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Thursday, December 11, 2008

Daily Observation - SBA Guarantee Fee

This fee is the exact same everywhere you go in the United States. It is a fee that is set by the Small Business Administration for assisting in the funding of a Business Opportunity 7A or a real estate 504 loan.

I chose that word assisting instead of funding because the SBA does not fund loans, the bank funds the loan, the SBA guarantees a portion of the loan for the benefit of the funding bank. That portion is knows as the SBA guarantee amount of the loan, which is 75% of the loan amount. For example your client buys a business and gets a loan for$750,000. 75% of $750,000 will be what the guarantee fee is computed on or$562,500.00.

The guarantee fee will be 3% of $562,500 or $16.875.00, based on the information below.

To offset the costs of the SBA's loan programs to the taxpayer, the Agency charges lenders a guaranty fee and a servicing fee for each loan approved and disbursed. The amount of the fees are based on the guaranty portion of the loans. The lender may charge the upfront guaranty fee to the borrower after the lender has paid the fee to SBA and has made the first disbursement of the loan.

The lender's annual service fee to SBA cannot be charged to the borrower. For loans approved on or after December 8, 2004, the following fee structure applies:

For loans of $150,000 or less, a 2 percent guaranty fee will be charged. Lenders are again permitted to retain 25 percent of the up-front guarantee fee on loans with a gross amount of $150,000 or less. For loans more than $150,000 but up to and including $700,000, a 3 percent guaranty fee will be charged.

There is a high probability that due to the economic situation we find ourselves in that the SBA Guarantee Fee may be removed completely for two years. This is one of the proposals currently being considered, but for now these fees remain in place.

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