SBA 7A & 504 Programs/ COVID-19 Debt Relief

Up to 6 months and 3 months guaranteed of principal and interest payments made by SBA
SBA 7A and 504 DEBT RELIEF LOAN

Brief Program Overview:

More than just the PPP-2 the Coronavirus Economic Relief Bill signed December 27th 2020, has multiple programs to assist businesses in need. One of the most significant offers involved is the SBA 7A and 504 Debt Relief program. Please see below the key benefits and utilizations uniquely offered as part of this Relief Bill.

Benefits for Small Business owners:

  • Up to 6 months and 3 months guaranteed of principal and interest payments made by SBA
  • The 6 pymts made by SBA are grant funds and considered non-taxable income
  • SBA Government Fees waived on all loan types
  • SBA has Increased availability with their participating banks

Common Utilizations of the SBA 7a and 504 Debt Relief Program

  • Business Debt Refinance
  • Commercial Real Estate Purchase or Refinance
  • Business Expansion
  • Start Up Business
  • Business Acquisition
  • Working Capital and New Equipment

** Program started February 1st 2021 and will run through September 30th 2021. Please note that the loan must be fully funded to qualify for the SBA7A and 504 Debt Relief payments**

If interested do not delay. 

Set up FREE consultation on the SBA 7a and 504 Debt Relief Program

 

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Update 4/1/2021 SBA Procedural Notice:

Adjustment to Number of Months of Section 1112 Payments in the 7(a), 504 and Microloan Programs Due to Insufficiency of Funds

On January 19, 2021, SBA issued two Notices in which it set forth the number of months of Section 1112 payments that covered loans in the 7(a), 504 and Microloan Programs would receive under Section 1112(c)(1) of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), as amended by Section 325 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act), enacted December 27, 2020, Pub. L. 116-260:

  • SBA Procedural Notice 5000-20079, “Guidance on the Implementation of the Extension of the Section 1112 Debt Relief Program for the 7(a) and 504 Loan Programs, as Authorized by Section 325 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act”, effective January 19, 2021, and
  • SBA Procedural Notice 5000-20080, “Guidance on the Implementation of the Extension of the Section 1112 Debt Relief Program for the Microloan Program, as Authorized by Section 325 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act”, effective January 19, 2021.

SBA has determined that the $3.5 billion that was appropriated to carry out Section 325 of the Economic Aid Act is insufficient to make the payments for the periods authorized by Section 1112(c)(1) of the CARES Act, as amended by Section 325 of the Economic Aid Act. In accordance with Section 1112(c)(7)(B), SBA has developed a plan to proportionally reduce the number of months provided for each category of loans described below, while ensuring that all amounts made available for the Section 1112 payments are fully expended. Under the plan, SBA will make the Section 1112 payments as described below (Adjustment Plan). This Adjustment Plan is effective immediately and will be applied to the Section 1112 payments that SBA makes beginning with the payments made in February 2021.

For the February payments, Lenders in the 7(a) Loan Program do not need to correct the loan data that they submitted through the CARES Act menu of the 1502 Dashboard on the FTA’s website (Section 1112 Report). SBA will adjust the number of months of payments for the covered loan based on the Adjustment Plan. In the event that the payment made by SBA results in an underpayment or an overpayment, refer to Section IV of SBA Procedural Notice 5000- 20079 for instructions related to reconciliation of payments.

Except as provided in this Notice, all other guidance provided by SBA in SBA Procedural Notices 5000-20079 and 5000-20080 continues to apply.

A. Newly Eligible First Round Loans

For a 7(a) or a 504 loan that was approved on or before September 27, 2020 and fully disbursed on or after September 28, 2020 (referred to as “Newly Eligible First Round Loans” in Procedural Notice 5000-20079), SBA will make the Section 1112 payments for a 3-month period (instead of a 6-month period). (Note that, for loans that were approved and fully disbursed on or before September 27, 2020, SBA will continue to make the Section 1112 payments for a 6-month period, as authorized under the original CARES Act.)

B. Second Round Section 1112 Payments for 504 and 7(a) Loans (except for loans made under the Community Advantage Pilot Program) Approved Before March 27, 2020

1. For all 504 and 7(a) loans (except for loans made under the Community Advantage Pilot Program, referred to hereafter as Community Advantage Loans) that were approved before March 27, 2020, SBA will make the Section 1112 payments for a 2-month period (instead of a 3-month period). This 2-month period of Section 1112 payments may cover amounts that are past due at the time that SBA makes the February Section 1112 payment, subject to the monthly payment limit of $9,000.

2. If the 504 or 7(a) loan is made to a borrower that, according to the records of SBA, is assigned a North American Industry Classification System code beginning with 61, 71, 72, 213, 315, 448, 451, 481, 485, 487, 511, 512, 515, 532, or 812, SBA will make the Section 1112 payments for an additional 3-month period (instead of an additional 5- month period) immediately following the end of the 2-month period provided in paragraph B.1 above. SBA will not begin to make the payments for this additional 3- month period until SBA provides to 7(a) Lenders and CDCs a list of their respective borrowers with each borrower’s assigned NAICS code.

