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SBA Halts PPP Applications, but Other Relief Options Remain

April 16, 2020

By: Ferran Arimon and Mark Heimendinger

This morning the SBA announced that “The SBA is currently unable to accept new applications for the Paycheck Protection Program based on available appropriations funding.” This halt in application processing indicates that the nearly $350 billion allocated to this program is being depleted much faster than expected by congressional leaders.

Additionally, the SBA stated on its website that it has also run out of funding for the Economic Injury Disaster Loan Program (EIDL), including the $10,000 advances under the Program. Applicants who have already applied will continue to be processed on a first-come, first served basis.

However, other assistance to small businesses outside the EIDL and Payroll Protection Program is still in place and includes the following, without limitation:

  1.  Standard 7(a)

    Maximum loan amount

    $5 million

    Maximum SBA guarantee %

    85% for loans up to $150,000 and 75% for loans greater than $150,000

    Interest rate

    Lenders and borrowers can negotiate the interest rate, but it may not exceed the SBA maximum

    Eligibility decision

    By the SBA. Qualified lenders may be granted delegated authority (PLP) to make eligibility determinations without SBA review.

    Revolving lines of credit

    Up to 10 years (Permitted only under CAPLines submission. See below)

    SBA turnaround time

    5-10 business days

    Forms

    SBA Form 1919 and SBA Form 1920 are required for every loan (other SBA Forms may be required)

    Collateral

    Lenders are not required to take collateral for loans up to $25,000. For loans in excess of $350,000, the SBA requires that the lender collateralize the loan to the maximum extent possible up to the loan amount. If business fixed assets do not “fully secure” the loan the lender may include trading assets (using 10% of current book value for the calculation), and must take available equity in the personal real estate (residential and investment) of the principals as collateral.

    Credit decision

    By the SBA. Qualified lenders may be granted delegated authority (PLP) to make credit decisions without SBA review.

 

  1. 7(a) Small Loan

    Maximum loan amount

    $350,000

    Maximum SBA guarantee %

    85% for loans up to $150,000 and 75% for loans greater than $150,000

    Interest rate

    Lenders and borrowers can negotiate the interest rate, but it may not exceed the SBA maximum

    Eligibility decision

    By the SBA. Qualified lenders may be granted delegated authority (PLP) to make eligibility determinations without SBA review.

    SBA turnaround time

    5-10 business days

    Forms

    SBA Form 1919 and SBA Form 1920 are required for every loan (other SBA Forms may be required)

    Collateral

    Lenders are not required to take collateral for loans up to $25,000. For loans over $25,000, up to and including $350,000, the lender must follow the collateral policies and procedures that it has established and implemented for its similarly-sized non-SBA-guaranteed commercial loans, but at a minimum the lender must take a first lien on assets financed with loan proceeds and lender must take a lien on all of the applicant’s fixed assets including real estate. Lender is not required to take a lien against applicant’s real estate when the equity is less than 25% of the fair market value. The lender may limit the lien taken against real estate to the loan amount.

    Credit decision

    By the SBA. Qualified lenders may be granted delegated authority (PLP) to make credit decisions without SBA review.


  1. SBA Express
    This program features an accelerated turnaround time for SBA review. The SBA will respond to applications within 36 hours.

    Maximum loan amount

    $350,000

    Maximum SBA guarantee %

    50%

    Interest rate

    Lenders and borrowers can negotiate the interest rate, but it may not exceed the SBA maximum

    Eligibility decision

    Made by the lender

    Revolving lines of credit

    Up to seven years with maturity extensions permitted at the outset

    SBA turnaround time

    Within 36 hours

    Forms

    Lender primarily uses own forms and procedures, plus SBA Form 1919

    Collateral

    Lenders are not required to take collateral for loans up to $25,000. May use their existing collateral policy for loans over $25,000 up to $350,000.

    Credit decision

    Made by the lender

    Purchase

    Lender may request expedited SBA purchase on small loans or in situations where liquidation may be delayed

 

Other available SBA loans include Export Express (which provides exporters and lenders with a streamlined method to obtain SBA-backed loans and lines of credit up to $500) and Export Working Capital (which provides working capital loans for businesses that can generate export sales and need additional working capital to support these sales).

