SBA Guarantee Fee Being Eliminated

The SBA Guarantee Fee of one-half percent that borrowers pay is being eliminated for all 504 loans approved on or after Oct. 1, 2007.

This one-time, upfront fee is assessed to borrowers to offset costs associated with administering the guarantee the SBA issues to debenture investors. However, since the 504 program is performing at a zero government subsidy the fee is no longer necessary.

The fee’s elimination is something to keep in mind for loans that are being considered in the September timeframe. If formal applications are delayed until after Oct. 1, borrowers will benefit from the elimination of this fee from their financing.

“The elimination of the borrower (guarantee) fee is demonstrative proof that the 504 portfolio continues to outperform Office of Management and Budget projections, which help determine fee structure,” said Chris Crawford, President & CEO of the National Association of Development Companies.

The SBA First Mortgage Lenders Fee of one-half percent, however, has not been eliminated, despite rumors to the contrary.