SBA Loan Fee Reductions Help Small Business Owners Nationwide
by Ann Mehlum, SBA Official
- Created: February 14, 2014, 12:00 pm
- Updated: February 14, 2014, 12:00 pm
In order for small businesses to remain viable in a recovering economy, access to capital must remain an SBA priority. At the same time, applying for and getting a commercial loan involves certain costs that may make borrowers think twice before making that commitment.
Often times, small businesses that need loans with smaller dollar amounts --$350,000 and under- are usually either just starting or in their early stages. Attention to the bottom line is paramount at this critical time, and a lack of adequate financial resources may become an obstacle to growth.
Mindful of this situation and consistent with our mission to help small businesses start, grow and succeed, SBA recently introduced two initiatives aimed at eliminating certain borrower fees, thus making it cheaper and easier for small businesses to obtain much needed financing.
One of the initiatives, launched at the end of fiscal year 2013, set borrower fees to zero (0) on all 7(a) loans $150,000 and under originated on or after Oct. 1, 2013. This initiative is among SBA’s latest efforts to make sure we’re reaching more business owners and entrepreneurs to help them to tackle the next challenge in their businesses.
The 7(a) Loan Program is the SBA’s primary program to help start-up and existing small businesses obtain financing when they may not be eligible for conventional business loans . In just three months after its implementation, fee elimination on loans $150,000 and under have saved small businesses nationwide more than $5 million. A small business obtaining a $150,000 loan now saves more than $2,500 in fees, which can be used for other business expenses.
The SBA has begun a similar effort to help small business owners who are veterans. Beginning Jan. 1, 2014, SBA launched the SBA Veterans Advantage initiative, which has zero borrower fees on all loans $350,000 and under made through this program. This program is expected to yield significant savings for veterans looking to start or grow a business. Of all SBA loans made to veterans during the last 5 years, 73 percent were below $350,000.
In the first 10 days (Jan 1 – Jan 10) this initiative saved veterans business owners almost $179,000.
While it is still too early to gauge the impact these initiatives will have on the success of small businesses, the initial numbers seem to indicate that savings will be significant.
These two initiatives are in place through the end of the current fiscal year, Sept. 30, 2014.
About the AuthorAnn Marie Mehlum is the Associate Administrator for SBA’s Office of Capital Access.
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