April 7, 2021

Caity Roach
Editor

C-Suite Wednesday – SBA Extends COVID-19 Underwriting Guidance for SBA 7(a) Loans

The U.S. and its territories have begun to see improvements in economic conditions. However, many restrictions have not yet been removed and the economic situation has not yet returned to previous levels. As a result, the SBA has extended its guidance on certifications of “no adverse change” for 7(a) loans through December 31, 2021.

The guidance states that lenders may continue to disburse 7(a) loans if the lender has determined that the small business concern can remedy the adverse change under the following conditions:

  1. If the borrower is fully operational, the Lender must work with the small business concern to verify that the impacted small business has a plan to remedy the adverse change. Additionally, the lender must document in the loan file their rationale for disbursing or continuing to disburse the loan.

  2. If the borrower is partially operational, the lender must determine if the adverse change cannot be remedied and is significant enough to warrant withholding or not making additional disbursements. If not, the Lender must follow the steps for a fully operational business (see above).

  3. If the borrower is not operational, no disbursement should be made until the borrower begins operating again.

  4. In all cases, lenders are encouraged to assist the borrower with locating and applying for other forms of financial assistance such as Economic Injury Disaster Loans and Paycheck Protection Program loans.

  5. Lenders must consider whether it is likely that the borrower will have the ability to make timely loan payments after their period of Section 1112 payments ends. 

Lenders must continue to analyze each 7(a) loan in a commercially reasonable manner, consistent with prudent lending standards. All requirements for continued borrower creditworthiness remain in effect.

Questions concerning certifications of “no adverse change” during the COVID-19 emergency may be directed to the Lender Relations Specialist at your local SBA Field Office.