It’s That Time again: the time each year when SBA reviews their fee structure for 7(a) loans. You can download the full Fee Notice from the SBA website here: 7(a) Fees Effective October 1, 2021 (sba.gov) It’s a fairly straightforward Notice (unlike some issued by SBA!), so we’re not going to cover the details here.
As that link indicates, the updates took effect on October 1st. So if you have loans in the pipeline, submitted for SBA approval prior to October 1st but not yet received back from them, you’ll need to review and manage those loans in order to accommodate the fee increases.
Consider fee financing options
Obviously, the fees can be paid in one of two ways. Each requires your oversight in order to manage the potential impact to your Borrowers.
1. The fee can be financed with the loan
This may require an increase in the loan amount – which means you’ll need to complete an analysis to ensure the loan structure and repayment ability is in line with SBA SOP requirements.
Will the Borrower still qualify for the loan based on the increased debt service needed?
Remember, too, that the Borrower may need to provide additional collateral.
2. The fee can be paid out of pocket by the Borrower
In this case, double-check the source of injection. Has it been fully verified, given the increase in funds required?
Then notify your Borrowers
Hopefully, you’ve already discussed the possibility of these guarantee fees with any Borrowers whose loans are in the approval process. Now is the time to let them know that yes, this is happening.
If you didn’t already talk with them about this, now is definitely the time to do so!
With the fee payment options in mind, and having reviewed their loans to determine which option would be best for them, you can work with your Borrowers to be sure their loans will continue through the SBA approval process without setbacks.
LRM Lender Consultants provides support, training, and consulting services to SBA 7(a) lenders. It’s our specialty and our passion – yes, really! So request a free consultation today and discover how we can help you manage your 7(a) loan portfolio.