*Amended on February 23, 2021 to reflect SBA’s Procedural Notice posted on February 16, 2021. Details constantly subject to change. For more information, visit the SBA’s website at www.sba.gov.

As things continue to rapidly evolve in commercial financing during COVID-19, one thing is for certain: small businesses need help more than ever. As it becomes more and more unlikely for a business to walk into their corner bank and secure a loan, private lenders and commercial loan brokers have assumed the role and are coming to the rescue – with the help of the SBA.

This week, the SBA announced its emergency enhancement plans to provide new stimulus for 2021 — and they’re coming in HOT and ready to help small business.

So, if you’re looking to acquire a business, start a franchise, purchase a building for your business, expand or even refinance – NOW is a better time than ever. Why?

Free Money.

That’s right. Unlike the SBA’s stimulus package from the last major recession (which also increased guarantee percentage and cancelled guarantee fees), the SBA has added in an extra bonus of paying THREE full months of principal and interest to the lender on the borrower’s behalf – up to $9,000 per month.

While we wait for the guidelines to officially come out, these are the details that we are hearing from the SBA on how this will actually work…*

For New SBA Loan Borrowers (Approved after Feb. 1, 2021)

1. Three Months of P&I Payments Made For You by the SBA

For all new SBA loans approved after February 1, 2021, the SBA will make three payments of principal and interest on the loan, paid to the lender, on the borrower’s behalf. These payments are good for all amounts up to $9,000 per month. In addition, the borrower does not need to apply for this relief, as it will be automatically applied to for them, by the lender.

2. Waiving of Guarantee Fees

In addition to the three free payments, the SBA will also waive SBA Guarantee Fees on all new SBA 7(a), 504, and Micro-loans that are approved starting February 1, 2021. These SBA guarantee fees are paid by the borrower, and are usually around 2-3% of the guaranteed portion of the loan. For example, here are some common amount guarantee fees:

• $1mm loan = $26k fee waived
• $3mm loan= $82k waived
• $5mm loan = $138k fee waived

3. Increase of Guarantee Percentages for SBA 7(a) Loans

The SBA is also changing the guarantee percentage of its 7(a) loans. These guarantees provide insurance to the lender in case the borrower is unable to repay the loan. In such a case, the SBA would cover the loan payment amount to the lender, thus mitigating the lender’s risk in taking the loan.

While this has no real effect on the borrower, it has major implications for the lenders: it encourages them to fund loans that they wouldn’t have otherwise funded. (Thus, if you were on the cusp, now would be a good time to go back to your lender and try again!) Typically, this guarantee percentage is 75-85%, but thanks to the new guidelines, that guarantee percentage will go up to 90% (or even 100% on loans with commercial real estate!)

With all of these new bonuses, a new $5 million SBA loan will save approximately $135,000 in payments and fees! However, there is a deadline: to qualify, your loan must be approved before September 30, 2021. So borrowers — make sure to apply prior to August 2021, as we will surely see the system bottleneck as it comes to a close…

Who is encouraged to apply?

If you’re looking to purchase, grow or expand your business and require between $500,000 to $5 million, an SBA loan might be for you. SBA Loans cover these requirements:

• Owner-occupied Commercial Real Estate Purchase or Refinance
• Debt Refinance
• Business Acquisitions
• Partner Buyout
• Expansion
• Start-up Franchise
• Machinery/equipment Purchase

This applies across most industries, even covering hospitality that has bounced back during the pandemic. Unfortunately, this leaves out specific businesses and property types such as gas stations, mobile home parks, and ground-up construction.

Pre-Approval Checklist: What You’ll Need

The SBA loan application and approval process has never been described as “quick and easy” (most SBA loans take about 30-90 days to close), but you can make the process easier for both you and the lender by having these documents prepared ahead of time:

Business Documents

• Three Years business tax returns
• Interim Financials (P&L statement and balance sheet – no more than 60 days old)
• Month-by-Month Financials (may be required for businesses impacted by the pandemic)
• Business Debt Schedule

Personal Documents (for any owner with a 20%+ stake in the company)

• Three Years of Personal Tax Returns
• Updated Credit Score (make sure to double check this!)
• Personal Financial Statement
• Resumé (for acquisitions and startups)

And as always, when looking to obtain commercial financing, we advise that all borrowers and business owners keep their big-ticket purchases to a minimum! While a new house or fancy car might be selling at a price that you feel you can’t miss out on, you’ll really kick yourself if it ends up making you miss out on these killer loans!

Where to Apply for a New SBA Loan

Although traditionally, a business’s first instinct is to ask their local bank for a loan, that is no longer a viable option — especially for SBA loans. In order to obtain an SBA loan, you’ll want to apply for a loan with an SBA Preferred Lending Partner, or PLP. However, not all PLP’s fund the same SBA loans, and some only fund specific industries or commercial real estate property types. Your best move, to save time and find the best lender for your loan requirements, is to consult with a Commercial Loan Specialist who can help you examine several different lenders at once. These commercial loan specialists leverage their relationships with PLP’s and behave like a partner to you, the borrower — advocating for you from application to approval to close.

If you’re interested in applying for a new SBA loan today, we encourage you to reach out to our specialists at Commercial Capital Ltd., FL (ComCapFL) and find out how we can help you find the best options for you and your business.

Additional Resources:

• SBA Procedural Notice: 7a and 504 Section 1112 Payment Extension 2/16 https://cdn.ymaws.com/www.naggl.org/resource/resmgr/policynotices_2021/5000-20095_Adjustment_to_Num.pdf

• SBA Procedural Notice: 7a and 504 Section 1112 Payment Extension 1/17 https://www.sba.gov/sites/default/files/2021-01/Procedural%20Notice%205000-20079%207a%20and%20504%20Section%201112%20Payment%20Extension-508.pdf

• SBA Provisions: The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act https://www.sba.gov/sites/default/files/articles/12-29-20_SBA_provisions_in_new_legislation_0.pdf