Emergency Enhancement to SBA Loans
As part of the CARES Act, the Small Business administration is enhancing the program to make it much more attractive to borrowers and the banks that fund these loans. The guaranty fee (typically 2.25% – 3.50% of the loan amount) is being temporarily waived for 7a and 504 loans. This fee is the primary objection to SBA loans that we typically hear from borrowers. The guaranteed coverage for the lender is being temporarily increased from 75% to 90% on 7a loans. This means that with just 10% exposure for the lender, the loan is much more likely to be approved. This helps businesses that were affected by COVID and need to expand their business or refinance their debt. On both loan programs, the SBA will pay 6 months of principal and interest payments (capped at $9,000/month). The temporary enhancements to the SBA loan program will take effect on February 1, 2021 to September 30, 2021. Now is a great time to apply for SBA Financing. Call Greg Ponder or Will Sanford at (912) 243-9404 to start your SBA application. Program highlights for the changes to the 7a program are below.
SBA 7a Program
- SBA Guaranty increased from 75% to 90%. This further reduces exposure to the lending bank and therefore increases the chances for loan approval.
- SBA Guaranty Fee generally charged to the borrower is waived. The SBA Guaranty Fee which is approximately 3.5% of the loan amount will be waived. Upfront fees are the main objection we hear from borrowers about SBA loans. The waived fee clears the largest hurdle for borrowers looking for SBA loans.
- Loans “approved” (SBA issues a lender a loan number) after January 31, 2021 to September 30, 2021 will receive 6-months of loan payment, but are capped at $9,000/month. Also the loan must be fully disbursed to begin receiving these loan payments.
