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Wednesday, October 29, 2008

Daily Observations - SBA Guarantee Fees & Points?

Prior to this debacle there was never any points associated with SBA Loans. The only fee a client would pay was the SBA Guarantee Fee. That fee was 75% of the loan amount times either 2.0, 2.5, or 3.0% of that number. Usually lenders would also charge a $1,000 to $1,500 processing fee and that was all the fees associated with the loan with the exception of appraisal, title, escrow and any other environmental reports associated with the purchase of the real property if any.

No More...

Lenders are now charging points in addition to the above fees. The reason why, the lack of the secondary market. As I have mentioned previously six months to a year ago a lender would sell their loans to the secondary market for six to ten points. That was the way lenders would be compensated and they would then be able to offer rebates to brokers and other bankers that they were working with.

Since there is no secondary market we now see lenders beginning to charge borrowers points to cover their risk as well as increase their yield on a loan. So don't be surprised when all of a sudden you hear there are points now associated with SBA loans. This structure is going to probably be the norm as more and more lenders leave the lending SBA arena with fewer lenders chasing and cherry picking the deals they want to lend on expect this trend to continue.

For more on SBA loans visit loanforbiz.com.

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