Disaster Funding Sources
SBA Economic Injury Disaster Loan Program (EIDL)
Businesses nationwide can access disaster relief funding up to $2 million at an interest rate of 3.75% through EIDL. Additional information is available on the SBA website. SBA is now directly accepting applications. Please note that this loan program is available through SBA and not Prudent Lenders. Inquiries and applications will be managed by SBA.
Information and details:
- Eligible businesses are encouraged to apply online for the EIDL. The online application can be accessed here.
- This presentation from SBA provides significant detail on the program including criteria and filing requirements.
- Please caution your customers to be wary of fraud. There are reports of other organizations posing as SBA and accepting applications for loans. The ONLY accurate link for the EIDL program is sba.gov/funding-programs/disaster-assistance
Coronavirus Aid, Relief and Economic Security (CARES) Act
The CARES Act has multiple disaster relief components including the Paycheck Protection Program, debt relief program, and EIDL grants. Learn more about the CARES Act here.
Local Disaster Loan Programs
- Cities and states across the U.S. have rolled out disaster loan programs. If you’re sending information to your clients, or posting your own updates online, locate information that may be unique to your market. As an example, below is something we’ve posted for businesses in NYC.
- “NYC Department of Small Business Services has announced a relief loan program. Loans of up to $75,000 at 0% interest will be available to businesses with fewer than 100 employees that have seen decreases of more than 25% in sales. There is also a grant component that will offer businesses with fewer than 5 employees a grant to cover 40% of payroll costs for two months. These programs have been announced, but not yet implemented. Businesses can sign up to receive updates from NYC Small Business Services.“
Prudent Lenders Programs
Prudent Lenders is not providing emergency-specific funding. The loan products we administer and their eligibility criteria remain the same
Payment Assistance/Loan Deferrals
We are working with clients on a case-by-case basis to provide payment assistance or deferrals, as needed. This assistance will reduce monthly payments for businesses to help them in this time of economic crisis.
To be clear, Prudent Lenders is not advertising deferments and we do not believe lenders should advertise them either. It is, however, our sincere desire to work with you and your clients to defer payments and make loan modifications, as appropriate.
What information is required for a deferral request?
The list of required information is standard is captured by the digital form. To help expedite requests, we’re leaning on our technology. Calls are welcome, however, please recognize there is a current demand on our time.
The deferral request form collects the following information:
- Borrower name (legal name and dba, if applicable)
- Contact information (Owner(s) name, email address and phone number)
- SBA loan number
- Type of business
- Length of deferment requested (in months)
- Has the borrower contacted other creditors/debtors for payment relief? If yes, detail outcome.
- Summary of impact on business due to COVID-19
Tips: When contacted by a business owner for a deferral, begin asking questions, including:
- How has COVID-19 impacted your company?
- When did the problem start? Why?
The SBA will want to tie current business performance to our current situation. Speak openly and candidly with business owners to identify the appropriate length of the deferral (landing on something the client can afford).
Note: Historically speaking, payment assistance serves as an opportunity to bring loan files current. For example, if a business has not provided tax returns for the most recent period, outstanding items would be requested at the time of a loan modification. We provide a list of outstanding items on every loan file to your organization monthly. We strongly encourage lenders request missing information as a part of their consideration for payment assistance. However, please note deferrals will not be held up should a client fail to provide historically missing information.
What is the process for requesting payment assistance?
- Justin Nadeau and our loan modifications team will handle all requests. The online form – to be completed by lenders – will be directed to Justin and his team.
- You should expect an email confirming receipt within 1 business day of submission of the form.
- To ensure success, please work out terms with your borrower regarding what they can afford and the length of the requested deferral.
- The Prudent Lenders team will then prepare a memo and agreement to document the approval of the Note Modification.
- We will notify and/or request approval the SBA and/or Investor as needed.
- Requests for payment assistance will be sent to the SBA and/or investor within 4 business days.
- If action is unilateral, documents for signature will be distributed within 2 business days of approved Memo.
- If action requires SBA and/or Investor approval, the SBA can take up to 15 business days (may take longer with high volume due to COVID-19) and Investor can take up to 30 days to approve.
- Without delay, the process should take approximately 10 business days in total.
As a lender, what do I do when asked to provide a note modification?
First, develop an understanding of exactly what is going on with the borrower. Be sure to obtain all missing and expired information from the borrower, including all financials and interim statements.
How long can I defer a payment?
The length of time that a payment can be deferred depends on whether or not the loan has been sold. If the loan has been sold, you, as the lender, have a one-time, unilateral authority to defer the loan for 90 days (principal or principal and interest). Any alternate deferral arrangement requires investor approval. If the loan has not been sold, you may defer payments for up to 6 months. Any additional length of time requires SBA approval.
How do I obtain investors’ approval to defer a loan?
Email email@example.com or go through the Colson portal.
Can you add the deferred payments to the end of a loan?
No, you cannot add deferred payments to the end of the loan; there cannot be a balloon payment at the end of the term.
Can I extend the loan maturity?
Per SBA policy, you can extend the maturity of a loan for up to 10 years from the original maturity date. The benefit of extending the loan maturity is a reduction in monthly payments.
What status code do I use on SBA 1502?
Status code 4
Do I have to update E-Tran?
E-Tran needs to be updated when you extend the maturity date on a loan.
- FIL-17-2020: The FDIC is encouraging financial institutions to take prudent steps in assisting customers and communities impacted by COVID-19. Financial Institution Letter FIL-17-2020 details their recommendations.
- FDIC Coronavirus resource page
- SBA Notice 5000-20004: the SBA has issued a notice reminding 7(a) Lenders, Certified Development Companies, and Microloan Intermediaries (such as Pursuit) of their ability to provide temporary relief in the form of deferred payments to existing borrowers under certain circumstances.