The US Small Business Administration has announced that they will waive the interest rate for the first year on new disaster loans and extend the initial payment deferment period automatically to 12 months.
New disaster loan borrowers will now have up to one year from the date of the note to begin making payments, instead of the standard five months. Interest on the loan will not begin to accrue until 12 months from the date of the initial loan disbursement. Previously, interest began to accrue on all disbursed loan funds including during the initial payment deferment period. Today’s announcement will benefit disaster survivors and help them to decrease the overall cost of recovery by setting the interest rate to 0% for the first 12 months and reducing the overall amount of accrued interest they must repay.
SBA disaster loans offer individuals and businesses direct access to affordable financial assistance to help fully repair or replace disaster-damaged property. By offering affordable loans with no interest and no payments for the first year, and low fixed-interest rates for the remaining 30-year term, SBA is maximizing disaster survivors’ likelihood of a successful recovery and minimizing further financial hardship.
The extended deferment to 12 months is automatic and loan borrowers do not need to take any additional action. There is no prepayment penalty and borrowers can begin making loan payments during the deferment period if they choose.
The change is effective for all disaster loans approved in response to a disaster declared on or after September 21, 2022, through September 30, 2023. The effective date covers SBA disaster loans currently available for Hurricane Fiona and Hurricane Ian declared earlier this year. SBA does not have the authority to forgive interest that has already accrued on disbursed loan funds. Borrowers who already received a loan for a disaster declared after the September 21 effective date will also receive an automatic extension of their first payment due date to 12 months and 0% interest. SBA will notify eligible borrowers of their loan modification and they will not need to submit a request to receive this automatic benefit.