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MODIFICATIONS TO THE 7(A) LOAN PROGRAM - ECONOMIC AID ACT
On January 27th 2021, SBA released an Information Notice announcing some significant changes to the guaranteed loan programs. This action is a part of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the Economic Aid Act). These modifications affect the 7(a) Loan Program, and include temporary increases in guaranty percentages and fee reductions on eligible 7(a) loans, as well as an increase in the maximum SBA Express loan amount and guaranty percentages.
Effective December 27, 2020, the following changes will remain in place through September 30, 2021:
SBA 7(a) Loan Program
For Standard 7(a) Loans, 7(a) Small Loans, CAPLines, Preferred Lender Program (PLP) Loans, and Community Advantage Pilot Program (Community Advantage) Loans:
- Effective now and through September 30, 2021, the guaranty percentage provided by the SBA is increased to 90%. On October 1, 2021 the guaranty percentages will automatically revert to previous levels.
- There is no increase in the statutory aggregate guaranty per borrower of $3,750,000. In order to receive a 90% guaranty, the maximum loan amount cannot exceed $4,166,666 ($3,750,000 divided by 90%). Once a borrower reaches this maximum aggregate gross loan amount, their $3,750,000 maximum guaranty is exhausted.
- Both the SBA Guaranty Fee (the upfront fee paid by the borrower) and the Ongoing Service Fee (the .55% paid by the lender or holder of the SBA guaranty) are temporarily reduced to zero for all 7(a) loans (including Community Advantage Loans) for which an application is approved. This reduction will remain in place through September 30, 2021, subject to availability of funds.
SBA Express Loan Program
- The Maximum Loan Amount of $1,000,000 currently in effect will be temporarily extended through September 30, 2021. On October 1, 2021, the maximum loan amount will permanently change to $500,000.
- The Guaranty Percentage on loans of $350,000 or less will temporarily increase from 50% to 75% and remain in effect through September 30, 2021.
- For SBA Express loans greater than $350,000, the maximum SBA Guaranty Percentage remains at 50%.
For more information about these and other provisions in the Economic Aid Act, please see the SBA Information Notice released January 27, 2021.
These significant changes in the SBA lending programs will offer our readers many opportunities to serve small business borrowers with valuable access to capital tools.
Please contact your Holtmeyer & Monson Account Executive with any questions or needed clarifications.