There’s so much going on in our personal and professional lives. Words are added to our everyday vocabulary: coronavirus, social distancing, personal protective equipment. Not to mention the challenges of adjusting to working from home with our families around us – and importantly – safe-guarding ourselves and our families as we go about our daily lives.

All this with finally dissecting and implementing the CARES Act Paycheck Protection Program (PPP) and other SBA borrower assistance programs. We still have much to learn about the PPP and as of this writing, a lot of guidance remains to be given. So, let’s focus on what we do know and have received guidance on.

What we know. SBA has issued a release for existing SBA loans under the CARES Act. SBA will begin making payments due after March 27, 2020 for 6 months, for existing SBA Loans in regular servicing status. For lenders, guidance was given on what to communicate to borrowers:

  • Notify borrowers that they have the option to:
    • have the payment returned; or
    • have lenders hold the payment, and once the SBA payment is applied, lenders may apply the borrower’s payment to the principal
  • Borrowers whose payments were deferred before the Cares Act was enacted (3/27/2020) have these options:
    • Borrowers may voluntarily decide to end the deferment period to begin receiving the 6 months of SBA payments; or
    • Borrowers may choose to continue the deferment and begin receiving the 6 months of SBA payments when their full P&I payments resume.

The catch with what we know: Information is coming fast and furious, yet there’s still much we’re waiting to learn. While SBA has said payments to lenders for gross monthly loan payments will be made within 30 days of the payment due date, after March 27, 2020, SBA hasn’t yet provided guidance on how to request those payments. Also, if SBA’s payments come 30 days after the due date, do lenders report the loans as past due to Colson on the 1502 Report or will they be able to supply proof that they have requested SBA’s guaranteed payments and report the loan payments as current?

That said, CARES PPP and other borrower assistance is a big help to our struggling small businesses. While mechanics aren’t yet clear, providing borrowers with options now, gives them some piece of mind in a very crazy world.

As always, JRB is here to assist you with your SBA lending needs and provide you with updates as issues evolve. Even more, we wish you health and serenity at a time when they are very much needed.

Rebecca Mendoza
Senior Associate