The phone is ringing off the hook here at Seedcopa, with borrowers asking 2 key questions about the new $900 billion in COVID relief:
1) How will my SBA loan application be affected?
2) Will my existing SBA loan payments be covered, with no need to repay, under the new COVID relief bill?
With more than 5,000 pages, the COVID relief bill requires analysis, with implementation under the purview of the SBA. As you know, Seedcopa releases information once we’re able to confirm it, as we did with the CARES Act of last spring. Here’s what we know now, and stay tuned for more.
- Covered Loan Payments
The new stimulus bill now forgives up to eight months of principal and interest payments on SBA 504 loans and 7(a) loans. For borrowers who have already received six months of covered payments, we believe you’ll receive an additional three months. You may be able to enjoy another five months of covered payments (bringing the total up to eight months) if you are in a hard-hit industry such as food service and lodging, arts, entertainment, education, personal care and recreation. Also, as we understand it today, there may be six months of principal and interest payments available for newly approved loans. The stated cap is $9,000 a month per borrower.
- Fee Relief
The new legislation allows the SBA to waive certain fees for borrowers, and as a result, Seedcopa is seeing a surge in inquiries from businesses that have been considering new projects and are now ready to pull the trigger. Previously, borrowers paid a little more than 2.5% in 504 fees built into their loans. The SBA plans to cover 2% of those fees for borrowers whose loans are approved from enactment of law and ending 9/30/21.
- Guarantees Raised
The new legislation is raising the guarantee for 7(a) loans to further stimulate the economy. 7(a) loans previously guaranteed at 75% will now be guaranteed at 90% until 10/1/2021.
This Just In: Paycheck Protection Program
The SBA and U.S. Treasury Department just released two new interim final rules regarding PPP.
- Interim Final Rule on Paycheck Protection Program as Amended by Economic Aid Act (1/6/2021)
- Interim Final Rule on Second Draw Loans (1/6/2021)
Another important factor regarding the COVID relief bill for PPP loans: With this new legislation, we believe that PPP loans under $150,000 may utilize a simplified forgiveness application (not yet released) intended to be a one-page certification for most borrowers. We will continue to update you on more details for implementation as we receive them from the SBA. In the meantime, we are participating in the legislation’s interpretation through the National Association of Development Companies (NADCO), where Seedcopa’s Sherwood Robbins serves as Region 3 Director.
Here are a few valuable resources from NADCO:
December 2020 COVID Relief Bill (small business provisions begin on page 2042)