Effective March 19, 2020, the Small Business Administration (SBA) issued a Procedural Notice, Control No. 5000-20008, to 7(a) Lenders, 504 program Certified Development Companies (CDCs), and Microloan Intermediaries providing guidance on deferments for existing borrowers. The SBA strongly encouraged its lending partners, i.e., banks, credit unions, and non-bank lenders, to offer deferment relief to borrowers for businesses adversely affected by COVID-19.
Highlights of SBA’s guidance to CDCs that would like to offer deferment relief to their 504 Loan borrowers, included:
- The Procedural Notice applies to all 504 Loans, regardless of location of the borrower, if the borrower has been adversely affected by COVID-19-related economic disruptions.
- For 504 Loans with debentures outstanding that were in “regular servicing” status on March 12, 2020, CDCs now have unilateral authority to:
- Grant up to a 6-month deferment of principal and interest payments to borrowers when the borrower can show it needs such relief as a result of COVID-19-related economic disruptions. The CDC must document the basis for its determination that the borrower has been adversely affected by such disruptions.
- 504 Loans that were not in “regular servicing” status on March 12, 2020, CDCs may not grant any deferment.
- Deferments may be granted retroactive to the March 1, 2020 payment date. All deferments related to COVID-19-related economic disruptions must be granted on or before June 30, 2020.
- Payments are not required during the deferment period. However, voluntary payments are permitted.
- Interest will continue to accrue during the deferment period.
The entire SBA Procedural Notice, Control No. 5000-20008, can be found here.