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Is 2021 a Great Year to Start or Expand Your Small Business?

If you are a small business looking for a great financing deal, regardless of whether you have been affected by the pandemic, you may be eager to learn more about what the new stimulus bill has in store for small business. 

 

While much of the news coverage on the new stimulus bill adopted at the end of December 2020 (and found in the Consolidated Appropriations Act, 2021) has focused on expanded PPP options for small businesses (click here for more info), there is actually another forgivable loan program found in the new stimulus bill that hasn’t received much attention in the news. This alternate forgivable loan program does not even require that your business demonstrate impact from the COVID-19 pandemic. 

 

This relief comes in the form of up to eight months of forgiveness on principal and interest payments for Section 7(a) and 504 Microloans from the SBA. 


What is a Section 7(a) Loan?

 

Section 7(a) loans come from SBA lenders and can be used for working capital, equipment, inventory, and business acquisitions. You can borrow up to $5 million at both fixed and variable rates if you have under 500 employers and less than $7.5 million in average annual receipts. Maturities range from 7 to 25 years depending on use of the funds. 

 

More info on Section 7(a) loans can be found here.


What is a 504 Microloan?

 

The SBA’s Microloan program is geared more toward economic development and job creation. Loans are available to purchase commercial real estate, existing buildings, and equipment that will help grow your business. These loans also have a $5 million dollar limit; however, interest rates are fixed and maturities range from 10 to 20 years depending on the loan. 

 

More info on 504 Microloans can be found here.


Forgiveness

 

For both new and existing borrowers, the latest stimulus bill offers several months of forgiveness for both principal and interest payments. New borrowers are eligible for 6 months of forgiveness, and existing borrowers are eligible for 8 months of forgiveness.

 

What’s unique about this forgiveness is that that you don’t have to demonstrate that your business was impacted by COVID-19. And you may even qualify if you have an existing Paycheck Protection Program Loan. 

 

While borrowers will still face a due diligence process to prove creditworthiness, getting forgiveness on a Section 7(a) or 504 Microloan might just make 2021 a great year for you to start or expand your small business.