Guidance on SBA’s Implementation of Section 1112 of the Coronavirus Aid, Relief, and Economic Security Act
Summary
This SBA Procedural Notice, Control No. 50000-20015, effective April 8, 2020, explains how SBA implements Section 1112 of the CARES Act for the Microloan Program, with the 7(a) and 504 programs to follow in a separate notice. SBA will pay the principal, interest and associated fees that borrowers owe on a covered loan in regular servicing status to Intermediaries for a 6-month period. A covered loan is a loan an Intermediary makes to a small business using a loan received under section 7(m) of the Small Business Act, and regular servicing status means a loan not more than 120 days delinquent. For a covered loan made before April 1, 2020, the six months begin with the April payment.
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SBA Procedural Notice
TO: All SBA Employees and SBA Microloan CONTROL NO.: 50000-20015
Program Intermediary Lenders
EFFECTIVE: April 8, 2020
SUBJECT: Guidance on SBA’s Implementation of
Section 1112 of the Coronavirus Aid, Relief, and
Economic Security Act (“CARES Act”) Related to
the SBA Microloan Program
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, workers, families, and the health-care
system, to alleviate the severe economic hardships and public health threat created by the 2019
Novel Coronavirus pandemic. Under section 1112 of the CARES Act, SBA will provide debt
relief to borrowers in the 7(a), 504, and Microloan Programs. The purpose of this Notice is to
address the implementation of Section 1112 of the CARES Act for the Microloan Program. SBA
will address the implementation of section 1112 for the 7(a) and 504 Loan Programs in a
separate notice.
In accordance with section 1112(c), SBA will pay the principal, interest, and any associated fees
that borrowers owe on a “covered loan” in a “regular servicing status” to SBA Microloan
Program Intermediary Lenders (Intermediaries) for a 6-month period. SBA will make these
payments to Intermediaries in accordance with the criteria and procedures described below.
A. Definitions:
1. A “covered loan” is a loan made by an Intermediary to a small business using a
loan received under section 7(m) of the Small Business Act (15 U.S.C. 636(m)). A microloan
must be associated with an outstanding loan between the Intermediary and SBA to be considered
a “covered loan.”
2. “Regular servicing status” means a loan that is not more than 120 days
delinquent.
PAGE 1 of 3 EXPIRES: 4-1-2021
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B. Implementation of the Six-Month Period of Payments. SBA will implement the six-
month period of SBA payments as follows:
1. For a covered loan made before April 1, 2020, SBA will make the loan
payments for the 6-month period beginning with the April payment. SBA will make each
month’s payment to the Intermediary on or about the twenty-fifth day of each month during
the six-month period.
2. In order for SBA to make the first month’s payment, Intermediaries must
update MPERS with loan data for the quarter ending March 31, 2020, NO LATER
THAN APRIL 7, 2020, for the April payment calculation. Intermediaries must continue
to update MPERS monthly until six months of SBA payments have been made on all
covered loans. SBA will calculate the amount to be paid on each covered loan based on loan
data in MPERS as of the eighth day of each month.
3. For any covered loan made before April 1, 2020, for which the Intermediary
has granted a deferment, SBA will make the loan payments as described above. Unless
notified otherwise, SBA will assume that the Intermediary has applied the SBA payments
received to the loan balance and extended the deferment period so that it continues after the
6-month period of SBA payments.
4. SBA will also make payments for covered loans made beginning on April 1,
2020, and through September 27, 2020. SBA will make the loan payments for these loans on
or before the 25th day of each month for a six-month period. SBA will calculate the amount
to be paid on each covered loan based on loan data in MPERS as of the eighth day of each
month.
5. SBA payments will not exceed the outstanding balance of principal and
interest owed on a covered loan by the Borrower.
6. If an Intermediary receives any regular loan payment due from a Borrower
during the 6-month period that SBA is making the loan payments, the Intermediary must
inform the Borrower that it has the option of the Intermediary either returning the loan
payment to the Borrower or applying the loan payment to further reduce the loan balance
after application of SBA’s payment.
C. Payment Processing Instructions.
1. SBA will deposit funds into each Intermediary’s applicable Microloan
Revolving Fund (MRF) account and will send a report to each Intermediary detailing the
payment breakout for each covered loan on or about the twenty-fifth day of each month
beginning on April 25, 2020.
PAGE 2 of 3 EXPIRES: 4-1-2021
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
2. Each Intermediary shall report on how it applied the payments received
from SBA to each covered loan in the Microloan Program Electronic Reporting System
(MPERS) no later than 7 days after the end of each month.
3. For any covered loan that has been placed into SBA servicing, SBA will
credit the loan payment to the Borrower’s account.
Questions
Questions on this Notice may be directed to Daniel Upham, Chief, Microenterprise
Development Division via email at Daniel.Upham@sba.gov.
William M. Manger
Associate Administrator
Office of Capital Access
PAGE 3 of 3 EXPIRES: 4-1-2021
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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