On April 1st, 2020, Bay Colony Development Corp. notified its SBA 504 loan borrowers that their scheduled April 504 2nd mortgage loan payment would be paid by SBA rather than debited from their account. The notice continued “Under the CARES Act, SBA will pay the principal, interest and any associated fees that are owed on a 504 loan, SBA will continue to make these loan payments to the CSA for the 6-month period beginning April 1, 2020 and no further action is required on your part.”
These SBA 504 2nd mortgage payments are not a loan – they are a grant which 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. Third party lenders in an SBA 504 loan will need to determine if they will provide any deferment, forbearance or forgiveness on 1st mortgage payments and communicate any actions directly to their borrowers and 504 lenders (Certified Development Company).