Does this program offer a loan discount?
Partially. Businesses can apply for a disaster loan grant of up to $ 10,000. It is described on the application as a “loan advance,” but SBA officials have confirmed that it does not have to be repaid. Borrowers will be on the spot for the rest.
The CARES Act made the $ 10,000 grant available to all qualified applicants, whether or not they were approved for a loan. But the SBA appears to impose an additional restriction: A spokeswoman said the amount available to any sole proprietorship would be “based on the number of employees predisaster.”
The agency did not respond to questions about how the formula works. A message posted on the website Senator Brian Schatz, Democrat of Hawaii, a member of the Senate Banking Committee, said the SBA had limited the advance and was providing $ 1,000 per employee for up to 10 employees.
What should I know about the refund?
The remainder of the loan can be repaid over a maximum term of 30 years. The interest rate is 3.75% for small businesses and 2.75% for non-profit organizations. No payment is due for the first year.
Is there a catch?
Yes, but it’s not as big as it used to be.
Usually, disaster loans require a “personal guarantee” of repayment, which means that the SBA can seize your personal assets – like your house, if you own one – in the event of a default.
But in response to the pandemic, the SBA is changing that.
It will not require personal collateral on loans under $ 200,000. Business assets, such as machinery and equipment, can be used to secure loans of up to $ 500,000, a spokesperson for the agency said.
Larger loans will require real estate – whether it’s your business or yours – if you have it. If you don’t, the agency said, it won’t turn borrowers away because they lack collateral.