The U.S. Small Business Administration recently announced it will be waiving the interest rate for the first year on new disaster loans by extending the initial payment deferment period automatically to 12 months.
SBA Waives Disaster Loan Interest and Payments for First Year
This means new disaster loan borrowers will now have up to one year from the date of the note to begin making payments, instead of the usual five months.
Interest on such loans will not begin to accrue until 12 months from the date of the initial loan disbursement.
This is great news for borrowers as they will no longer need to pay interest accrued on all disbursed loan funds during this new initial payment deferment period.
It will benefit disaster survivors, helping them to decrease the overall cost of recovery.
By setting the interest rate at 0% for the first 12 months, the overall amount of accrued interest they must repay will be massively reduced.
Speaking about the payment deferment, SBA Administrator Isabella Casillas Guzman, said: “We must ensure that communities struck by disaster have the help they need to recover in the wake of natural disasters, and the Biden-Harris Administration is 100 percent focused on finding more ways to assist.
“Our zero-interest disaster loan and payment deferral solutions add new tools to our toolbox to help small business owners gain flexibility as they work to invest, reopen, and get back to business.”
The disaster loans provide individuals and businesses with direct access to affordable financial assistance for repairing or replacing disaster-damaged property.
With no interest and no payments for the first year, these affordable loans with low fixed-interest rates for the remaining 30-year term are helping minimize financial hardship in the short term.
In the long term, the loans are maximizing the chances of a successful recovery from disaster.
The extended deferment to 12 months will be automatic, with loan borrowers not required to take action themselves.
Borrowers can still make loan repayments during the deferment period as there is no prepayment penalty.