Payment of Interest
If SBA receives a lender’s complete purchase package within 120 days of default, then all interest is payable to the date of the purchase payment, including interest during the time SBA is processing the purchase, and also from the interest-paid-to-date until the date of default.
If SBA does not receive lender’s complete purchase package within 120 days from the date of default, only 120 days of interest is payable.
If lender has liquidated the loan prior to requesting purchase, lender is allowed to recover up to 120 days of accrued interest from liquidation proceeds. The rate of interest is the rate in effect on the day that the loan went into default. These interest days should begin with the interest-paid-to date up to 120 days maximum. SBA will then purchase the guaranteed principal balance remaining. Late charges are not covered under SBA’s guaranty agreement with a lender and therefore lender cannot recover such fees from liquidation proceeds.
Due to legislative changes, for loans that were approved between September 28, 1996 and September 30, 2000, SBA will pay the lender the rate of interest indicated in 13 C.F.R. § 120.122 less one percent. SOP 50 50 4A, Ch. 9, Para. 8.b. Congress eliminated this requirement for loans approved after September 30, 2000. See SBA Procedural Notice 5000-703 (Dec. 2000).
Lender also should refer to the discussion below of the payment of interest for guaranties that are sold in the Secondary Market and 13 C.F.R. §§ 120.521, 120.522, and SOP 50 50 4A, Ch. 9, Paras.7-8.