relief for small businesses

economic aid act

sba payment subsidies

What are Section 1112 Payment Subsidies?

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) was enacted to provide emergency and immediate national economic relief and assistance across the American economy, including to small businesses.  Section 1112 of the CARES Act authorized SBA to pay, for a six month period, the principal, interest and associated fees that borrowers owe on covered 504 loans, 7(a) loans and Microloans.  The initial availability of this debt relief expired on September 27, 2020 (hereafter “First Round Section 1112 Payments”).

With the enactment of the Economic Aid Act on December 27, 2020, Congress amended section 1112 to authorize a second round of Section 1112 payments, which will cover the principal, interest, and associated fees that borrowers owe on covered loans, subject to availability (hereafter “Second Round Section 1112 Payments”).  The terms and eligibility are case-specific, so please refer to SBA Procedural Notice 5000-20095 for more details, or contact any member of our team.

Key Details:

  • The debt relief payments are not a loan or a deferment.  The payments will be forgiven.
  • You do not have to apply for this…it is automatic.
  • For 504 Loans, the debt relief only applies to the 504 portion of the financing.  The first mortgage loan is through a bank, so borrowers should contact their lender if they need assistance with the first mortgage.
  • Any past or future payment subsidies made on behalf of borrowers will not be treated as taxable income for federal tax purposes.  However, borrowers are advised to check with their tax advisors, particularly regarding any possible state tax implications.

Relief provided in the Economic Aid Act is not a loan or deferment – the payments are simply made by SBA on behalf of the borrower. Payments will also not be treated as taxable income for federal income tax purposes.  State tax implications may apply – always check with your tax advisor.

Download Our Quick Reference Guides:

Guide to SBA Payment Subsidies

SBA Fee Elimination

Economic Aid Act



FEBRUARY 1, 2021 - SEPTEMBER 30, 2021

New borrowers approved 2/1/21 – 9/30/21 (subject to availability) will receive three months of payment subsidies (principal, interest and fees), capped at $9,000 per loan per month, beginning with the first payment due after the loan has been funded by a debenture guaranteed by SBA and is in regular servicing status.

In addition, until September 30, 2021 (subject to availability), SBA is eliminating the following fees:

  • 0.5% Third Party Lender Participation fee, and
  • 1.5% CDC Processing Fee

See SBA Procedural Notice 5000-20095 for more details.

Combined, these two measures will result in significant savings for borrowers looking to buy, build or refinance.



  • 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 3 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.
MARCH 27, 2020 - SEPTEMBER 27, 2020

Loans Fully Funded (fully disbursed) on or before September 27, 2020

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

Loans Fully Funded (fully disbursed) on or after September 28, 2020

  • 3 months of First Round 1112 Payments covering full amount of principal/interest/fees
SEPTEMBER 28, 2020 - JANUARY 31, 2020

Not eligible for payment subsidies

  • 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.

As with any regulations, case-specific rules and guidelines may apply.

Please contact us if you have any questions about your eligibility.

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