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Can You Defer Payments on a Business Loan?
A business loan deferment lets struggling business owners temporarily pause payments to regain financial stability. Approval depends on clear communication and a solid recovery plan.
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If your cash flow is tightening and you’re worried about making your loan payments on time and in full, you may be able to request a business loan deferment. This arrangement with your lender to temporarily pause your small-business loan payments can give you the breathing room to steer your finances back on course.
How much do you need?
We'll start with a brief questionnaire to better understand the unique
needs of your business.
Once we uncover your personalized matches, our team will consult you
on the process moving forward.
When it makes sense to request a business loan deferment
Your lender is likely to give serious consideration to a request for deferred loan payments if you’re experiencing economic hardship — especially due to a lack of working capital — and can identify the root cause, develop a plan to correct it and perhaps put some of your own money into fixing the issue, Kevin Janusz, vice president and SBA lending manager at Beneficial State Bank, explained to NerdWallet by email.
Janusz shared with NerdWallet examples of situations in which a lender may consider granting a deferment, including:
Financial hardship caused by losing an important client, inability to hire/retain talent or employee theft.
Macroeconomic issues affecting the business, such as tariffs, supply chain disruptions or pandemics.
Severe weather events that temporarily disrupt business operations.
“The best scenarios for deferment are when a borrower is experiencing a short-term impact that will cure within the period of the deferment, allowing the business to successfully ‘catch back up’ coming out of the pause in payments,” Maggie Ference, SVP, Small Business and SBA director at Huntington Bank told NerdWallet via email.
In other words, if the issue preventing you from making your loan payments isn’t likely to resolve itself or be remedied through adjustments within the next few months, then a deferment may not be the best option. In that case, you may have other forms of payment relief .
Nerdy Perspective
Communication with your lender is key
I’ve spoken with several small-business lending experts about payment options during tough times, and one piece of advice they’ve all shared is for business owners to be upfront and open in their communication with their lender. If you’re facing financial difficulties and are unsure whether you can make payments on time, or if you’re on a tight timeline to receive funding, don’t hesitate to reach out. Having an honest, early conversation with your lender can help you explore solutions before problems escalate.
Karrin Sehmbi
Small business
When a lender is unlikely to consider a deferment request
There are also situations in which a lender is unlikely to grant a deferment, Janusz told NerdWallet. Those could include the borrower:
Failing to be transparent with the lender.
Not making sufficient effort to correct the root cause of the financial issue.
Using the loan proceeds for something other than what they were approved for.
Engaging in fraudulent activity.
Removing collateral without the lender’s prior approval.
Breaking the terms of the loan agreement.
Pros and cons of deferring business loan payments
Pros
Provides temporary payment relief, typically up to three months.
May allow you to pause loan payments without interest accruing.
Cons
Payments may increase afterward if interest continues to accrue during the deferment.
Takes time and paperwork to set up the deferment.
May incur additional fees.
How to request a business loan deferment
If you think deferment may offer the temporary financial relief your small business needs, then the first step is to contact your lender.
Be prepared to explain the underlying cause of your cash flow crunch and demonstrate that you have a plan to get back on track. Your lender may require additional information, documentation or even an onsite visit to assess the issue and need.
“Every financial institution’s process will be a little different: Some may require a hardship letter to explain the need to pause payments, some notes may outline the repercussions of deferment, others may charge fees during these periods of change or require an action plan,” Ference said.
“The SBA expects lenders to work with borrowers in financial distress with reason and care. However, the SBA also requires the lender to preserve and protect the collateral securing the loan and conduct in-person site visits…when an SBA borrower is under financial stress,” Janusz said.
In other words, while the SBA encourages lenders to support struggling business owners, it also expects them to safeguard loan assets and maintain close oversight.
Janusz shared with NerdWallet several key steps that SBA borrowers should follow when requesting a deferment:
Contact your lender.
Schedule an appointment with the SBA SCORE office.
Identify the root cause of your financial hardship.
Develop an action plan to address the issue.
He added that borrowers should also be prepared to invest some of their own money into the business to help stabilize their finances.
Alternative options if your business is experiencing a financial hardship
If your business is facing a cash flow crunch and you’re concerned about making upcoming loan payments, you may have a few options available to you, depending on your lender, loan and specific circumstances.
In addition to a deferment, your options may include:
Interest-only payments: You only pay the interest, not the principal, on your loan for a short, agreed-upon period. This can temporarily and significantly reduce your payments, giving you time to stabilize your cash flow.
Business loan forbearance: Forbearance is a short-term relief option that’s similar to deferment. The key difference is that your loan term remains the same, so your payments increase sharply at the end of the forbearance period to make up for the months you didn’t make payments.
Business loan restructure: Loan restructuring involves working with your lender to renegotiate the terms of the loan so that future payments are more manageable.
Frequently Asked Questions
What is deferment vs. forbearance? What is deferment vs. forbearance?
Deferment and forbearance are both options a business owner has to temporarily pause loan payments, typically due to a financial struggle or emergency situation. While you may hear both terms used in similar context, there is an important difference in how each affects your loan payments.
With a deferment, your loan term is extended by the length of the deferment period, so your payment schedule generally remains the same once repayments resume. With forbearance, your term is not extended, so your regular payments increase once the forbearance period has ended.
What are the downsides to deferring a loan payment? What are the downsides to deferring a loan payment?
Deferring a business loan payment may result in increased loan payments if interest continued to accrue during the pause in payments. The official deferment process also takes time to put in place and requires some documentation. Additionally, your lender may charge you fees to defer your payments.
Can I get a deferment on my SBA loan? Can I get a deferment on my SBA loan?
Yes, you can request a deferment on an SBA loan. Deferments on a standard SBA loan are typically granted for 90-day periods and lead to higher monthly payments once the deferment ends.
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