SBA Procedural Notice: Guidance on 7(a) and 504 Loans with Monthly Installments in Excess of $9,000
Summary
SBA Procedural Notice, Control No. 5000-806780, effective March 12, 2021, to SBA employees, 7(a) lenders and certified development companies, giving guidance on 7(a) and 504 loans with monthly installments in excess of $9,000. It refers to Procedural Notice 5000-20079, in which SBA issued additional guidance on Section 1112 debt relief following enactment of the Economic Aid Act. It addresses how the Section 1112(c)(4) provision of the CARES Act, as amended, applies to these loans.
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Full text
SBA Procedural Notice
TO: All SBA Employees, 7(a) Lenders and CONTROL NO.: 5000-806780
Certified Development Companies
EFFECTIVE: March 12, 2021
SUBJECT: Guidance on 7(a) and 504 Loans with
Monthly Installments in Excess of $9,000
In SBA Procedural Notice 5000-20079 (“Notice”), SBA issued additional guidance for Section
1112 debt relief following enactment of the Economic Act to Hard-Hit Small Businesses,
Nonprofits, and Venues Act (the “Economic Aid Act”). As stated in the Notice, under Section
1112(c)(4) of the Coronavirus Aid, Relief and Economic Security Act, as amended by Section
325 of the Economic Aid Act, no single monthly payment of principal, interest, and associated
fees that is made by SBA to cover a Second Round Section 1112 Payment (described in SBA
Procedural Notice 5000-20079) may total more than $9,000. The Notice stated that it is the
borrower’s responsibility to pay any amount that exceeds the monthly limit of $9,000 (the
“excess due”) at the time the payment is due. If the borrower is unable to do so, Lenders are
responsible for addressing the excess due with affected borrowers using prudent lending
standards including entering into a mutually agreeable arrangement to make up the excess due.
The purpose of this Notice to provide supplemental guidance to Lenders with loans sold into
SBA pools in the Secondary Market and to CDCs with 504 loans in debenture pools.
7(a) Loans in SBA Pools
Approximately 90% of all loans sold in the SBA Secondary Market are in SBA pools. While
borrowers remain responsible for installment payments as prescribed in their respective SBA
Notes, some continue to experience financial hardship resulting from the pandemic. If a
borrower with a pooled loan is unable to pay the excess due at the time the payment is due, SBA
will approve the Lender’s request for a principal-only deferment. Lenders may submit these
requests through the SBA Fiscal and Transfer Agent (“FTA”), Colson Services Corporation, by
accessing the Customer Service Online Request (“CSOR”) feature from the Sign In drop down
menu on the FTA’s website, https://colsonservices.bnymellon.com.
504 Loans and Underlying SBA Debenture Pools
With respect to any excess due, the borrower must remit payment covering the excess due at the
time the payment is due to SBA through the Central Servicing Agent (CSA) by check or wire. If
the borrower does not pay the excess due timely, no late fee will be charged on the excess due
PAGE 1 of 2 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
and the CDC will be able to see that the $9,000 was applied by viewing the “Loan Detail” report
in CDC Online. CDCs are advised to coordinate with borrowers on their responsibility to make
timely payments on the 504 loan payments not covered by Section 1112 subsidy. However, if
the borrower is unable to pay the excess due at the time the payment is due, the CDC must
submit, upon the completion of the authorized period of Section 1112 payments, a
deferment/catch-up plan request to the CSA to cover the outstanding past due balance. The
Section 1112 payments will cover only up to $9,000 of the scheduled note payment and will not
cover any excess due amounts from prior months, or any accrued late payment amounts or late
fees. For questions on specific loans, please contact CSA at sba504csa@wellsfargo.com
Questions
Questions concerning this Notice may be directed to the Lender Relations Specialist in the local
SBA Field Office. Questions may also be submitted through the SBA email box dedicated to
Section 1112, Section1112@sba.gov.
Dianna L. Seaborn
Director
Office of Financial Assistance
PAGE 2 of 2 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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- Original
- www.sba.gov