C. Second Round 1112 Payments for Community Advantage Loans and Microloans Approved Before March 27, 2020 For Community Advantage Loans and Microloans that were approved before March 27, 2020, SBA will make the Section 1112 payments for a 5-month period (instead of an 8-month period). For Community Advantage loans, for the February Section 1112 payments, SBA will make a maximum of 2 months which may be applied to past due amounts (not to exceed 120 days). If additional funds are needed to cover past due amounts, the remaining 3 months of payments in March may be applied to cover additional past due amounts. All payments made are subject to the monthly payment limit of $9,000.

D. New Loans Approved Beginning on February 1, 2021 and Ending on September 30, 2021

For a new 7(a) loan, 504 loan, or Microloan approved during the period beginning on February 1, 2021 and ending on September 30, 2021, SBA will make the Section 1112 payments for a 3- month period instead of a 6-month period, subject to the availability of funds.

E. No Second Round 1112 Payments for Loans Approved Between March 27, 2020 and September 27, 2020.

A loan that was approved during the period beginning on March 27, 2020 and ending on September 27, 2020 is eligible for the first round of Section 1112 payments either for a 6-month period if the loan was fully disbursed on or before September 27, 2020 or for a 3-month period if the loan was fully disbursed after September 27, 2020. Under the Adjustment Plan, no other Section 1112 payments will be made for these loans.

Questions

Questions concerning this Notice may be directed to the Lender Relations Specialist in the local SBA Field Office. Questions may also be submitted through the SBA email box dedicated to Section 1112, Section1112@sba.gov.

Guidance on 7(a) and 504 Loans with Monthly Installments in Excess of $9,000

In SBA Procedural Notice 5000-20079 (“Notice”), SBA issued additional guidance for Section 1112 debt relief following enactment of the Economic Act to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Economic Aid Act”). As stated in the Notice, under Section 1112(c)(4) of the Coronavirus Aid, Relief and Economic Security Act, as amended by Section 325 of the Economic Aid Act, no single monthly payment of principal, interest, and associated fees that is made by SBA to cover a Second Round Section 1112 Payment (described in SBA Procedural Notice 5000-20079) may total more than $9,000. The Notice stated that it is the borrower’s responsibility to pay any amount that exceeds the monthly limit of $9,000 (the “excess due”) at the time the payment is due. If the borrower is unable to do so, Lenders are responsible for addressing the excess due with affected borrowers using prudent lending standards including entering into a mutually agreeable arrangement to make up the excess due. The purpose of this Notice to provide supplemental guidance to Lenders with loans sold into SBA pools in the Secondary Market and to CDCs with 504 loans in debenture pools.

7(a) Loans in SBA Pools

Approximately 90% of all loans sold in the SBA Secondary Market are in SBA pools. While borrowers remain responsible for installment payments as prescribed in their respective SBA Notes, some continue to experience financial hardship resulting from the pandemic. If a borrower with a pooled loan is unable to pay the excess due at the time the payment is due, SBA will approve the Lender’s request for a principal-only deferment. Lenders may submit these requests through the SBA Fiscal and Transfer Agent (“FTA”), Colson Services Corporation, by accessing the Customer Service Online Request (“CSOR”) feature from the Sign In drop down menu on the FTA’s website, https://colsonservices.bnymellon.com.

504 Loans and Underlying SBA Debenture Pools

With respect to any excess due, the borrower must remit payment covering the excess due at the time the payment is due to SBA through the Central Servicing Agent (CSA) by check or wire. If the borrower does not pay the excess due timely, no late fee will be charged on the excess due and the CDC will be able to see that the $9,000 was applied by viewing the “Loan Detail” report in CDC Online. CDCs are advised to coordinate with borrowers on their responsibility to make timely payments on the 504 loan payments not covered by Section 1112 subsidy. However, if the borrower is unable to pay the excess due at the time the payment is due, the CDC must submit, upon the completion of the authorized period of Section 1112 payments, a deferment/catch-up plan request to the CSA to cover the outstanding past due balance. The Section 1112 payments will cover only up to $9,000 of the scheduled note payment and will not cover any excess due amounts from prior months, or any accrued late payment amounts or late fees. For questions on specific loans, please contact CSA at sba504csa@wellsfargo.com.

Questions

Questions concerning this Notice may be directed to the Lender Relations Specialist in the local SBA Field Office. Questions may also be submitted through the SBA email box dedicated to Section 1112, Section1112@sba.gov.

Information from the U.S. Small Business Administration

SBA Debt Relief

SBA is providing debt relief to existing SBA loan borrowers

Content

7(a), 504, and Microloans

Initial Debt Relief Assistance

As a part of the CARES Act, SBA is authorized to pay 6 months of principal, interest, and any associated fees that borrowers owe for all 7(a), 504, and Microloans reported in regular servicing status (excluding PPP loans).  This debt relief to borrowers was originally dependent on the loan being fully disbursed prior to September 27, 2020 and does not apply to loans made under the Economic Injury Disaster Loan (EIDL) program.

