months.
- New loans that are issued by September 27, 2020, are also eligible for debt relief.
- Express Bridge Loan
- Some businesses are eligible to apply for an Express Bridge Loan of up to $25,000.
- This loan can be approved quickly and provide funding while your business awaits a decision on an Economic Injury Disaster Loan.
- Bridge loans may be eligible for partial or full repayment from an Economic Injury Disaster Loan.
- You can learn more about Express Bridge Loans in this program guide from the SBA.
- Connect with your local SBA District Office to discuss a bridge loan.
Other resources to explore
Many state and local businesses agencies are also offering programs and resources in response to the coronavirus pandemic, so it’s definitely worth checking with them to see what’s available in your area.
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