Frequently, we are asked by lenders what fees can be charged to an applicant for a SBA guaranteed loan. SBA Standard Operating Procedure 50-10-5(e) provides guidance, specifically on pages 169 and 170:
- The lender or a third party may charge a Small Business Applicant fees for packaging and other services. “Packaging services” includes assisting the Small Business Applicant with completing the application, preparing a business plan, cash flow projections, and other documents related to the application. “Other services” includes consulting as to what financing is needed and what type, broker or referral fees. The fees must be reasonable and customary for the services actually performed and must be consistent with those fees charged on the lender’s similarly-sized, non-SBA guaranteed commercial loans. In addition, fees for packaging and other services may be based on a percentage of the loan amount. With regard to fees for packaging or other services charged based on a percentage of the loan amount, in no event may the fee exceed 3% on loans of $50,000 or less, and for loans over $50,000, 2% on the first $1,000,000 and an additional ¼% on amounts over $1,000,000, with a maximum fee of $30,000. A standard fee charged to all Small Business Applicants is not acceptable.
- Lenders may be reimbursed by the Small Business Applicant for the direct costs (including reasonable overhead) of legal services performed by lender’s in-house counsel in connection with an SBA-guaranteed loan, but in no event may the lender be reimbursed for an amount that would exceed the cost of outside counsel. In accordance with 13 CFR 120.222(e), charges for legal services (regardless of who provides the service) must be on an hourly basis and must be for requested services actually performed. In addition, as with fees charged for other services provided by the lender to the Small Business Applicant, such charges must be reasonable and customary for the services performed. These fees may be reviewed at any time and lender must refund any fee considered unreasonable by SBA.
- Prior to the services being provided, the lender must advise the Small Business Applicant in writing that the applicant is not required to obtain or pay for unwanted services. If fees are charged to the Small Business Applicant, an SBA Form 159(7a) must be completed.
- A lender cannot charge a Small Business Applicant for the lender’s costs associated with underwriting the loan including the completion by the lender of SBA’s application forms and lender’s analysis. In addition, if the lender pays a third party to assist the lender with the completion of the application forms and the analysis, the lender cannot pass this cost onto the Small Business Applicant.
- SBA may review these fees at any time. Lenders and third parties must refund any fee considered unreasonable by SBA. (See paragraph X.C. below for further guidance.)
SOP 50-10-5(e) further explains some additional allowable and prohibited fees:
- Justification a Lender must have to Charge Extraordinary Servicing Fees (page 170);
- Charging for Recovery of Out-of-Pocket Expenses (page 171);
- Charging of Late Payment Fees (page 171);
- Subsidy Recoupment Fee (page 172);
- Assumption Fees (page 172);
- SBA Express, Export Express and Patriot Express Fee Policy (page 172);
- Prohibited Fees (Page 173); and
- Disclosure of Fees and Identification of Agents (page 173).