Why are Loan Deferments Given?
A loan deferment is a modification or suspension of your monthly payments game judi slot. With Small Business Administration (SBA) loans, your lender has the option to defer your loan payments, typically for up to about six months; however, the coronavirus pandemic has extended some of those periods. An SBA loan deferment is not a tool to help businesses that are struggling financially, but functioning normally. Instead, a loan is deferred when for some external reason – such as a natural disaster, global pandemic or construction on your business’s street – your business can’t make payments.
Jentri Smith, senior vice president of the SBA lending department with Houston-based Amegy Bank, said during Hurricane Harvey in 2017, for example, many business owners and employees whose businesses were in the destruction zone throughout Texas and Louisiana weren’t able to stay fully engaged in running their operation as normal harrysbarvenezia.
“To have that burden of knowing this payment is due as well, we just think, as a local bank and supporter of the local community, it was part of our duty to help the community not feel that pressure,” Smith said. [Find out how to get an SBA loan with our guide.]
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Smith said that after Hurricane Harvey, business owners who asked for deferments on their SBA loans received a three-month break on their payments. In this case, Amegy offered relief to businesses that weren’t even flooded to make up for the breakdown in normal economic activity.
The COVID-19 pandemic also brought relief to business owners needing to defer their SBA loans. As part of the 2020 CARES Act passed in during the early days of the pandemic, the SBA was authorized to pay six months of principal, interest and fees for all 7(a), 504, and microloan borrowers in good standing. For loans already in deferment, the SBA would start making the monthly payments once the deferment period ends. The payments are made automatically.
Additionally, the pandemic-related Economic Aid Act extended the deferment of payments beyond the six months laid out in the CARES Act. That assistance kicked in on February 1, 2021, and varies based on when your SBA loan was approved. For SBA disaster loan borrowers approved prior to 2020, they don’t have to make payments on their loans until March 31, 2022. During the deferral period, interest still accrues on the loan.
Business owners who borrowed through the COVID-19 Economic Injury Disaster Program or EIDL have longer deferments. If you applied for the loan in 2020, you have 24 months of deferment. Businesses that apply in 2021 get 18 months of deferment.