Prior to this announcement from the SBA, several congressional leaders had acknowledged the need to pass another emergency bill to limit the damage from the coronavirus pandemic. Marco Rubio, a Florida Republican and chairman of the Senate Small Business and Entrepreneurship Committee, has stated that Congress will likely have to expand pieces of the $2.3 trillion dollar stimulus package passed in March.

U. S. House Speaker Nancy Pelosi is also pushing for another bi-partisan bill to build on the CARES Act. She has stated that the new bill should include more direct payments to individuals, additional small business funding, and an extension of the enhanced unemployment insurance. During an April 6 conference call, Pelosi told Democrats that a bill Congress was negotiating with the Trump administration could include an excess of $1 trillion and another set of direct payments to individuals.

The House returns on April 20 and additional relief is likely to be a top priority. 

We will continue to monitor updates from Congress and the SBA and provide you with any new information as it becomes available.

Be sure to visit our Coronavirus (COVID-19) Resource Center page to keep up to date on the latest news.


This article is informational only. You should consult an attorney before acting or failing to act. The law may change rapidly and no warranty is given. LOWNDES DISCLAIMS ALL IMPLIED WARRANTIES AND WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. ALL ARTICLES ARE PROVIDED AS IS AND WITH ALL FAULTS. Consult a Lowndes attorney if you wish to establish an attorney/client relationship.
Ferran

Ferran Arimon is an attorney in the firm’s Commercial Real Estate Group. He focuses his practice on commercial real estate transactions, including the acquisition, disposition, financing, development and leasing of various property types, as well as construction financings and re-financings. His practice also includes corporate and securities law.

Ferran regularly advises buyers, sellers, developers, landlords and tenants in real estate transactions related to multifamily developments, industrial properties, office buildings, shopping centers, restaurants, hotels, retirement communities and vacant land. He also assists clients with leasing contracts, title review and survey analysis, contract negotiation for purchase and sale, due diligence, negotiation of transfer documents and finalizing of transaction closings.

Additionally, Ferran has experience in corporate and securities law, mergers and acquisitions, and tax law. He has worked with clients to structure financing transactions in compliance with federal and state securities laws, having represented both public and private companies in mergers, acquisitions, capital raising, and corporate governance matters. He has also counseled clients on a broad range of tax issues and business planning issues from entity selection and formation to dissolutions.

Prior to law school, Ferran was an analyst at real estate investment management company in Miami. His role centered around underwriting, valuing, and identifying acquisition opportunities for distressed or value-add commercial and residential real estate acquired through joint ventures, direct Investments and non-performing loans portfolios.

Fluent in Spanish, Ferran regularly writes articles on a variety of emerging legal issues.

Ferran earned his law degree from the University of Florida Levin College of Law and his MBA from the University of Florida Warrington College of Business. Prior to law school, he received his undergraduate degree from Babson College, where he majored in finance and was a member of the men’s tennis team.

Mark

Getting the deal done requires flexibility, creativity, and efficiency. Clients and colleagues alike turn to Mark Heimendinger for his years of debt and equity finance experience, particularly in the commercial real estate and other asset-based arenas.


A seasoned pro who has seen the risks and iterations associated with both sides of a deal and all aspects of the capital stack, Mark understands that many contentious legal issues often mask a business concern – one that he likely has faced before. Even with the most complex and challenging negotiations, he is pragmatic, and focused on the client’s commercial goals.

Mark’s clients include issuers, borrowers, lenders, and underwriters. He has negotiated and executed a variety of transaction structures, including term and revolving credit facilities, public bond financings, public and private securitization transactions (including CMBS), mezzanine financing, equipment financing, 144A and Reg. D offerings, repo agreements, syndications, currency and interest rate cap and swap transactions, underwriting agreements, intercreditor agreements, joint ventures, and jurisdiction-specific non-recourse structures. Within the real estate space, Mark has covered multiple asset classes, including hotels and leisure facilities, office towers, senior living facilities, and multi-family residential buildings.

In addition to his Florida practice, Mark has years of both domestic and overseas “AmLaw 100” experience and has completed numerous cross-border transactions, mostly in the Asia Pacific region and in Europe.
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