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Home Source documents Additional Guidance on the Implementation of Section 1112 of the CARES Act (Control No. 5000-20058)

Additional Guidance on the Implementation of Section 1112 of the CARES Act (Control No. 5000-20058)

Summary

SBA Procedural Notice 5000-20058, effective October 21, 2020, gives 7(a) Lenders and Certified Development Companies more guidance on Section 1112 of the CARES Act, the subsidy for certain loan payments, after the September 27, 2020 deadline for new loans passed. SBA decided it is not cost effective to make Lenders return overpayments of $10 or less on the 6th and final payment; the Lender credits the 7(a) loan instead. A Lender that finds an underpayment for any month of the 6-month period may ask for the additional funds as soon as it becomes aware of it, by written request to the FTA, Colson Services, subject to the availability of funds. Lenders and CDCs must also ensure that E-Tran reflects each Borrower's current owners and addresses. The notice runs over the name of William M. Manger, Associate Administrator, Office of Capital Access.

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Full text

                       SBA Procedural Notice

TO: All SBA Employees, 7(a) Lenders, and                                            CONTROL NO.: 5000-20058
Certified Development Companies

SUBJECT: Additional Guidance on the                                                 EFFECTIVE: October 21, 2020
Implementation of Section 1112 of the CARES Act,
Subsidy for Certain Loan Payments, for the 7(a) and
504 Loan Programs



The purpose of this Notice is to provide additional guidance on the implementation of Section
1112 of the CARES Act, Subsidy for Certain Loan Payments, for the 7(a) and 504 Loan
Programs. With the September 27, 2020 deadline now passed for new loans to be eligible for
Section 1112 payments, SBA wishes to provide the following additional guidance and reminders
to Lenders and Certified Development Companies (CDCs):

       A. Reconciliation of Payments to Lenders

               1. Threshold for Returning Overpayments to SBA

Paragraph N of SBA Procedural Notice 5000-20023 provides that, if a 7(a) Lender receives an
overpayment for the 6th and final section 1112 payment, then the additional funds owed the SBA
must be immediately returned to SBA via wire to Colson’s 7(a) Collection Account with a
reference to Section 1112 and the affected SBA Loan Number. SBA has determined that it is not
cost effective to require Lenders to return overpayments of $10 or less and, accordingly, Lenders
need not return the funds to SBA if the amount of the overpayment with respect to a particular
loan is $10 or less. In such cases, instead of returning the overpayment to SBA, the Lender must
credit the 7(a) loan for which the overpayment was made by the amount of the overpayment.

               2. Lender’s Request for Additional Funds

Paragraph N of SBA Procedural Notice 5000-20023 also provides that, if the Lender received an
underpayment for the 6th and final section 1112 payment, then the Lender may submit a 7th
request the following month (the 7th month) through the CARES Act menu of the 1502
Dashboard for the additional funds owed the Lender only after providing a written request to the
FTA, Colson Services. SBA understands that occasionally Lenders may not become aware by

PAGE 1 of 2                                                                                 EXPIRES: 10-1-21
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
the 7th month of an underpayment that was made for any month during the 6-month period of
Section 1112 payments. SBA has determined, therefore, that the Lender may submit a request
for additional funds to cover an underpayment made for any month of the 6-month period of
Section 1112 payments as soon as the Lender becomes aware of such underpayment, subject to
the availability of funds for Section 1112 payments.

The written request for the additional payment may be submitted to the FTA, Colson Services,
by email and must include the SBA loan number, the amount of the underpayment, and a
certification by the Lender that the additional funds are eligible for Section 1112 payment under
SBA Loan Program Requirements. SBA reminds Lenders that they must maintain a written
explanation of the circumstances justifying the request for an additional payment in their loan
files, which SBA may request at any time.

       B. Lenders and CDCs Must Ensure that E-TRAN Reflects Current Owners with Current
          Addresses

SBA reminds all 7(a) Lenders and CDCs that they must ensure that, for each 7(a) and 504 loan,
E-Tran reflects the current owners of the Borrower with their current “Project Address” and
“Loan Mailing Address”.

Questions

Questions on this Notice may be directed to the Lender Relations Specialists in the local SBA
Field office. The local SBA Field office may be found at https://www.sba.gov/tools/local-
assistance/districtoffices.




William M. Manger
Associate Administrator
Office of Capital Access




PAGE 2 of 2                                                                                 EXPIRES: 10-1-21
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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