SBA Will Continue to Zero Out Fees on Small Dollar Loans
Agency also expands relief for larger loans to vets
The SBA has announced that fee relief on 7(a) loans of $150,000 or less instituted last year and originally slated to expire on Sept. 30, 2014, will be extended through fiscal year 2015. Loans through the 7(a) program can be used for a wide variety of business purposes, including long-term working capital to pay operational expenses, accounts payable, and/or purchase inventory.
The agency has also announced that fee relief measures for SBA Veterans Advantage will be renewed as well as enhanced.
Both moves took effect Oct. 1 and will remain in effect through Sept. 30, 2015.
The most recent numbers available for Fiscal Year 2014 show that the SBA had guaranteed 28,806 loans totaling more than $1.74 billion in loans of $150,000 and under: up from 23,337 loans and $1.34 billion in FY 2013. This represents an increase of 23.4% and 30%, respectively. Fee reductions on these loans resulted in almost $19 million in savings to small business borrowers in FY 2013.
Under the original fee relief for 7(a) loans that began Oct. 1, 2013, both the upfront guaranty fee and the annual servicing fee (“ongoing guaranty fee”) were reduced to zero on loans of $150,000 and under.
Seventy percent of all SBA loans made to veterans are $350,000 or less. Since its inception through Sept. 20, 2014, SBA had guaranteed 153 loans for $38,861,900 under Veterans Advantage. Fee relief for these loans resulted in savings to borrowers of about $571,000.
- For loans larger than $150,000, the annual servicing fee lenders pay will be 0.519% of the guaranteed portion of the outstanding balance of the loan. The upfront guarantee fee will continue to depend on the amount and the maturity of the loan.
- For SBA Veterans Advantage loans, the conditions implemented on Jan. 1, 2014: zero upfront guaranty fee on all SBA Express loans to veterans of $150,000 to $350,000: will remain unchanged for FY 2015.
- The upfront guaranty fee for non-SBA-Express loans $150,000 up to $5 million will now be reduced by 50%. There is no reduction on the annual servicing fee for loans over $150,000.
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