Wednesday, February 17, 2021

NEW CASH INCENTIVE FOR BUYERS (& potential benefit to existing loans)


In an effort to assist the hardest hit industries due to Covid-19, The 2021 Consolidated Appropriations Act has been signed into law with some truly amazing changes to the SBA 504 Program:

  • With the exception of 504 loans approved between 9/27/2020 and 2/1/2021, all existing SBA 504 borrowers not on deferment or catch-up will receive an additional three months of payment assistance beginning February 2021, capped at $9,000 per month per borrower
  • After the three-month period, borrowers considered underserved will receive an additional five months of payment subsidies capped at $9,000 per month for borrowers in the hardest hit industries, including food service and accommodation, arts, entertainment, recreation, education, laundry, and personal care services with the following NAICS 213, 315, 448, 451,481, 485, 487, 511, 512, 532, 61, 71, 72 or 812.
  • Payment subsidies for six months will resume for new SBA 504 loans approved between February 1 and September 30, 2021, capped at $9,000 per month, per borrower.
  • The 0.5% Bank, SBA Participation Fee and the 1.5% CDC Processing Fee will be waived for all loans approved between December 28, 2020 through September 30, 2021. 
The timing of the following changes is still pending:
  • Any CDC with ALP status, including CDC New England, will be given unilateral authority to approve, authorize, close, and service SBA 504 loans up to $500,000, which will significantly speed up the approval process not only for loans this size, but for larger loans that still need to be submitted to the SBA. 
Big changes to SBA 504 Debt Refinancing:
  • SBA 504 “Debt Refinancing with Expansion” will change. Previously, you needed $2.00 in new debt for every $1.00 in existing debt. Now, it is a 1 to 1 ratio. This program has always allowed for refinancing of existing SBA 504 and 7A loans.
  • SBA 504 “Debt Refinancing without Expansion” has always allowed for a limited amount of cash out, but you could not refinance if there was existing SBA 504 or 7A debt. Now you can. Also, the debt only needs to be on the books for six months rather than 2 years. In the past, all payments had to be 30 days or less past due for the previous 12 months. This requirement will be dropped and it will become a credit decision.
  • The existing senior lender (bank, credit union, etc.) tied to an SBA 504 loan will be allowed to refinance their loans and include some level of cash out for business operating expenses. This provision will provide critically needed working capital.


Contact me and I can put you in touch with an SBA approved lender!
As of the date of this post, the incentive was 6 months. As of today, they may have modified this to 3 months plus paid closing costs.

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