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


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