On December 27, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act) was signed into law, providing an unprecedented level of emergency assistance for individuals, families, and businesses affected by the coronavirus epidemic.

The legislation includes an extension of the Paycheck Protection Program administered through the SBA for over $284 billion in loans to eligible entities, with such loans being subject to forgiveness under certain circumstances.

The loans may be used for a variety of purposes, including payroll costs, rent, utilities, mortgage interest (not principal), and other operating expenses. Your business must have been operating on or before February 15, 2020 to qualify.

Learn more about the details of the PPP Loan in our FAQ.

Section 1112 Payments

This program was extended under the Economic Aid Act for the SBA to cover monthly loan payments (principal, interest and any associated fees) for a number of months for eligible borrowers that qualify.

General Terms

• The new Economic Aid Act extended this program for SBA to pay the principal, interest and associated fees for eligible Borrowers
• Eligibility is now based on when the loan was approved (received an SBA loan #), instead of when fully disbursed
• Payments will be covered when the loan is fully disbursed (or if already in regular servicing status, when the next payment is due)
• No action required from the borrower and instead the Lender is required to identify and submit these eligible loans to SBA
• Payments are capped at $9,000/month

Newly Eligible First Round Loans:

• Any 7a or 504 loan that was approved on or before September 27, 2020 is eligible for the First Round Payments, even if not fully disbursed by that date
• These loans will begin to receive 6 months’ of payments once the loan is fully disbursed and the first full payment is due
• If the loan is on deferment, payments will begin the first month after the deferment period
• The First Round Payments must be completed before a Newly Eligible First Round Loan may receive any Second Round Payments, as described below

Eligible Second Round Payments

• For loans approved between February 1, 2021 and September 30, 2021, SBA will cover 6 months of payments
• For loans approved before March 27, 2020 and NOT on deferment, SBA will:
• Cover 3 months of payments beginning on or after February 1, 2021
• Cover an additional 5 months immediately following the end of the 3-month period for a Borrower that, according to the records of SBA, is assigned a NAICS code beginning with 61, 71, 72, 213, 315, 448, 451, 481, 485, 487, 511, 512, 515, 532, or 812 (https://www.naics.com/search/)
• For loans approved before March 27, 2020 that IS on deferment, SBA will:
• Cover 3 months of payments (beginning on or after February 1, 2021) beginning with the later of:
• the next payment due on the loan after the deferment period or the first month after SBA has completed the First Round Section 1112 Payments
• *** if your loan is on deferment, you can voluntarily decide to end it early to receive the payments, but once the payments begin they must be continuous and cannot be interrupted by deferment.
• Cover an additional 5 months immediately following the end of the 3-month period for the same Borrowers under the NAICS codes as above
• For loans approved between March 27, 2020 and September 27, 2020, SBA may make Second Round Payments if SBA determines there are sufficient funds.

Ineligible Loans

• Loans in liquidation status
• Loans in delinquent status more than 120 days
• Borrower (entity) that has received or will receive the payments for a loan approved 3/27/2020- 9/27/2020 can’t receive payments for any other loan beginning on or after 2/1/2021. This one-loan limitation does NOT apply to affiliates of the Borrower (entity)
• Loans approved on or after September 28, 2020 and ending on January 31, 2021. Lenders are prohibited from cancelling a loan approved during this period and resubmitting a loan for a similar purpose on or after February 1, 2021 in order to obtain Section 1112 payments for the Borrower. Lenders are also prohibited from refinancing a loan on or after February 1, 2021 that was approved beginning on September 28, 2020 and ending on Jan 31^st to obtain the Section 1112 Payments.

The Economic Aid Act includes some incentives for new 7(a) SBA loans, including:

• Waived SBA guaranty fee (typically 3-3.5% of the guaranteed portion of the final loan amt)
• SBA will now guarantee up to 90% of the loan amount, reducing some of the risk for lenders for new SBA loans approved between 12/27/2020 and 9/30/2021

These incentives should incentivize lenders to continue lending and may result in more opportunities; however, the SBA Standard Operating Procedures (SOP) for approval and funding still apply, so borrower qualifications for SBA eligibility are still the same.