SBA Guaranty Fee Incentives Updated thru 9-30-2023!
SBA Guaranty Fee Incentives Updated thru 9-30-2023!
The U.S. Small Business Administration has reduced fees again for fiscal year October 1, 2022 through September 2023.
The highlight is that for SBA 7(a) loans of $500,000 and less, there is No SBA Guaranty Fee. The complete schedule is as follows, and please see calculation notes* below it:
- No SBA Fee for loans of $500,000 or less**
- Loans of $500,001 to $700,000: 0.55%
- Loans of $700,001 to $1,000,000: 1.05%
- Loans of $1,00,001 to $5,000,000: 3.5% of guaranteed portion (see below) up to $1,000,000 plus 3.75% of guaranteed portion over $1,000,000.
*SBA fees are charged on the Guaranteed Portion of Each Loan which is 75% of the total loan. Therefore a 0.55% fee on a $700,000 loan would be paid on a $525,000 Guaranty and would be $2,887.50. Compare that to pre-incentive levels when this size loan’s SBA fee would be $15,750! That’s a big savings!
**Coffman Capital can typically process SBA (a) loans with a minimum of $100,000 if there is sufficient cash flow and buyer’s cash injection. A consulting fee applies – as always, no fee is due Coffman unless the loan closes. Please call for details.
Other Great Features of SBA Loans Offered through Coffman Capital:
- Loans for Business Acquisition & Business Real Estate
- Lowest Cash Injections Possible – lenders vary in their cash injection requirements so we find the best options to best use the SBA guidelines!
- No Minimum Collateral required, while many lend only with “sufficient asset coverage”. However, Available Collateral is used as needed by lenders. Call us to see, for instance, if you own a home that may be used as collateral if necessary. It may be waived under certain circumstances.
- All Business Acquisition Loans include Working Capital and may include New Equipment if needed. SBA Closing Costs incurred by the lender including SBA Guarantee fee is financed as part of the project.
- Coffman Capital always structures your loan in the most advantageous way possible, because each situation is different. We also qualify some customers that others cannot – but we’re not perfect.
Coffman Capital Inc. is your Best Source for SBA Financing. The best program we’ve found that utilizes an SBA Guaranty is the SBA 7(a) program. It involves the U.S. Small Business Administration guarantying the bank’s loan for typically 75% of the balance and 85% for smaller loans.
What Are They Used For?
They can be used for both real estate and non-real estate transactions. Commonly, banks use it to augment their lending limits by using the guaranty to offset their liabilities on the books.
More importantly for you and me, they use it to allow them to make loans they otherwise could not, because of good lending policies that safeguard the bank’s shareholders. Case in point: an unsecured business acquisition. Normally most banks would not entertain these loans because they have far too much “blue sky” or “air ball” to them, which are bank slang for the un-collateralized portions of the loans.
The good news for YOU, is that Coffman Capital has effectively identified the lenders that invite these type of loans. The majority of banks in the market-place, even with an SBA guaranty, would not make these loans.
Are SBA Lenders All The Same?
Coffman Capital knows who wants to lend to Professionals and therefore will not consider the lack of collateral a problem. We actually have some Non-SBA programs that can entertain some healthcare professionals but these are not nearly as consistently effective as an SBA 7(a) loan.
Having said all that – not all SBA lenders have the same terms!! They are usually similar but the main differences are in the following areas:
- Loan Term – they don’t all lend the full 10 years for a business acquisition without collateral. They also don’t all use the full benefit of using the real estate portion of a loan if there is any to maximize the term for up to 25 years.
- Cash Injection – some lenders still want 20% of project cost (see below) instead of 10% or even 5% if we can use a seller “standby” note. We can limit it to 10% almost every time and also use the 5% if circumstances allow it.
- Interest Rates – first, most of our loans have to be adjustable because the most aggressive lenders can’t afford to fix their rates, which is another discussion. But sometimes we can get a fixed rate. And the adjustable spreads we get for you are sometimes less as long as it’s not a smaller request.
Those are the most important differences, but there are others still, such as credit tolerance, borrower experience and more. Coffman Capital gives you the advantage of knowing – or finding – the Right Lender to finance your project.
What is Project Cost?
Regarding the “project cost”, FYI that means you are financing not just the purchase price, but also working capital, SBA fees, other closing costs, even new equipment if you tell us to. The project cost is the sum of these items and dictates the amount the bank will finance, how much cash injection and if any seller financing is involved.
What About SBA 504 Loans?
The SBA 504 loan program is meant for new developments, namely a large construction project and also large building acquisitions, though it’s really best used for construction. It finances 90% of all the costs and is divided into a bank loan and an SBA loan which are administered separately. The latter is funded by a debenture, i.e. debt security, and they take quite a while to close. They also have terms not quite as advantageous as an SBA 7(a) in many cases.
When discussing your loan we can explain all of the terms more in depth. We usually recommend an SBA 7(a) for most projects but a 504 can be the right tool for a particular project.
Please let us help you get the job done right – and make sure you are completely knowledgeable about the loan program you are using.
Call us at 813-891-1811 and Let’s Get Started!