Are you one of the millions of businesses that have an outstanding non-disaster Small Business Administration (SBA) loan? These include:
- 7(a) loans (general small business loans of up to $5 million),
- 504 loans (loans of up to $5.5 million to provide financing for major fixed assets such as equipment or real estate), and
- microloans (short-term loans of up to $50,000 for small businesses).
If so, you have already benefited, or soon will benefit, from a little-known provision included in the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Lawmakers appropriated $17 billion so that the SBA could provide a temporary loan payment subsidy to businesses with these non-disaster SBA loans. Under this provision, the SBA automatically makes monthly loan payments on behalf of borrowers. There is no need to file an application.
Now, with the newly enacted stimulus law (December 27, 2020), lawmakers made this loan subsidy program even better. Its massive second stimulus bill expands the loan payments for up to 14 months for many businesses. It also extends the program to loans approved by the SBA as late as September 30, 2021.
Even better, the new law makes tax-free the SBA loan payments made on your behalf. And that’s not the end of the good news. Under this new law, you can deduct the interest and fees that were paid by the SBA on your behalf.
Takeaways
Here are six things to know from this article:
- The CARES Act, as revised by the second stimulus law enacted on December 27, 2020, requires the SBA to make several months’ worth of payments for 7(a) loans, 504 loans, and microloans.
- All businesses get at least six subsidized loan payments, but some qualify for 14 if they obtained their loans before March 28, 2020.
- Loan subsidy payments made after February 1, 2021, are capped at $9,000 per borrower per month.
- You’ll qualify for six subsidized payments up to $9,000 per month if you obtain one of these loans from February 1, 2021, through September 30, 2021.
- The SBA loan subsidy is not taxable income to the borrower and needs not to be reported on your tax return as such. Further, the deductible expenses paid by the subsidy are tax-deductible, such as interest and fees.
- If you don’t have one of these loans, you should think about applying for one
If you have any further questions or need my assistance, please call me on my direct line at 509-543-7600 or HERE.
March 2021
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