Bay Colony Development Corp. in the News

Bay Colony Development Corp celebrates our 40^th Anniversary this June.  We were founded in June 1981 by David King and George Berbeco, David served as our President and George served as our Board Chair. Early Applications had to be hand delivered to SBA Boston District Office, and David would sit down with the loan officer to go over each application in person.  Originally founded to administer the SBA 503 Program (now known as the 504 Loan Program), Bay Colony was formed with the mission of helping Small and Medium Sized businesses grow and be able to obtain long term fixed rate financing for long term assets.  In 1981, we served the majority of the State of Massachusetts, and over the last 40 years we have expanded to serve growing small businesses statewide in Massachusetts, Rhode Island, New Hampshire, Vermont and the Northern counties in Connecticut.  As we reflect back on the last 40 years, we thought it would be nice to compare where we started in 1981 to where we are today!

In 1981, we had…

• 2 employees
• 5 loan approvals totaling $1,177,000
• 0 closings
• Maximum debenture in 1981 was $500,000
• Interest rate ranged from 11.0% – 15.04%
• BCDC was renting a shared office in the basement of a building owned by one of its board members

In 2021, we have…

• 13 employees
• In FY 2020 we had 114 loan approvals totaling $64,679,000
• 105 loan closings for nearly $57,000,000
• Maximum debenture in 2021 is $5 million for traditional 504 borrowers and manufacturers and $5.5 million per project for Energy projects
• Interest rate averaged all-time lows below 3%
• Bay Colony Development Corp rents office spaces in Waltham, MA; Worcester, MA; Warwick, RI;  Nashua, NH; Shelbourne, VT as well as having employees working remotely
• Our Longest Tenured employee has been with Bay Colony Development Corp. for 36 years.  Mary Katherine Mansfield started working Part Time while attending school, and little did she expect 36 years later to be President and CEO of Bay Colony Development Corp.
• Additional Staff member tenures include Danielle Boutin at over 25 years; Caileen Horrigan and Betty Ule over 15 years; and Erik Adams at 11 Years
• In addition to the 504 loan Program, we now also offer an in house Micro Loan Program providing Small Businesses with loans up to $25,000

As we celebrate our 40^th Anniversary, we know we could not have gotten to where we are without the relationships that we have built with our lending partners, SBA District offices, SBA Loan Processing Center and SBA headquarter staff as well as the support from Bay Colony Development Corp. Board Members.  Sadly, in 2020 we lost one of our founding Board Members, Walter Huskins.  We thank you for your support over the last 40 years, and we look forward to what the next 40 years will bring as we continue to Help Small Businesses Grow!

On February 16, 2021, SBA issued Procedural Notice 5000-20095 detailing reduced debt relief benefits to 7(a), 504, and Microloan Programs due to insufficiency of funds. Congress appropriated $3.5 billion to carry out extended CARES Act Section 1112 payment subsidies under Section 325 of the Economic Aid to Hard Hit Small Businesses, Nonprofits, and Venues Act (“Economic Aid Act”) enacted December 27, 2020. SBA has determined that the $3.5 billion is insufficient to make all payments for the periods originally authorized. Consequently, as authorized by the law, SBA has developed a plan to proportionally reduce the number of months of payment subsidies provided for each category of loans (“Adjustment Plan”). The Adjustment Plan is effective immediately.

1. Newly Eligible First Round Loans –

For 7(a) and 504 loans approved on or before September 27, 2020 and fully disbursed on or after September 28, 2020, SBA will make Section 1112 payments for a 3-month period (instead of a 6-month period). If the loan was approved and fully disbursed on or before September 27, 2020, SBA will continue to make the Section 112 payments for a 6-month period as authorized under the original CARES Act.

1. Second Round Section 1112 Payments for 504 and 7(a) loans (except loans made under the Community Advantage Pilot Program) approved before March 27, 2020 –

SBA will make Section 1112 payments for a 2-month period (instead of a 3-month period). The monthly payment remains capped at $9,000. This 2-month period of Section 1112 payments may cover amounts that are past due at the time that SBA makes the February Section 1112 payment, subject to the monthly payment limit of $9,000. For borrowers in hard-hit NAICS Codes beginning with 61, 71, 72, 213, 315, 448, 451, 481, 485, 487, 511, 512, 515, 532, or 812 (according to the records of SBA), SBA will make the Section 1112 payments for an additional 3-month period (instead of an additional 5-month period) subject to the monthly payment limit of $9,000.

1. Second Round Section 1112 Payments for Community Advantage Loans and Microloans approved before March 27, 2020 –

SBA will make Section 1112 payments for a 5-month period (instead of an 8-month period). For Community Advantage loans, for the February Section 1112 payments, SBA will make a maximum of 2 months which may be applied to past due amounts (not to exceed 120 days). If additional funds are needed to cover past due amounts, the remaining 3 months of payments in March may be applied to cover additional past due amounts. All payments made are subject to the monthly payment limit of $9,000.

