December 22, 2020
Hot Topic Tuesday – SBA Update from 504 Lenders Connect Conference
Last week, at the 504 Lenders Connect Quarterly Conference, a panel of SBA staff members provided an update on recent agency notices and upcoming procedural changes.
Here is a summary of the key topics discussed at the conference:
- Procedural Notice 5000-20064 allows 504 loans that will be funded through debenture sales scheduled in January, February and March to continue to be available when the CDC has concluded that there has been a substantial adverse change in the Borrower’s ability to repay.
- Until January 31, 2021, SBA 7(a) and 504 lenders may accept scanned copies of 7(a) and 504 SBA forms as long as the lender also obtains a valid form of identification and a valid original signature within 6 months of the date of the Note (see procedural notice 5000-20061).
- Procedural Notice 5000-20067 clarifies that the SBA will be filing Tax form 1099-MISC for all 504 Section 1112 payments.
- Pursuant to SBA Information Notice 5000-20086, the new IRS Form 4506-C will be used exclusively with IVES. the IRS will accept either the 4506-T or 4506-C through the end of February. However, starting on March 1, 2021, the Form 4506-C will be mandatory.
- A loan that is currently on deferment or that was granted deferment in the prior 12 months may qualify for refinancing under 504 debt refinancing programs if the applicant is current on all payments, deferment on the loan to be refinanced was granted on or after March 1, 2020, and the borrower experienced an adverse impact caused by COVID-19 (see procedural notice 5000-20039).
- Prudent 504 underwriting during the COVID-19 emergency should consider current and future effects of the emergency on business operations, cash flow, and repayment ability (see procedural notice 5000-20040).
- Federal Register Notice 2020-2650 retroactively rescinds the Express Rule on the Personal Resources Test. This rule was removed by the CARES Act and was already reflected in the SOP 50 10 6.
- Federal Register Notice 2020-26446 proposes the removal and revision of obsolete regulations on the 7(a), Microloan, and 504 loan programs. Since this proposed rule is in its public comment period, the SBA could not discuss any details pertaining to the rule’s contents.
Since most SBA staff are teleworking due to the pandemic, the conference hosts recommend that any outstanding questions be directed to the appropriate SBA staff member listed in Appendix 12 in SOP 50 10 6.