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The U.S. Small Business Administration (SBA) has recently completed its annual review of the fees that it charges lenders under the 7(a) small business loan program.
This process sets out the fees that a lender must pay under the SBA program for all loans approved in the upcoming fiscal year. The latest information notice (5000-848801) confirms that these new fees will become effective on October 1, 2023.
Many borrowers may be unaware of the specific terms and conditions of their loan agreements including the fees that SBA lenders are entitled to pass onto them.
There are two main fees that lenders must pay the SBA on a 7(a) loan;
New fees will apply for any loans approved from October 1st, 2023, through to and including September 30th, 2024 (the Fiscal Year 2024) as follows;
There are a number of other scenarios outlined in the latest SBA update that may impact your particular situation and the fees charged by your lender; when you’re extending an existing loan for example and borrowers should be fully informed of these thresholds.
Whilst this fee cannot be passed on to borrowers, the Lender’s Annual Service Fee on a loan is calculated based on the guaranteed portion of the outstanding loan balance, according to the fee schedule in effect at the time the loan was approved. When a loan is increased the Annual Service Fee will be recalculated based on the revised loan amount and lenders will be obligated to pay this.
Should they meet all the eligibility requirements, the SBA 7(a) loan program offers small businesses access to a diverse range of lenders for their financial needs, however it won’t be the best fit for every business. The availability and terms of SBA loans can fluctuate frequently so it’s crucial for business owners to carefully assess their needs and compare different loan options to determine which one is most suitable for their situation.
With any financial agreement. It’s important to understand all your obligations and the specific terms and conditions before entering into a contract. If you’re unsure if or how this latest update impacts you, reach out to your local SBA district office for advice.
Our team is always here to answer any commercial funding questions you may have and help you research the finance options available to you. Reach out today.
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