SBA 504 Borrowers: Get 6 Months of Payment Forgiveness Through Covid-19 Relief Act
The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act) provides $3.5 billion in additional Covid-19 relief, some of which is authorized for use through the SBA 504 loan program for both existing borrowers and on newly originated loans to help small business owners during the pandemic.
New SBA 504 Loan Relief
The SBA 504 Loan has been made even more attractive to new small business borrowers. For all loans approved from February 1 until September 30, 2021, the SBA will subsidize the first 6 months of principal, interest, and any associated fees starting with the first payment. Borrowers need not apply for this assistance. The SBA provides this assistance automatically and is capped at $9,000 per loan per month.
Relief for 2020 SBA 504 Borrowers
The Small Business Administration was authorized by the Economic Aid Act to pay 6 months of principal, interest, and any associated fees that borrowers owe for all 504 loans approved up to September 27, 2020 even if not fully disbursed and existing loans that are in in regular servicing status.
SBA 504 Loan NOT Eligible for Relief
According to SBA guidance, unfortunately, loans approved during the period beginning on September 28, 2020 and ending on January 31, 2021 are not eligible to receive any payment relief.
SBA Fees Eliminated
Alejandro Buitrago, Vice President and Business Development Officer at Florida First Capital Finance Corporation has been parsing through the new legislation. According to Buitrago, for any SBA 504 Loans approved between December 27, 2020 and September 30, 2021; the following fees will be eliminated:
- 5% of the 1st Mortgage (aka TPL Fee)
- 5% of the Interim Loan (aka CDC Processing Fee in the debenture)
To illustrate, here is what fees would be eliminated on a standard $1,000,000 Project being financed at 90%
- Fee Elimination 1st Mortgage: $2,500
- Fee Elimination Interim Loan: $6,000
- Total Fee Elimination: $8,500
Some debenture fees remain in the equivalent of 1.15% of the Interim Loan In the above scenario the SBA Debenture Fees would total: $4,600, reducing the SBA Fees from $13,100 to $4,600 on a $1,000,000 project, a 65% decrease in costs.
Liberty SBF is Your Connection to SBA
Covid-19 is still adversely affecting thousands of small businesses across the country and the SBA’s lending programs are key tools in the Federal Government’s economic stimulus efforts. Liberty SBF, one of the largest SBA 504 lenders in the country, is helping small businesses connect with the SBA to take advantage of stimulus relief through Paycheck Protection Program and the SBA 504 loans.
Small business owners positioned to acquire a new property to expand their businesses right now need to finance their expansion through the SBA 504 loan program, which already offers the best terms for borrowers out of any commercial property loan: low, long-term rates starting at 3.99%, with up to 90% loan-to-value financing. Small business owners who already operate out of their own commercial property can tap into their equity at similarly favorable terms through an SBA 504 refinance. Both borrowers will get to take advantage of new SBA 504 loan relief in the Economic Aid Act.
As always, please refer to SBA Procedural Notice 5000-20079 for complete guidance on SBA 504 loan relief in 2021.