** This post has been updated to reflect adjustments to Section 1112 payments announced by the SBA on Feb. 16, 2021 **
The COVID relief bill passed by Congress in December 2020 included temporary changes to the SBA 7(a) loan program that made additional benefits available to both borrowers and lenders. One of these benefits is payment relief, referred to as Section 1112 payments, which are P&I loan payments made by the SBA on the borrower's behalf. In February 2021, the SBA determined that the funds allocated were insufficient to make Section 1112 payments as had been set forth previously. On Feb. 16, 2021, it issued a procedural notice proportionally reducing the months of Section 1112 payments.
We have updated the chart below to reflect the adjusted enhancements alongside the the standard features of SBA 7(a) loans. As of now, the enhancements remain in effect until Sept. 30, 2021, and still provide significant benefits to both borrowers and lenders. Here's a quick recap of the Feb. 2021 adjustments:
- Section 1112 payments for new 7(a) loans is now three months, reduced from six months.
- Borrowers with 7(a) loans approved before Mar. 27, 2020 will receive two additional months of Section 1112 payments, reduced from three months.
- Businesses in specified NAICS codes may be eligible for an additional three months of Section 1112 payments (reduced from five months) immediately following the two months.
With a third stimulus bill still pending, there is a possibility of further changes to SBA programs. We will continue to share new information as it develops. The experienced SBA lending team at LendXP is always on top of the latest SBA program changes -- please contact us to discuss how we can help you
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Standard Features |
Changes in 2021 (Until Sept. 30) |
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Payment relief (new loans) |
N/A |
Three months of Section 1112 P&I payments (max $9,000/mo) will be made by the SBA on behalf of the borrower, beginning with the first payment.
This is considered nontaxable income.
New loans to a borrower that previously received Section 1112 payments are not eligible for additional payments.
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Payment relief (existing loans) |
N/A |
Existing 7(a) loans that were approved prior to 3/27/20 will receive two additional months of Section 1112 P&I payments made by the SBA (max $9,000/mo).
Businesses in specified NAICS codes may be eligible for an additional three months of Section 1112 payments immediately following the two months.
7(a) loans that were approved between 3/27/20 and 9/27/20 and previously received six months of Section 1112 P&I payments are not eligible for additional payments.
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Maximum loan size |
$5 million |
The maximum loan size remains $5 million in 2021.
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Maximum SBA loan guarantee |
85% for loans up to $150,000 and 75% for loans greater than $150,000 |
Loan guarantees have been increased to 90%.
This significantly increases the amount of noninterest income lenders can generate through secondary market sales.
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| 7(a) interest rates | Lenders and borrowers can negotiate the interest rate, but it may not exceed the SBA maximums |
Interest rates for 7(a) loans have not changed. SBA maximum interest rates are:
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Guaranty Fees |
2 - 3.75% of the guaranteed portion of the loan | Guaranty fees for both lenders and borrowers have been waived. |
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SBAExpress Loan size A type of 7(a) loan with an accelerated turnaround time of 36 hours. |
The maximum loan size is traditionally $350,000. |
The maximum loan size has been increased to $1 million until Sept. 30, 2021.
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SBAExpress Loan maximum guarantees
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50% |
For loans of $350,000 and less, the guarantee is increased to 75%.
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| SBAExpress Loan interest rates | Lenders and borrowers can negotiate the interest rate, but it may not exceed the SBA maximums |
Interest rates for SBAExpress have not changed. SBA maximum interest rates are:
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SBA loans are an excellent tool that helps community lenders respond to the urgent needs of business customers while strengthening and mitigating risks in the commercial portfolio. Read more about why every community lender should have them in their toolkit!
Our experienced team provides comprehensive SBA loan services to lenders that are serious about serving the small business community.
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