These original provisions were amended on December 27, 2020 through the Economic Aid to Hard-Hit Small Businesses, Non-Profits and Venues Act (Economic Aid Act).  The Economic Aid Act revised the eligibility criteria for assistance to include all 7(a), 504, and Microloans approved up to September 27, 2020 even if not fully disbursed. All other provisions for initial debt relief remained the same.

Borrowers need not apply for this assistance.  SBA provides this assistance automatically as provided below:

  • For loans not on deferment, SBA will make monthly payments based on the next payment due on eligible loans for a total amount equivalent to no more than 6 months of installment payments.
  • For loans currently on deferment, SBA will begin making monthly payments with the first payment due after the deferment period ends for a total amount equivalent to no more than 6 months of installment payments.

SBA has notified 7(a), 504, and Microloan Lenders that it will pay these borrower loan payments. Lenders are to report to SBA periodically on the amounts due once a loan is fully disbursed. Payments collected after March 27, 2020 may be applied to the outstanding loan balance or returned to the borrower at the borrower’s discretion.

Additional Debt Relief Assistance

The Economic Aid Act also authorized additional debt relief payments to 7(a), 504, and Microloan borrowers beyond the 6-month period prescribed in the CARES Act.  The level of assistance varies based on when the loan was approved and will begin on or after February 1, 2021.  Please contact your Lender for questions on the availability of this assistance for your SBA loan.

THE INITIATIVES DESCRIBED ABOVE ARE LIMITED TO THE LEVEL OF AVAILABLE FUNDING PROVIDED BY CONGRESS.

Disaster Home and Business Loans

For current SBA Serviced Disaster (Home and Business) Loans: If your disaster loan was in “regular servicing” status on March 1, 2020, the SBA is providing automatic deferments through March, 31, 2021.

What does an “automatic deferral” mean to borrowers?

  • Interest will continue to accrue on the loan.
  • 1201 monthly payment notices will continue to be mailed out which will reflect the loan is deferred and no payment is due.
  • The deferment will NOT cancel any established Preauthorized Debit (PAD) or recurring payments on your loan.  Borrowers that have established a PAD through Pay.Gov or an OnLine Bill Pay Service are responsible for canceling these recurring payments.  Borrowers that had SBA establish a PAD through Pay.gov will have to contact their SBA servicing office to cancel the PAD.
  • Borrowers preferring to continue making regular payments during the deferment period may continue remitting payments during the deferment period. SBA will apply those payments normally as if there was no deferment.
  • After this automatic deferment period, borrowers will be required to resume making regular principal and interest payments.  Borrowers that cancelled recurring payments will need to reestablish the recurring payment.

If you have questions about your current loan and whether or not your loan is automatically deferred, please contact your Loan Servicing Office directly using the following information:

Small Business Loans

No matter your business size, Funding Well Capital has a loan for you. With our vast experience, we’re proud to say that over our many years of business that we treat clients of all sizes, whether a Fortune 500 company or a business of 2-5 people with respect, integrity and always strive to find the best financing options for their business. We’ve also found that supporting small businesses has been a great way for us to invest in America.

Is a small business loan right for your company?

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Why are Small Businesses important to the USA?

According to the US Census Bureau, there were nearly 28 million small businesses in 2010. That number qualifies for half of the economy’s private-sector employment. Furthermore, in 2011 statistics indicated that 64% of new jobs came from small businesses.

Small businesses are undoubtedly a good chunk of the American economy. Our belief is that small businesses define much of what the American dream is all about — Freedom, opportunity and the pursuit of financial independence.

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What is a small business loan?

A small business loan is offered through the Small Business Administration (SBA). The SBA is a government agency that provides support to entrepreneurs and small business. The SBA was created to “aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy” of our country.

The SBA is vital in helping create jobs, create innovation, and provide opportunities for people of all types to earn an income and work toward their dreams.

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What’s different about SBA Loans?

The gist of the difference between an SBA loan and a conventional loan comes down to a guarantee by the federal government. Conventional loans are held by private banks and/or lenders and will typically carry higher rates and shorter terms. SBA loans tend to have lower interest and longer terms, but often times can be more difficult to get approved with lengthier processing times.
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Types of SBA Loans

To see what types of SBA loans exist and which is are right for your business, click the link below:

https://www.sba.gov/loanprograms

If you’re interested in learning more to see if you qualify for SBA loans, reach out to us at Funding Well Capital to see how we can assist you. The key to obtaining an SBA loan is working with someone who has a deep knowledge and understanding of the application and underwriting process to ensure you get the best rate and term for your business.

Let Funding Well Capital help your business thrive.

Call us today for a free consultation 480-292-8244 and get your business headed in the right direction with your number one business financing source.

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