Businesses that have existing SBA Section 7(a) and 504 loans should be aware of two opportunities that have arisen for them. Many small business acquisitions include an SBA 7(a) loan.
First of all, SBA lenders have been reminded that they may assist borrowers under Section 7(a) and 504 experiencing temporary cash flow issues by deferring payments for a stated period of time. They are allowed to offer deferrals of up six months. Many SBA loans are sold on the secondary market. SBA lenders are authorized to grant deferments of up to three months for loans sold on the secondary market without getting the consent of the holder of the loan.
We believe that based on SBA guidance, these 90-day deferments are very easy to obtain in the current environment. Borrowers should contact lenders for more information and to request a deferment.
Also, under the CARES Act, the SBA will pay six months of payments on existing SBA loans. If the loan has a deferment, the six months begins at the end of the deferment, so borrowers have the potential to have nine months without required payments.
Deferments are just that. They are tacked on to the back end of the loan. The six months of loan payments by the SBA, however, are an out-right grant under the CARES Act and do not have to be repaid and there seems to be no special qualifying process. The six months of payments also applies to new SBA 7(a) loans closed through September 27, 2020.