SBA 504 Debt Relief

In March of 2020, the CARES Act charged the Small Business Administration with making debt relief payments (principal, interest and fees) to help certain SBA borrowers. The federal government recently approved an additional $3.5 billion to continue and expand this payment assistance. PLEASE NOTE: the number of months for which a loan may receive assistance and the amount is subject to the availability of funds provided by Congress.

Per Procedural Notice 5000-20095 the following debt relief will be provided for SBA 504 borrowers:

For SBA 504 Loans APPROVED PRIOR to March 27, 2020 and funded on or before September 27, 2020:

Loan Funded (Fully Disbursed) On or Before September 27, 2020:  Total of 8 months (6 full/2 capped) payment assistance with the possibility of 2 additional capped months based on NAICS code

  • 6 months of First Round 1112 Payments covering full amount of principal/interest/fees (per the CARES Act passage in March 2020).
  • 2 months of Second Round 1112 Payments starting capped at $9,000 per loan per month – this 2-month period for the Second Round Section 1112 Payments does not begin until the first month after SBA has completed the First Round Section 1112 Payments.
  • Additional 2 months (immediately after 2 months described above) of payment subsidies will be provided for loans of industries that Congress designated as hard hit by the pandemic capped at $9,000 per loan per month. These targeted loans are assigned one following NAICS codes beginning with: 61, 71, 72, 213, 315, 448, 451, 481, 485, 487, 511, 512, 515, 532, or 812.

Loan Funded (Fully Disbursed) On or After September 28, 2020:  Total of 5 months (3 full/2 capped) payment assistance with the possibility of 2 additional capped months based on NAICS code

  • 3 months of First Round 1112 Payments covering full amount of principal/interest/fees (per the CARES Act passage in March 2020).
  • 2 months of Second Round 1112 Payments starting capped at $9,000 per loan per month – this 2-month period for the Second Round Section 1112 Payments does not begin until the first month after SBA has completed the First Round Section 1112 Payments.
  • Additional 2 months (immediately after 2 months described above) of payment subsidies will be provided for loans of industries that Congress designated as hard hit by the pandemic capped at $9,000 per loan per month. These targeted loans are assigned one following NAICS codes beginning with: 61, 71, 72, 213, 315, 448, 451, 481, 485, 487, 511, 512, 515, 532, or 812.

For SBA 504 Loans APPROVED BETWEEN March 27, 2020 – September 27, 2020:

Loan Funded (Fully Disbursed) On or Before September 27, 2020: Total of 6 months of full payment assistance

  • 6 months of First Round 1112 Payments covering full amount of principal/interest/fees (per the CARES Act passage in March 2020).

Loan Funded (Fully Disbursed) On or After September 28, 2020: Total of 3 months of full payment assistance

  • 3 months of First Round 1112 Payments covering full amount of principal/interest/fees (per the CARES Act passage in March 2020).

For SBA 504 Loans APPROVED BETWEEN September 28, 2020 – January 31, 2021:

Not eligible to receive Second Round Section 1112 Payments

  • Why? The congressional intent of Section 1112 payment subsidies is to provide relief to existing borrowers in place at the onset of the pandemic and to stimulate new loans that would not otherwise occur because of the pandemic. Loans approved during this time period were approved in a window where there was no expectation of COVID-19 relief.

For New SBA 504 Loans APPROVED BETWEEN February 1, 2021 – September 30, 2021:

Total of 3 months of capped payment assistance

  • 3 months of payment subsidies starting with first payment due after the loan is in regular servicing status. Relief is capped at $9,000 per loan per month.

This debt relief is not considered a loan, forbearance, or deferment of any kind. This will not impact the business credit score. Simply, the SBA will be paying these loan payments on the borrower behalf. Additionally, please see SBA Procedural Notice 5000-20087 for guidance on tax treatment of 1112 Payments.

Please note – a borrower that has received, is receiving, or will receive, Section 1112 payments on a loan that was approved beginning on March 27, 2020, and ending on September 27, 2020, may not receive assistance under Section 1112 for any other loan approved beginning on or after February 1, 2021.

Have Questions?
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Margaret Griffin
EVP, Chief Lending Officer
mgriffin@somercor.com
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Elisabeth Williams
VP, Loan Officer
ewilliams@somercor.com
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Eric Bacon
VP, Loan Officer
ebacon@somercor.com
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Joseph Bailey
AVP, Loan Officer
jbailey@somercor.com
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