1. New Loans Approved Beginning on February 1, 2021 and Ending on September 30, 2021 –

For a new 7(a) loan, 504 loan, or Microloan approved during the period beginning on February 1, 2021 and ending on September 30, 2021, SBA will make the Section 1112 payments for a 3- month period instead of a 6-month period, subject to the availability of funds.

1. No Second Round 1112 Payments for Loans Approved Between March 27, 2020 and September 27, 2020 –

A loan that was approved during the period beginning on March 27, 2020 and ending on September 27, 2020 is eligible for the first round of Section 1112 payments either for a 6-month period if the loan was fully disbursed on or before September 27, 2020 or for a 3-month period if the loan was fully disbursed after September 27, 2020. Under the Adjustment Plan, no other Section 1112 payments will be made for these loans.

Please refer to the Flowchart below for eligible payment relief to be provided under the adjusted plan.

Section 1112 Payments Flow Chart

The Economic Aid Act passed by Congress and signed into law at the end of December provides benefits to small business borrowers with SBA loans. The Act provides additional funding for the PPP loan program, rescinds the Tax Implications that previously applied to PPP Loans, EIDL Advances and Grants and payments previously made under the CARES Act Payment Subsidies. But what does it mean for the 504 loan program? Many changes are coming to the program, and many of these changes will take time to implement as they will require SBA to issue Regulations, Notices, Updated SOP’s and revised forms. Please be patient and when the information on these changes is available we will share it with you. In the meantime, here are some highlights, which are all subject to full pending SBA implementation guidance.

Temporary Fee Eliminations for 504 Loans

For new loan approvals from date of enactment of new law (December 27, 2020) through September 30, 2021

• Waives 5% Third Party Lender Participation Fee –on loan in senior lien position in 504 project
• Waives 5% CDC Processing Fee (in debenture pricing)
• Offset with appropriation to fund fee to CDC

SBA guidance is expected to address handling of all loans in process at SLPC

DEBT RELIEF UNDER CARES ACT SECTION 1112

Qualifying Loans APPROVED prior to CARES ACT (March 27, 2020)

• 6 months of payment subsidies- these payments may have already been received by the borrower.
• 3 months of payment subsidies starting February 1, 2021, capped at $9,000/per loan per month.
• Additional 5 months (after 3 months) payment subsidies for loans to “underserved – hard hit” entities, capped at $9,000/per loan per month (see table below for NAICS codes). If a borrower is unaware of their NAICS code, they are encouraged to contact their accountant.
• Bay Colony Development Corp will be notifying existing borrowers in the coming weeks of what payment subsidies they will be entitled to. Any questions on what payments subsidies a borrower has already received, or will receive should be addressed with the Bay Colony Development Corp Servicing department.

Qualifying Loans APPROVED during the original CARES ACT (March 27, 2020 – September 27, 2020)

• 6 months of payment subsidies- these payments may have already been received by the borrower

Qualifying Loans APPROVED February 1, 2021 – September 30, 2021

• 6 months of payment subsidies, capped at $9,000/per loan per month

Loans APPROVED September 28, 2020 – January 31, 2021

• No payment subsidies

Why? Congressional intent of the subsidies is to provide “relief” to existing borrowers in place at the onset of the pandemic and to stimulate new loans that would not otherwise have occurred because of the pandemic.

Debt Refinance

Changes to the refinance program will take time to implement as SBA prepares to issue Regulations, Notices, Updated SOP’s and revised forms. Some of the changes as part of the Economic Aid Act are as follows:

• Elimination of prohibition on refinance of any government-guaranteed debt
• Elimination of requirement that 504 Debt Refinance without Expansion be suspended if the 504 Loan Program goes on subsidy
• Reduction from 2 years to 6 months required time that Qualified Debt must be in place for refinance eligibility. Please note start-up business do not qualify.
• Elimination of requirement that loan must have been current for not less than 1 year prior to application date. This is now a credit decision for the CDC
• 504 Debt Refinance With Expansion
  • Increase in amount of debt eligible for refinance from 50% of expansion costs to 100% of expansion costs
• Refinancing Senior Project Debt
  • During the 1-year period following enactment of the law, a CDC can process a cash-out subordination to re-leverage the TPL loan to a total 90% loan to value (LTV) when combined with the outstanding balance on the existing 504 loan
  • Proceeds can be used to support business operating expenses

SBA 504 Express Loan Program

We are excited about the SBA 504 loan program, which will allow the processing of smaller 504 loans to be expedited and processed in house at the CDC. Again, the program will take time to implement as SBA prepares to issue Regulations, Notices, Updated SOP’s and revised forms, and we will keep you updated as more information is available and when the program is available to process applications.

• Temporary Program until September 30, 2023
• Delegated authority to approve, authorize, close, and service 504 loans of $500,000 Debentures or less