August 15, 2023
SBA Hot Topic Tuesday – SBA Disaster Lending Program, NO Interim Financing Available
As the Maui wildfires continue burning a week later, SBA lenders have expressed their desire to help with the disaster. In a rule that is effective for all disasters declared on or after July 31, 2023, the SBA made major changes to the disaster lending program. Some key changes to be aware of are:
- The loan limit for primary residences has been raised from $200,000 to $500,000.
- The loan limit for personal properties has risen from $40,000 to $100,000.
- The administrative limit on landscaping is not capped at $5,000.
- The initial payment deferral period is extended from five months to 12 months for the first payment for all disaster loans.
- No interest is accrued for the first 12 months from the date of the initial disbursement.
In the past, the SBA has made interim financing available for disasters, but currently, there is no mechanism for disaster interim financing.
The new SOP 50 10 7 allows interim financing for 7(a) and 504 loans, not disaster loans.
For 7(a) loans greater than $500,000 that are processed GP lenders may make interim advances, bridge loans, before the disbursement of the 7(a) loan.
Similar standards exist for 7(a) small loans and SBA Express loans.
Under the 504 program, an interim lender can provide interim financing to cover the period between the SBA’s approval of the project and the debenture sale. The proceeds from the debenture sale repay the interim lender for the amount of the 504 project costs that it advanced.