relief for small businesses

economic aid act

sba payment subsidies

Now Limited to Refinance Loans Only

Update (8/27/21)Fee eliminations and Section 1112 SBA payment relief will no longer be available for the regular 504 loan program.  These Economic Aid Act provisions will however, remain available for loans approved under the 504 refinance (without expansion) loan program until September 30, 2021, or until funds are exhausted.

Given the unprecedented volume of 504 lending this year, the regular 504 Loan Program has reached its FY21 congressionally authorized cap of $7.5 billion.  Absent congressional to provide additional authority for the 504 Loan Program, SBA will be unable to approve new 504 loans until October 1, 2021, when the new fiscal year starts.

However, the SBA 504 Refinance program has a separate authorization of $7.5 billion and is not in danger of reaching its cap before the September 30, 2021, deadline.  Therefore, these loans can still be approved by SBA and will still be eligible to receive the Economic Aid Act provisions (subject to availability) until the funding authorization for SBA fee eliminations expires on September 30, 2021.

New 504 refinance loans approved prior to September 30, 2021, (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.*

*If refinancing an existing SBA 504 or 7a loan that has already received Section 1112 payments, additional Section 1112 payments are not available.

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.

Payment Relief for Existing 504 Loans

In Section 325 of the Economic Aid Act, Congress appropriated $3.5 billion to carry out extended CARES Act Section 1112 payment subsidies.

You likely received a letter from SBA dated January 27, 2021, detailing the additional debt relief benefits that had been authorized by Congress based on the approval date of your SBA loan.

SBA has since determined that the funds appropriated by Congress will be insufficient to make all payments for the periods previously authorized.  Consequently, SBA developed an Adjustment Plan to proportionately reduce the number of months of payment subsidies provided for each specific category of loans.

Please note:  if your SBA loan was approved prior to March 27, 2020 and your Second Round of Section 1112 payments began in February 2021, ACH debit transactions will resume on April 1, 2021.*

*If your business falls into one of the “underserved” industries based on the NAICS code, according to SBA records, your loan may be eligible to receive three additional Second Round Section 1112 payments that will begin April 1, 2021.

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.  For ease of reference, please refer to a flow chart  Guide to Section 1112 Payments covering the changes in SBA’s Adjustment Plan.

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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