A federal agency has extended a program offering small business loan guarantees at no charge and reduced fees for certain loans and applicants.
The U.S. Small Business Administration announced it will continue through the 2015 fiscal year fee relief on its 7 (a) general loan program, offering the guarantees for no upfront fee for loans of $150,000 or less. Free and reduced guarantees also are available on certain loans to veteran-owned businesses. The extensions will remain in effect through at least Sept. 30, 2015.
“We zeroed out fees on loans of less than $150,000 to any 7(a) borrower because we don’t want SBA fees to be an impediment to getting capital out to communities where it can make a game-changing difference, especially to our underserved communities who use these small dollar loans more frequently,” said SBA Administrator Maria Contreras-Sweet.
“We also owe a debt of gratitude and so much more to our service men and women and veterans who are the cornerstone of small business ownership. This fee relief will continue to help veteran business owners who grow their businesses, create jobs in their communities and put their training and passion for our country to work in their neighborhoods,” Contreras-Sweet said.
Under the original fee relief for 7(a) loans that began Oct 1, 2013, both the upfront guaranty fee and annual servicing fee were reduced to zero on loans of $150,000 and less. Those provisions will continue through FY 2015.
For loans larger than $150,000, the annual servicing fee lenders pay will be 0.519 percent of the guaranteed portion of the outstanding balance of the loan. The upfront guarantee fee will continue to depend on both 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 up to $350,000 will remain unchanged for FY 2015.
In addition, the upfront guaranty fee for non-express loans $150,000 up to $5 million will be reduced by 50 percent. There’s no reduction on the annual servicing fee for loans over $150,000.
The most recent numbers available for the 2014 fiscal year that ended Sept. 30 showed that the SBA had guaranteed 28,806 loans of $150,000 and less with a combined dollar volume of $1.74 billion. Compared to FY 2013, the number of such loans increased 23.4 percent the collective dollar volume rose 30 percent.
Fee reductions on these loans resulted in almost $19 million in savings to small business borrowers in FY 2013.
Seventy percent of all SBA loans made to veterans are $350,000 or less. Since its inception through Sept. 20, the SBA had guaranteed 153 loans for a total of nearly $39 million under Veterans Advantage. Fee relief for these loans resulted in savings to borrowers of about $571,000.