SBA Debt Relief
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.
** SBA has determined that the $3.5 billion that was appropriated is insufficient to make the payments for the periods authorized. SBA has developed a plan to reduce the number of months provided for each category of loans described below while ensuring that all amounts made available for the payments are fully expended. Under the plan, SBA will make the payments as described below (Adjustment Plan). This Adjustment Plan is effective immediately and will be applied to the Section 1112 payments that SBA makes beginning with the payments made in February 2021.
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
- Since limited funds were made available by Congress, certain Borrowers were prioritized to receive additional payment support over others. Below is how it’s broken down.
Newly Eligible First Round
- Any 7a or 504 loan that was approved on or before 9/27/2020, but fully funded after 9/28/2020 is eligible
- SBA will cover 3 months of payments once the loan is fully disbursed
- SBA will cover 3 months of payments once the loan is fully disbursed
- Any 7a or 504 loan that was approved and fully funded on or before 9/27/2020 is eligible
- SBA will cover 6 months of payments
Second Round
- For loans approved before 3/27/2020 that are fully funded, SBA will:
- Cover 2 months of payments beginning on or after February 1, 2021, capped at $9k/month
- SBA will cover an additional 3 months immediately following the end of the 2-month period for Borrowers assigned a NAICS code beginning with:
- 61 (Educational Services), 71 (Arts, Entertainment and Recreation), 72 (Accommodation and Food Services), 213 (Support Activities for Mining), 315 (Apparel Manufacturing), 448 (Clothing and Clothing Accessories Stores), 451 (Sporting Good, Hobby, Book and Music Stores), 481 (Air Transportation), 485 (Transit and Ground Passenger Transportation), 487 (Scenic and Sightseeing Transportation), 511 (Publishing Industries), 512 (Motion Picture and Sound Recording Industries), 515 (Broadcasting), 532 (Rental and Leasing Services), or 812 (Personal and Laundry Services)
- For new loans approved between 2/1/2021 and 9/30/2021, SBA will cover 3 months of payments
- No Second Round Payments for Loans Approved between 3/27/2020 and 9/27/2020 as stated in the Adjustment Plan released by SBA on 2/16/2021 (since already received payments under the First Round)
Ineligible Loans
- Loans in liquidation status
- Loans in delinquent status more than 120 days
- Borrower (entity) that received payments for a loan approved 3/27/2020- 9/27/2020 can’t receive payments for an additional loan under that same entity 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 9/28/2020 and ending on 1/31/2021. Lenders are prohibited from cancelling a loan approved during this period and resubmitting a loan for a similar purpose on or after 2/1/2021 in order to obtain the covered payments for the Borrower. Lenders are also prohibited from refinancing a loan on or after 2/1/2021 that was approved beginning on 9/28/2020 and ending on 1/31/2021 to obtain the covered payments.
- If you are ineligible based on the above statement, we encourage you to join the Franchise Action Network (HERE) through IFA and reach out to your state and local legislatures to try and push a revision