We’re pleased to introduce Paul Baker who has joined our JRB family of consultants. Paul has over 25 years of experience in SBA lending specializing in servicing, portfolio management, and risk mitigation and has held positions such as Vice President, SBA portfolio management and most recently Director of Special Assets and SBA Credit Administrator. At JRB he provides client guidance and assistance with intensive loan servicing. He’ll be writing regular JRB eBulletins: “From Paul @ JRB …” Welcome, Paul!

The CARES Act Chronicles continue. We’re in Episode III: What to do as deferments wind down? To recap: As the first round of CARES Act payments for7(a) and 504 loans was completed for most borrowers, SBA “strongly encouraged” lenders to provide borrowers immediate debt deferment relief after the six months of payments under Section 1112 of the Act were completed. Now, deferment periods for many lenders are ending. It’s highly likely you’re asking yourself, What now? Defer or not defer? Wait for CARES Act payments to resume?

Waiting for further guidance. What to do. Further guidance from SBA on additional Section 1112 payments is “coming soon.” While you wait, use this time wisely. Taking a hard look at your SBA borrowers will help determine your next steps. From what we know already about CARES Act payment requirements, these three qualifiers are key:

  1. If the loan is in liquidation, the borrower cannot receive assistance from CARES Act payments,
  2. Loan cannot be on deferment. Borrower can receive CARES Act payments after the deferment period ends.
  3. Loan has not moved into liquidation status – adverse change experienced during the CARES Act payment period.

What to look for. Prudent lending and portfolio management will help you be sure your borrowers would qualify for further assistance. Has the borrower/business experienced an event to classify their loan in liquidation status, e.g., business closure, or bankruptcy?  Does the borrower continue to communicate regarding their operations?  Have they responded to requests to provide reliable financial information?

The ultimate goal. While you monitor and work with borrowers each step of the way during this economic crisis, it’s important to keep an eye on the finish line: doing everything possible to help these borrowers succeed in this unprecedented time.

Taking these actions will make the process easier for your lending department and your borrowers. For all of us, this is one more learning curve resulting from the CARES Act. Please reach out to us if you have questions or need assistance.

Stay tuned for further guidance. And stay safe.

Paul Baker
JRB Associate