August 9, 2020

Volume X, Number 222

August 07, 2020

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Borrowers Under SBA 504 and SBA 7(a) Loan Programs Eligible for Deferral of Principal, Interest and Fees for up to Six Months

To address temporary business interruptions, U.S. Small Business Administration (SBA) lenders nationwide have authority to defer payments of principal, interest and servicing fees for up to six months.  Borrowers with existing loans under the SBA 504 Loan (Certified Development Company) program and the SBA 7(a) Loan Guarantee program should proactively contact their lenders to request a deferment. The deferred amounts are typically repaid through catch up payments beginning in the seventh month and amortized over an agreed upon period not longer than the life of the loan.

Banks, credit unions, and non-bank lenders should take this opportunity to check in with their borrowers to discuss available deferral options.  It is important to note that SBA approval is not required for the initial deferral, which is solely within the lender’s discretion under current SBA guidelines.  An additional deferral period of up to six more months is also possible but does require SBA approval.

The ability to bypass the SBA for approval of the initial deferral is key, given how busy the SBA will likely be granting approvals related to the debt forgiveness provisions of the CARES Act [Employer Relief May Be in Sight – Senate Bill Includes Forgivable Loans to Maintain Payroll for Next Four Months] and directly administrating the Economic Injury Disaster Loans (EIDLs) program [Wisconsin Acts to Secure State and Federal Assistance for Small Businesses Affected by COVID-19].  On a related note, the SBA recently provided step by step guidance on the EIDL online application process and related FAQs [link or embed SBA PowerPoint presentation and FAQs].

© 2020 Davis|Kuelthau, s.c. All Rights ReservedNational Law Review, Volume X, Number 81


About this Author

Lawrence Glusman Real Estate Attorney Davis Kuelthau

Larry’s practice focuses on commercial lending, real estate and business transactions. It also includes creditors’ rights in litigation, foreclosure and various insolvency proceedings. For more than 20 years, Larry has represented Milwaukee Economic Development Corporation (MEDC), a trailblazing non-profit lender which invests in the Milwaukee business community. He has documented and closed hundreds of MEDC loans to a wide array of local businesses, helping them achieve their business goals.

Larry also represents established and start-up businesses with real estate and asset...

Mike van Someren Real Estate Attorney  Davis Kuelthau Law FIrm

Mike is a member of the real estate, commercial finance, and corporate practice groups at Davis and Kuelthau. He regularly counsels clients in all aspects of commercial real estate transactions, including providing advice on entity selection and formation, drafting purchase and sale agreements, offers to purchase, performing due diligence, and negotiating and drafting agreements with municipalities and other stakeholders. He has extensive experience counseling clients on land use and zoning matters, such as drafting easements and restrictive covenants, and providing advice regarding project requirements under local zoning laws. Mike also represents landlords and tenants in the drafting and negotiation of retail, healthcare, industrial and office lease agreements.

In addition to his commercial real estate work, Mike advises clients on corporate matters. He focuses specifically on corporate governance issues, business to business contract review and negotiation and business to consumer contract drafting. Mike represents clients in merger and acquisition transactions, negotiating and drafting stock purchase and asset purchase agreements and performing due diligence research.

Representing clients on commercial finance transactions, Mike addresses their capital needs, including structuring joint ventures, raising cash from investors through the sale of securities in private placements, as well as tax credit financing when available. Mike also represents borrowers and lenders in the negotiation and drafting of loan documents.