Why we still need small business debt relief (CARES 1112)



While the CARES act has provided 6 months of debt relief for existing SBA borrowers "in regular servicing," this relief will end for existing borrowers in October and eliminated for new borrowers who can't close and fully fund in a few weeks - mid August for 504 or fully fund by September 27 - 7a borrowers.  

I believe Congress should pass legislation that would extend this Section 1112 of the CARES Act to extend these payments for a MINIMUM of 3 months.  It is painfully obvious that the recovery from the pandemic is going to take much longer than originally anticipated when the CARES act was passed in late March. I applaud the speed and efficiency the SBA executed this section of the law.  It is time for Congress to recognize the return on this investment and extend its provisions.

The businesses benefiting from this provision were viable businesses in good standing prior to the pandemic ("regular servicing").  Businesses will continue to struggle to adapt to a "new normal," recover and transform their business models to succeed.  In many cases, their homes are also at stake.  Entrepreneurs are risk takers, but also innovators and they have been using their skills to survive.  They need a continued lifeline to support their efforts.

If you need further convincing, remember most 7a loans have a 75% guaranty by the SBA.  If these businesses do not survive, the payout of a few months of payments will pale in comparison to the guaranty repurchase tsunami.  Loans with secured personal guarantees including the homes of borrowers creates added hardship and stress on business owners who are in a predicament through no fault of their own.

The 504 loans, while largely collateralized, provide for higher loan to value lending.  While the bank in first position may get a full payout in a liquidation, the SBA again could face significant recovery shortfalls.  This circumstance would only benefit vulture investors who are ready and willing to take advantage of the situation.

#SBAArena #CARESAct #SmallBusinessDebtRelief #ExtendSection1112  @SenRubioPress @MarcoRubio @SenatorCardin @NydiaVelazquez @RepSteveChabot

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