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How the December relief bill affected the SBA 7(a) loan program


When Congress passed the latest round of economic relief in December 2020, much of the attention around it was directed toward a new round of Paycheck Protection Package (PPP) funding. In fact, the bill included many new provisions to provide relief to businesses affected by the COVID-19 outbreak. Among these are a variety of enhancements to the SBA’s existing flagship program: the 7(a).

Reduced SBA upfront guaranty fee

One of the most impactful pieces introduced in the relief bill is a temporary fee reduction, lowering the SBA Upfront Guaranty Fee to zero. This reduction applies to new SBA 7(a) loans now through September 30, 2021. (Note: the SBA may change these dates at any time.)

This fee reduction can represent substantial cost savings. For example, on a loan size of $1 million, a typical guaranty fee would have been $26,250; and is now zero.

Subsidy payments to new SBA borrowers

In addition to the reduced guaranty fee, an expanded subsidy program will be available to new SBA 7(a) borrowers through September 30, 2021. This program will pay borrowers up to $9,000 for six months.

Subsidy payments to SBA borrowers prior to March 27, 2020

Borrowers who were approved for 7(a) loans before March 27, 2020, are also eligible for a subsidy program. In general, as long as the loan is not in deferment, these borrowers will receive a payment of up to $9,000 per month for three months. Businesses in the following NAICS codes will receive these subsidy payments for five months: 61, 71, 72, 213, 315, 448, 451, 481, 485, 487, 511, 512, 515, 532, or 812.

The new subsidy benefit also affects borrowers with revolving lines of credit. These payments will be made for up to three total months during which a borrower had  an outstanding balance.

Understanding your options

The financial landscape has seen many shifts throughout the COVID-19 outbreak, and the SBA 7(a) loan program is no exception. I always recommend working with an SBA-preferred lender to evaluate your options, as they will have the expertise necessary to implement SBA guidance as it evolves.

About Brandi Nelson

Brandi has worked in commercial banking since 2003. She builds long-term client relationships based on prudence, responsibility and trust while helping individuals, families, foundations and other organizations establish and meet their financial goals. By understanding your objectives and risk tolerances she will integrate cash and credit strategies into your wealth plan. Before assuming her current role, Brandi served as vice president of SBA lending at Falcon National Bank, SBA business development officer at U.S. Bank and prior to specializing in SBA served as a trusted commercial lender for 10+ years. Brandi holds a Business Administration degree, as well as an MBA, from the University of Mary. She is a volunteer with United Way of Central MN and serves on several committees at All Saints Academy in St Cloud, MN. A Judith Gap, MT native, Brandi is married with 2 children, Ian and Tiegan, and enjoys fishing, sports and spending time with her family.)

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