Procedural Notice 5000-21003: Microloan Program Changes due to Economic Aid Act

Summary

SBA Procedural Notice, Control No. 5000-21003, to SBA employees and microloan intermediaries, effective March 8, 2021, on changes to the Microloan Program under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act. It gives guidance on implementing Section 329 of that act, enacted December 27, 2020. It lists temporary changes to the Microloan Program in effect from December 27, 2020 through September 30, 2021.

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Full text

SBA Procedural Notice

TO: All SBA Employees and Microloan CONTROL NO.: 5000-21003
Intermediaries
EFFECTIVE: March 8, 2021
SUBJECT: Changes to the Microloan Program under
the Economic Aid to Hard-Hit Small Businesses,
Nonprofits, and Venues Act (PL 116-260)

The purpose of this Notice is to provide guidance on the implementation of Section 329 of the
Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act),
enacted December 27, 2020, Pub. L. 116-260.

A. Effective December 27, 2020 through September 30, 2021, the following temporary
changes to the Microloan Program apply:

1. Increase of the total amount an Intermediary may borrow under the Microloan
Program
The maximum amount of all outstanding loans to an Intermediary under the Microloan
Program is temporarily increased to $10,000,000. Note that this limit reduces to
$7,000,000 on October 1, 2021. As a result, SBA will not make any new loans to an
Intermediary on or after that date until the Intermediary’s total outstanding Microloan
Program debt is less than $7,000,000.

2. Increase of the maximum amount an Intermediary may borrow from SBA in
FY2021
Existing Intermediaries may request new loans from SBA under the Microloan Program
in amounts up to $4,500,000. The maximum amount that an Intermediary may borrow in
its first year of participation remains $750,000. The aggregate amount of all loans
received between October 1, 2020, and September 30, 2021, may not exceed $4,500,000.

3. Waiver of grant match requirements
The 25 percent matching funds requirement for technical assistance (TA) grants is
waived for FY2020 grants for the period from January 1, 2021 through June 30, 2021 and
for new grants awarded in FY2021 for the period from July 1, 2021 through September
30, 2021.

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4. Waiver of the limitations on TA grant expenses
The requirement that not more than 50 percent of grant funds be used to provide
assistance to prospective borrowers and the requirement that not more than 50 percent of
grant funds be used for third-party TA contracts is waived for FY2020 grants for the
period from January 1, 2021 through June 30, 2021 and for new grants awarded in
FY2021 for the period from July 1, 2021 through September 30, 2021.

5. Increase of the maximum Microloan term to eight years
Intermediaries may extend the terms of existing Microloans to eight years. New
Microloans made between December 27, 2020, and September 30, 2021, may have a
maximum maturity of eight years.

B. The following permanent changes are required by the Economic Aid Act, and will be
implemented as described below:

1. Increase in the total amount an Intermediary may borrow under the Microloan
Program
Beginning October 1, 2021, the maximum amount of all outstanding loans to an
Intermediary under the Microloan Program will be $7,000,000.

2. Increase in the maximum amount an Intermediary may borrow from SBA per year
Beginning October 1, 2021, the maximum amount an Intermediary may borrow per year
(except for the first year) is $3,000,000. The maximum amount an Intermediary may
borrower during its first year of participation remains $750,000.

3. Maximum Microloan term
Beginning October 1, 2021, the maximum term of a new Microloan is seven years, and
the term of any existing Microloan may not be extended beyond seven years.

4. Expanded eligibility for Intermediaries to receive a bonus grant
Currently, Intermediaries that maintain a portfolio of Microloans averaging $10,000 or
less are eligible for a bonus grant equal to 5 percent of the Intermediary’s total
outstanding SBA loan balance. The Economic Aid Act expands eligibility for bonus
grants to: (a) Intermediaries that provide not less than 25 percent of their Microloans to
small businesses located in or owned by one or more residents of an economically
distressed area and (b) Intermediaries with a Microloan portfolio of which at least 25
percent is serving rural areas. For FY21, SBA will award bonus grants based on
portfolios averaging $10,000 or less. SBA is working to implement the expanded bonus
eligibility provisions and will issue further guidance for future grant cycles.

5. Minimum TA grant amount and increase in the maximum TA grant amount
The Economic Aid Act provides a new minimum grant amount of 25 percent of an
Intermediary’s total outstanding SBA loan balance and increases the maximum grant

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SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
Must be accompanied by SBA Form 58

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amount to 30 percent of an Intermediary’s total outstanding SBA loan balance.
Intermediaries eligible for bonus grants may receive an additional grant, for a total
eligible maximum grant amount of 35 percent of the total outstanding SBA loan balance.
These minimum and maximum amounts only apply in fiscal years in which the amount
appropriated for TA grants is sufficient to provide all Intermediaries with a grant equal to
25 percent or more of their total outstanding SBA loan balances. SBA plans to provide
all eligible Intermediaries with a 30 percent grant for FY21.

Questions
Questions concerning this Notice may be directed to Dan Upham, Chief, Microenterprise
Development Division.

Dianna L. Seaborn
Director
Office of Financial Assistance

PAGE 3 of 3 EXPIRES: 3/1/22
SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
Must be accompanied by SBA Form 58

Federal Recycling Program Printed on Recycled Paper

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