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Washington
SBA encourages loan deferment relief
WASHINGTON (10/21/08)—The U.S. Small Business Administration Monday announced it is strongly encouraging its participating 7(a) lenders and Certified Development companies to work with business borrowers to provide needed flexibility to “keep businesses running during these difficult economic times.” “As access to credit and capital has tightened, many businesses face increased challenges in meeting their financial obligations. This is especially true of small businesses hit hard by the recent economic slowdown that are now unable to make payroll, or purchase essential inventory,” the SBA noted in a release. In April of this year, there were 386 credit unions that participate in SBA's 7a program. Credit unions and other 7(a) lenders were reminded they have authority, on a case-by- case basis, to extend temporary payment relief for qualifying borrowers with 7 (a) and 504 guaranteed loans who are struggling to make their payments. The SBA encouraged its lending partners to extend three-month payment deferments on their SBA guaranteed loans to qualified borrowers who need relief. If a deferment longer than three consecutive monthly payments is needed for a loan, the SBA said, borrowers can work directly with their lenders who, in turn, will work closely with the SBA to “identify the best solution.” The agency also asked its lenders not to broadly call borrower loans due to changing financial variables, such as fluctuations in personal credit scores, declining collateral values, and reduced home equity, which are currently affected by the disruption in the financial markets. The SBA has issued a notice that will be distributed widely to its lenders and 120 field offices encouraging them to look at these cases individually and to work with individual borrowers in order to facilitate the longer term success of these small businesses. The Credit Union National Association (CUNA) supports the kind of flexibility SBA has reminded lenders they have, but will work to ensure that SBA has coordinated with the National Credit Union Administration on the use of such latitude by CUs. Use the resource link below for more on SBA’s programs.
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