SBA 504 Cheat Sheet: COVID Relief/Stimulus Bill
Are you a banker or broker that refers clients to the SBA 504 Loan?
Your FE Small Business Finance SBA 504 team has identified key information and benefits of the new Covid Relief/Stimulus Bill to help you stay informed. We have read through all the details and, as always, we are committed to helping you stay up to date on the provisions that relate to the SBA 504 program and matter for you and your clients.
Get a Head Start on the Opportunities Ahead:
- Attract deals: Seek opportunities within your current portfolio and with your prospects to market the program
- Start the application process now: Identify who might benefit from the new provisions and get those applications started
- Take full advantage of the offerings: Once the SBA Notice is released applications can be fine tuned based on the final details and you will have deals ready to go right when the SBA Notice is effective.
We highly recommend you stay in close contact with one of our SBA 504 Loan Experts for the latest details.
SUMMARY FOR SBA 504
Many of the relief provisions elevate the SBA 504 program to be an even more attractive loan product in the current environment. The summary below provides you a roadmap of what is expected in the SBA Notice.
We expect the SBA Notices for provisions one thru three to be released by Friday, January 8th. The SBA Notices with guidance for implementation of provision four and five to come later in January, 2021.
1. TEMPORARY FEE ELIMINATION FOR THE 504 LOAN PROGRAM
- From enactment of law and ending on September 30, 2021
- Elimination of 0.5% SBA Participation Fee
- Elimination of 1.5% FE Fee in debenture pricing offset with appropriation to pay the FE
2. REFINANCING SENIOR PROJECT DEBT (Strong client retention tool)
- Advantage for existing 504 lenders to help clients in portfolio looking to release working capital and restructure the 1st
- During the 1-year period following enactment of the law, a FE can process a cash-out subordination tore-leverage the TPL loan to a total 90% loan to value (LTV) when combined with the outstanding balance on the existing 504 loan
3. EXTENSION OF CARES ACT SECTION 1112 PAYMENT SUBSIDIES (awaiting specific details)
- Loan payment subsidy by the SBA will be implemented again. The SBA Notice will provide details on who qualifies and number of months the subsidy will be applied. The SBA Notices have not been released so we do not have the specifics at this time.
4. EXPRESS LOAN AUTHORITY FOR ACCREDITED LENDERS – 504 EXPRESS LOAN PROGRAM
- Expires on September 30, 2023
- Only qualified ALP- FEs will be granted authority to approve, authorize, close, and service 504 loans of $500,000 or less – subject to SBA’s review and acceptance of eligibility only (SBA shall not review FE decisions involving creditworthiness, loan closing, or compliance with legal requirements imposed by law or regulation). Choose your FE partner wisely.
5. 504 DEBT REFINANCE
REFINANCING NOT INVOLVING EXPANSIONS
- Elimination of prohibition on refinancing any government-guaranteed debt
- Qualified Debt must be at least 6 months old to be eligible for refinance – down from 2 years old
- Elimination of requirement that loan must have been current for not less than 1 year prior to application date
- More creative use of program goals has been reinstated for refi projects. In regards to jobs, all existing jobs may be counted as jobs retained (full time and full-time equivalent jobs allowed)
6. DEBT REFINANCE WITH EXPANSION
- Increase in cap on amount of existing debt eligible for refi from 50% of expansion costs to 100% of expansion costs increasing use of 504 loan pricing up to 25% of the project’s value
Contact one of our SBA 504 loan experts who can answer questions and keep you up to date.
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