Major Changes to 7(a) Lending

With the $900 billion stimulus bill expected to become law, major changes will be coming to the SBA 7(a) lending program.

Summary of Changes Coming to SBA

7(a) Program Changes for Acquisition Loans

The stimulus bill will fundamentally change the 7(a) loan program to start 2021 with the SBA increasing their loan guarantee to lenders from 75% to 90% and waiving guarantee fees to all borrowers until September 30, 2021.

Payments Extended

The SBA will again pay principal and interest payments on behalf of borrowers with 7(a) loans. Borrowers who have already received six months of payments will receive an additional three months, with those in certain industries like restaurants, retail stores, and salons receiving an additional five months for a total of eight months. Loans approved (not closed) between February 1, 2021 and September 30, 2021 will also receive six months of payments. Limitations were added, capping payments by the SBA at $9,000 per payment. Borrowers with monthly payments over $9,000 will have to cover the difference.

Paycheck Protection Program Round 2

The Paycheck Protection Program has received an additional $284 billion and certain businesses are eligible for a second loan. Loan amounts are still 2.5x monthly payroll costs, but this time capped at $2 million. Generally, eligibility for a second loan requires that the business must have experienced a 25% or more drop in revenue in Q1, Q2, or Q3 of 2020 over the same period in 2019. Another change in the Program was clarification that all P.P.P. loans are not taxable and not considered as income.

Securing Additional PPP funds through March 31st, 2021

• • Simplified forgiveness application for loans of $150k and below
• • Expanded covered expenses now may include supplier costs, operations expenditures, employee protection activities (ie: Cleaning procedures), property damage costs (occurring during 2020) and specific group insurance.

SBA Lending and Debt relief updates for the 7(a) 504 and express lines of credit (all contingent upon funds availability)

• • All SBA fees are waived until 9/30/21
• • Buyers receive 6 months of payments made by SBA ($9k maximum per month) on new loans
• • Current borrowers may now receive 6 payments previous now will receive additional 3 payments ($9k maximum per month) (Hard hit sectors receive more)
• • SBA Express LOC has temporarily increased to $1mm through September and then permanently remains at $500k (Permanent increase from $350k)
• • Lenders SBA guaranty increases to 90% (up from 75%)

What can you be doing today with this information?

• • Contact all previous clients informing them of the 3 additional payments being made by SBA
• • Contact all previous "potential" buyers informing them of the fee waivers and 6 free payments up closing
• • Contact all potential sellers and listings, explaining the opportunities the buyers will have ONLY until Sept. 2021
• • Solicit listings on less affected industries
• • Assist all current listings to apply for forgiveness with PPP
• • Contact your "hardest hit" clients and share this information

Major Changes to 7a Lending: Article from CK Books & Billing. This article has been reprinted with permission from CK Books & Billing