SBA Lowers Guarantee Fees

Great news from the SBA

The SBA just announced that it will provide a significant reduction in its loan guarantee fees.  This is great news for anyone looking to buy or sell a business since the majority of small business acquisitions are funded by SBA backed loans.

Reduced SBA fees

Loans closed between October 1, 2022 and September 30, 2023,  will see a significant reduction in SBA fees.
For loans with a maturity that exceeds 12 months, the upfront fees are:
For loans of $500,000 or less: 0.0%
For loans of $500,001 to $700,000: 0.55% of the guaranteed portion
For loans of $700,001 to $1,000,000: 1.05% of the guaranteed portion
For loans of $1,000,001 to $5,000,000: 3.5% of the guaranteed portion up to $1,000,000 plus 3.75% of the guaranteed portion over $1,000,000

Offsetting higher Interest Rates

Rising interest rates over the past year have threatened to stall small business sales, but they are only one factor influencing the overall cost to obtain capital.  SBA guarantee fees are another.

Contrary to what many people think, the SBA does not make loans.  What it does do is  guarantee the lenders that they will be repaid even if you default.  Think of it as an insurance policy, and, like any insurance policy, it comes at a cost.  That cost is the guarantee fee.  The fee is due when the loan is taken out and  typically rolled into the loan.  It increases the overall cost of the loan and your monthly payments.  By reducing the SBA guarantee fees, the cost of obtaining capital is reduced and can offset higher interest rates.

Take Advantage Now

If you are looking to buy a business or in need of financing to expand an existing business, now is the time to act! The versatility of the SBA Program makes it a great option for a range of small businesses. SBA guaranteed loans can be used for working capital, acquisitions, debt refinancing, partner buy-outs, equipment and business occupied real estate.  Call 502-425-0995, today.

Copyright: Pamela R Florence, Business Brokers & Consultants, Inc.