The Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, includes $349 billion for an expanded SBA 7(a) loan program that would allow currently certified SBA 7(a) lenders to quickly offer loans of up to $10 million to businesses with up to 500 employees, as well as to non-profits, self-employed individuals, and contractors. The SBA and the Treasury Secretary would also streamline the process to add lenders to the program quickly so they, too, can process, close, disburse, and service the loans, which would be forgiven if employers maintain their payroll through June 30 or bring back their workforce. New lenders would only be permitted to make loans under the stimulus program, called the Paycheck Protection Program, and would be unable to make regular 7(a) loans, according to a summary of the bill from Sen. Marco Rubio’s (R-FL) office.
The new SBA loans would be eligible to be sold on the secondary market and would receive a risk weighting of 0 percent related to financial institutions' risk-based capital requirements. They would be eligible to cover more employer costs than the existing 7(a) program. In addition to current allowable uses, loans could cover:
- Payroll costs, including payment of cash tips
- Employee salaries and commissions
- Continuing group health care benefits during paid sick, medical or family leave, and insurance premiums
- Rent (including rent under a lease)
- Utilities
- Interest payments on mortgages
SBA loans with a remaining balance after the government’s forgiveness was applied would continue to be guaranteed and would have a maximum 10-year maturity. Interest rates could not exceed 4%.