A loan deferment is a modification or suspension of your monthly payments. With SBA loans, your lender has the option to defer your loan payments, usually for up to about six months. An SBA loan deferment is not a tool to help businesses that are struggling financially but functioning normally. Instead, a loan is deferred when for some external reason – such as a natural disaster or construction on your business’s street – your business can’t make payments.
“[In] a lot of our cases during [Hurricane] Harvey and stuff, the business owners and the employees – their minds weren’t set on the business,” said Jentri Smith, senior vice president of the SBA lending department with Houston-based Amegy Bank. “To have that burden of knowing this payment is due as well, we just think, as a local bank and supporter of the local community, it was part of our duty to help the community not feel that pressure.”
Smith said that after Hurricane Harvey, business owners who asked for deferments on their SBA loans received a three-month break on their payments. In this case, Amegy offered relief to businesses that weren’t even flooded to make up for the breakdown in normal economic activity.
The SBA also said that deferments can be extended in non-disaster situations. Keep in mind, however, that deferments aren’t granted by the SBA, but by the local bank with which you have an SBA loan.
“Deferments are available to SBA borrowers under normal circumstances when they are suffering a temporary cash flow problem,” said Bill Manger, associate administrator for the SBA’s Office of Capital Access. “Deferments are appropriate if the temporary payment relief can enable the borrower to improve its cash flow so that it can resume payments on its SBA loan.”
If your business is struggling because of a natural disaster or some other external reason and you can’t make payments, it’s important to be transparent with your lender and explore all options, including deferment. However, there are some important ways to mitigate the need for a deferment, like practicing healthy financial habits, exploring line-of-credit options in down cycles and maintaining a good relationship with your local lender.
Read more: https://www.businessnewsdaily.com/11108-sba-business-loan-deferment.html