There has been a lot of attention paid to the Paycheck Protection Program part of the CARES Act since it was released in March. But another part of the CARES Act, Section 7(a), provides a helpful loan option for small businesses who are struggling to make ends meet.
Section 7(a) has been around for many years and is a loan program, rather than a forgivable grant like the PPP provides. This SBA backed loan can be used for working capital or to purchase equipment, real estate, or even another company.
Thanks to the CARES Act, Section 7(a) loans closed before September 27, 2020 are entitled to forgiveness for the first six months of both principal and interest payments and related fees.
On a $500,000 that could be a savings of about $33,000.
Qualifying Factors:
- Less than 500 employees
- Or less than $7.5 million in average annual receipts
- Operate as a for-profit business
- Based in USA
- Up to date on any debt owed to the government such as taxes
- Be able to prove how you’re using the funds
You will need to complete some due diligence, but this is a great opportunity for many small businesses to get a much needed loan at a discount.
“Say you know of a competitor who is going out of business or you have your eye on a piece of used equipment that has come up for sale. Perhaps you want to acquire the assets of another strategic company or buy a key piece of real estate that will benefit your business in the long run. Or you just need working capital to finance the hiring of new employees or the purchase of inventory. You can use the loan for all of these reasons and reap an enormous discount. But hurry: You must close your loan before Sept. 27, and other small-business owners are also getting in line.”