SBA Disaster Loan Delay Extended Until 2022

The Small Business Association (SBA) has extended the deferment periods for all disaster loans until 2022...

The Small Business Association (SBA) has extended the deferment periods for all disaster loans until 2022. That means businesses that received loans under the COVID-19 Economic Injury Disaster Loan program won’t have to start making payments on the loan until 2022.

“Small Businesses, private nonprofits and agricultural enterprises, including those self-employed individuals, contractors and gig workers, continue to navigate a very difficult economic environment due to the continued impacts of the Coronavirus COVID-19 pandemic, as well as historic Severe Winter Storms in 2020,” SBA Administrator Tami Perrillo said in a press statement.

COVID-19 Economic Injury Disaster Loan Program

The SBA continues to approve new disaster loans for businesses impacted by COVID-19. As of mid-February 2021, the SBA has approved more than $200 billion in emergency funding in low-interest loans under the program.

As discussed in greater detail in a prior article, small businesses may apply for a maximum business loan of $150,000, which must be used exclusively to address economic injury. Funds can be used to pay for normal operating expenses and working capital needs, such as rent, utilities, payroll, accounts payable, and fixed-payment debts. Loan terms may last up to 30 years. Terms are determined on a case-by-case basis and are dependent upon each borrower’s ability to repay. The interest rate is 3.75% for small businesses and 2.75% for non-profits.

Collateral is not required for loans less than $25,000, and the SBA is not requiring personal guarantees for loans of less than $200,000. To be eligible for COVID-19 EIDL, applicants must be physically located in the United States (or a designated territory) and have suffered working capital losses due to the COVID-19 pandemic. Eligible applicants include:

• Businesses with 500 or fewer employees or satisfy the Small Business Act’s definition of “small business” 
• Cooperatives with 500 or fewer employees
• Agricultural enterprises with 500 or fewer employees
• Most private nonprofits
• Faith-based organizations
• Sole proprietorships and independent contractors

If approved, payments are deferred for one year; although interest still accrues. Borrowers may make payments if they choose to do so and will not incur a penalty.

Deferment for Existing COVID-19 EIDL Borrowers

Existing borrowers will now enjoy an extended deferment. On March 15, 2021, the SBA announced extended deferment periods for all disaster loans, including the COVID-19 EIDL program, until 2022.

• All SBA disaster loans made in calendar year 2020, including COVID-19 EIDL, will have a first payment due date extended from 12-months to 24-months from the date of the note.
• All SBA disaster loans made in calendar year 2021, including COVID-19 EIDL, will have a first payment due date extended from 12-months to 18-months from the date of the note.

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.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Junjuan Song, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.