Understanding Sba 504 Loan Fees In 2023

by Rino Abdulah Mei 27, 2023 Posting Komentar

SBA 504 Loans in Oklahoma VAST Bank from www.vast.bank

Introduction

Small Business Administration (SBA) 504 loans are popular among entrepreneurs for purchasing fixed assets such as land, buildings, and equipment. Like any other loan, SBA 504 loans also come with fees that borrowers must pay. In this article, we will discuss the various SBA 504 loan fees that you need to know about in 2023.

Origination Fee

The origination fee is a one-time fee charged by the lender for processing your loan application. In 2023, the SBA has set the maximum origination fee at 1.5% of the loan amount. This fee covers the costs of underwriting, credit checks, and documentation. It is usually paid at the time of loan closing.

Guaranty Fee

The SBA charges a guaranty fee to lenders to cover the costs of guaranteeing your loan. The guaranty fee is a percentage of the guaranteed portion of the loan. In 2023, the fee is set at 0.5% of the guaranteed portion. The fee is usually passed on to the borrower and is payable at the time of loan closing.

Third-Party Fees

Apart from the origination and guaranty fees, there are other fees that you may have to pay to third-party service providers such as appraisers, attorneys, and environmental assessors. These fees vary depending on the service provider and the complexity of the transaction.

Prepayment Penalty

SBA 504 loans have a prepayment penalty if you pay off the loan before the maturity date. In 2023, the prepayment penalty is set at 5% in the first year, 3% in the second year, and 1% in the third year. After the third year, there is no prepayment penalty.

Interest Rate

The interest rate on an SBA 504 loan is usually lower than the market rate. The rate is set by the lender and is based on the prime rate plus a fixed spread. In 2023, the maximum spread that a lender can charge is 2.75%.

Debenture Fees

The SBA issues debentures to investors to fund the guaranteed portion of the loan. The SBA charges a fee for issuing and servicing these debentures. In 2023, the fee is set at 0.6425% of the debenture amount.

CDC Processing Fee

The Certified Development Company (CDC) that processes your loan application charges a processing fee. In 2023, the maximum processing fee is set at $5,000. This fee covers the costs of packaging and processing your loan application.

Servicing Fee

The lender or the CDC may charge a servicing fee for servicing your loan. This fee covers the costs of collecting payments, monitoring the collateral, and managing the loan. In 2023, the maximum servicing fee is set at 0.5% of the outstanding balance.

Conclusion

SBA 504 loans are an excellent financing option for small businesses looking to purchase fixed assets. However, like any other loan, there are fees associated with SBA 504 loans that borrowers must pay. In 2023, the fees are regulated by the SBA, and borrowers should be aware of these fees before applying for the loan. By understanding the fees associated with SBA 504 loans, you can make an informed decision and avoid any surprises down the road.