• Lori N. McCausland

LRM’s Take on SBA Procedural Notice 5000-20079


Expanded Eligibility of Covered Loans for First-Round CARES Act, Section 1112 Payments, Part 1


SBA’s Procedural Notice 5000-20079 (the “Notice”) has lots of great information regarding the CARES Act, Section 1112 payments.

In order to not miss any nuggets of information in the Notice, I’m breaking my analysis down into two parts. Part 1 covers the revisited Round 1, outlining the expanded eligibility requirements for first-round Section 1112 payments on covered loans.


Originally, SBA 7a loans must have been approved by SBA and be fully disbursed by 9/27/2020 to qualify for the original six months of subsidy payments.


That’s changed, and here’s how.


Lenders must now go back and review all loans approved before 9/27/2020 to determine:

  1. Which loans were not fully disbursed by 9/27/2020 (10/1/2020 for Community Advantage Recovery Loans (“CARL”)),but were fully disbursed as of the date of the Notice (January 19, 2021).

  2. Which loans were not fully disbursed by 9/27/2020 (10/1/2020 for CARL) and are still not fully advanced as of the date of the Notice.

For Loans that are now fully disbursed as of the date of the Notice (1/19/2021) and are in regular servicing status, Lenders must submit payment requests through Colson’s (“FTA”) 1502 Dashboard.

  1. The initial report should be submitted by 2/8/2021 (since the 7th is a Sunday), but no later than 3/8/2021 (since, again, the 7th is a Sunday).

  2. If the loan has previous payments outstanding, these payments can also be requested with the initial CARES Act 1502 payment request submission.

NOTE:

  1. Revolving loans are considered fully disbursed after initial disbursement.

  2. The deadline for submitting these reports is now the 7th of the month in which payment is due, or the next business day if the 7th is a non-business day.

  3. If circumstances exist that would have prompted any loan to be placed in “Liquidation” status, Section 1112 payments should not be requested.

For loans that are not fully disbursed as of the Notice date, Lenders must continue to monitor the loans until the loans are fully disbursed and placed in regular servicing.

  1. When loans are fully disbursed and placed in regular servicing, CARES Act payments should be added to the payment request submission by the 7th of the month, in which the first payment is due after full disbursement.

  2. If the loan has previous payments due when the initial request for payments are made, these payments can also be requested with the initial submission.

Continued Applicability of Prior SBA Notices to All First Round Section 1112 Payments


Lenders should continue to follow previous guidance provided by SBA with respect to Section 1112 payment, unless revised by the Notice. These include:


5000-20020 effective 4/16/2020, referring to loans not purchased by SBA.

  1. Lenders must submit their monthly Section 1112 reports by the 7th of the month (or the next business day).

  2. SBA will make payments by the 15th of each month.

5000-20023 effective 4/29/2020, referring to loans purchased by SBA.

  1. Lenders must submit their monthly Section 1112 reports by the 7th of the month (or the next business day).

  2. SBA will make the payments by the 15th of each month.

5000-20041 effective 7/28/2020 – No updates or changes


5000-20049 effective 9/24/2020 – No updates or changes


5000-20058 effective 10/21/2020 – No updates or changes


Stay tuned for our next article on Round 2 payments!


At LRM we are dedicated to remaining current on all PPP and 7a requirements coming from SBA so we can provide you with the most up to date tips and best practices. By all means, feel free to contact us at 877-576-0819 with any questions.


SCHEDULE A CONSULTATION TODAY