It shouldn’t need to be said: 2020 was a harrowing, tumultuous year. Not long after the Coronavirus arrived on our shores, governments nationwide imposed stay-at-home orders. This action had drastic economic consequences, as sales quickly cratered.

With the average business owner having less than 27 days cash-on-hand, Congress needed to act – and fast. After hours of emergency debate, they passed the CARES Act. Within its many provisions was the PPP, or the Paycheck Protection Program. This plan, funded to the tune of 523 billion USD, offered emergency loans through banks and sanctioned brokers.

However, many borrowers are still confused about the repayment terms of SBA loans. In the case of the PPP, if borrowers hit certain benchmarks, loan forgiveness applies. Some are even asking, “Do I have to pay back an SBLA loan?”

Below, we’ll lay out SBA loan repayment terms, in clear, concise language.

Do I Have to Pay Back My PPP Loan?

It depends. If you:

1. Spent at least 60% of your PPP loan on your payroll.
2. Kept everyone on your pre-COVID payroll.
3. Paid at least 75% of their pre-COVID salary/wages.

Then, you may be eligible for loan forgiveness. However, if you don’t meet the above requirements or don’t apply for loan forgiveness ten months after your 8/24-week claim period, then yes, you must pay back your PPP loan.

When you applied for your loan, it came with either a two or five-year term. Depending on which loan you have, you’ll begin making payments to your lender at an interest rate of 1% once your ten-month grace period expires. Your deadline will be coming up soon, if it hasn’t already. Don’t waste another second – if you haven’t looked into your situation, do so immediately.

 

Do I Have to Pay Back Standard SBA Loans?

Yes. Before COVID-19, the SBA offered small business financing through a variety of loan programs. These included 7 (a) loans, CDC 504 loans, and SBA microloans. However, unlike the PPP, these programs contain no forgiveness loopholes – you must pay back what you borrowed. Fortunately, though, they come with generous repayment periods – 15 to 30 year terms are common.

It’s true that the SBA guarantees 50% to 85% of SBA loans. However, this protection is meant to encourage lenders to offer these loans to small businesses in need. If your business fails, you’ll be on the hook for 15% to 50% of the loan not covered by the SBA.

We’ll say it again – unlike the PPP, other SBA loan programs do not offer loan forgiveness. Keep this in mind when applying for non-PPP SBA loans and be informed of what happens if you default on an SBA loan.