April 2020
Commercial Lending
CARES Act and SBA 504 Mortgage Debt Relief

The Small Business Administration (SBA) has released Procedural Notice 5000-20020, effective April 16, 2020, implementing CARES Act Section 1112, under which the SBA will provide mortgage debt relief payments (principal, interest and any associated fees) as follows:

CARES Act and SBA 504 Mortgage Debt Relief1. Loans in Regular Servicing: The SBA will cover all 504 loan 2nd mortgage payments for existing SBA borrowers, including principal, interest and fees, for 6 months.  These payments are not a loan – they are a grant that borrowers will not be required to repay.  This provision applies to all SBA 504 loans, regardless of the COVID-19 economic impact on the business.  No action is required on the borrower’s part.

Payments on existing (funded) SBA 504 loans in regular servicing began with the April 1, 2020, payment and will continue for the 5 subsequent scheduled monthly payments through September 2020.  The SBA will make the payments for each subsequent month by the last business day of the month.

Additionally, a borrower may elect to receive the SBA 2nd mortgage grant payments and then go on deferment.

2. Loans Currently in Deferment: The SBA will pay the first 6 monthly 2nd mortgage payments post-deferment. The grant payments will be made by the last business day of the month.

Note: These payments will only cover the regular monthly payment amount, not the difference between the catch-up amount and the regular monthly payment amount.  The borrower remains responsible for the catch-up payment and the borrower must remit the catch-up payment to the Central Servicing Agent (CSA) by wire or check.  The CSA will not make an ACH debit for the catch-up amount during the 6-month period that the borrower is receiving the SBA grant payments.

3. New Loans: For new loans that fund through Sept. 27, 2020, the SBA will make the 2nd mortgage grant payments, which will not be required to be repaid, for the 6-month period beginning with the first payment due on the covered loan.  The grant payments will be made by the last business day of the month.

A lender may also grant the borrower an immediate deferment on these new loans (in accordance with the applicable SOP provisions) in which case the 6-month period of SBA payments will begin after the deferment ends.  As noted above, these payments will only cover the regular monthly payment amount, not the difference between the catch-up amount and the regular monthly payment amount.  The borrower remains responsible for the catch-up payment.

Read the full notice here: Procedural Notice 5000-20020

Florida First Capital is working diligently to ensure our 504 lending partners and borrowers have the support they need to help in surviving this adversity.  If you have questions or concerns about an SBA 504 loan administered through us, please email our Loan Administration Department at servicing@ffcfc.com or call 850.681.3601 or toll-free at 800.504.LOAN.