Does this program offer loan forgiveness?
Partly. Businesses can request up to $10,000 of a disaster loan as a grant. It’s described on the application as a “loan advance,” but S.B.A. officials confirmed that it did not have to be repaid. Borrowers will be on the hook for the rest.
The CARES Act made the $10,000 grant available to any qualified applicants, whether they are approved for a loan or not. But the S.B.A. appears to be imposing an additional restriction: A spokeswoman said the amount available to any individual business would be “based on the number of predisaster employees.”
The agency did not respond to questions about how the formula will work. A message posted on the website of Senator Brian Schatz, Democrat of Hawaii, a member of the Senate Banking Committee, said the S.B.A. had limited the advance and was providing $1,000 per employee for up to 10 employees.
What do I need to know about repayment?
The rest of the loan can be repaid on a term of up to 30 years. The interest rate is 3.75 percent for small businesses and 2.75 percent for nonprofits. No payment is due for the first year.
Is there a catch?
Yes, but it’s not as big as before.
Usually, disaster loans require a “personal guarantee” of repayment, meaning that the S.B.A. can seize your personal assets — like your house, if you own one — if you default.
But in response to the pandemic, the S.B.A. is changing that.
It will not require a personal guarantee on loans of less than $200,000. Business assets, like machinery and equipment, can be used to secure loans of up to $500,000, an agency spokeswoman said.
Larger loans will require real estate — whether it’s your business’s or your own — if you have it. If you don’t, the agency said, it will not turn borrowers away because they lack collateral.
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