The Consolidated Appropriations Act, 2021, a $900-billion COVID relief package, was passed by Congress and signed into law. The legislation includes many provisions for small businesses, including enhancements to the SBA 504 Refinance Program, Temporary Fee Elimination for the SBA 504 Loan Program, and an extension of the CARES Act payment subsidies for SBA 504 loan payments. What you need to know:
The NEW SBA 504 Refinance Program
With the proposed regulations, more businesses will be eligible for the SBA 504 Refinance Program. How this looks:
- The loan to be refinanced only needs to have been in place for 6 months, rather than 2 years;
- The program can now refinance government-guaranteed debt;
- 12 months of current payments is no longer an eligibility criteria and is reviewed as part of the credit decision.
For borrowers with existing SBA 504 loans:
- For one year from December 27, 2020, borrowers can refinance the first trust deed and take cash out to be used for business needs, rather than exclusively used on their building;
- Total financing: up to 90% LTV when combined with the 504 second mortgage.
Temporary Fee Reduction for SBA 504 Program
- Fee reductions for new SBA 504 loans approved from December 27, 2020 (the date of enactment of the new law) through September 30, 2021
- Waives 0.5% Third Party Lender Participation Fee - on loan in senior lien position in 504 project
- Waives 1.5% CDC processing fee (in debenture pricing)
- SBA guidance is expected to address the handling of all loans currently in process at SBA.
Payment Subsidies
The Act appropriates $3.5 billion to extend the small business debt relief program established by the CARES Act. What this means:
For SBA loans approved prior to the CARES Act (March 27, 2020), borrowers receive the following:
- 6 months of payment subsidies
- Funded borrowers & borrowers coming off deferment may have already received or been allocated this relief under original CARES Act.
- 3 months of payment subsidies starting February 1, 2021 capped at $9,000 per loan per month;
- Additional 5 months (after 3-months) payment subsidies for loans to "underserved" and "hard hit" industries, capped at $9,000 per loan per month:
- Community Advantage loans and microloans
- For a list of "hard hit" NAICS codes for 7(a) and 504 loans click here
For SBA loans approved and funded during original CARES Act (March 27, 2020 - September 27, 2020) borrowers receive the following:
- 6 months of payment subsidies
For SBA loans approved (September 27, 2020 - January 31, 2021) borrowers receive the following:
- No payment subsidies
- Why? Congressional intent of the CARES Act 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.
For NEW SBA loans approved (February 1, 2021 - September 30, 2021) borrowers receive the following:
- 6 months of payment subsidies, capped at $9,000 per loan per month
*All information above is subject to full pending SBA implementation guidance - required regulations, notices, and revised forms. We expect more information to be available as we get closer to the February 1, 2021 proposed start date. Capital CDC will provide further updates at that time.