SBA Rewards 504 Borrowers by Reducing Loan Fees

Effective October 1, 2005, SBA fees under the 504 Loan Program have been reduced. Fees for the SBA 7a Guaranty Program increased.

These changes point directly to the value of a borrower and a lender in using the 504 wherever possible and are a direct result of the better than expected performance of the 504 loan portfolio.

Each year the fees payable to SBA under its loan programs are reviewed to determine if they need to be adjusted to recognize for new loans to offset the estimated costs to the program as a result of losses. The adjusted fees together with the other fees paid to SBA will keep both of these lending programs at a zero subsidy rate.

The monthly payment on the debenture portion of an SBA loan includes principal, interest, and three servicing fees. In addition to the CDC servicing fee, and the Colson Servicing Fee, there is an ongoing guarantee fee paid to SBA annually on the outstanding principal balance.

A reduction in any of the servicing fees reduces the effective interest rate to the borrower every month. FFCFC will use this decreased on-going guarantee fee of 0.192 of one percent, as opposed to the previous higher rate of 0.288 of one percent, for 504 projects authorized on or after October 1, 2005.