There have been a couple of changes to the SBA 504 loan fees and the overall effect is a reduction to the fees.
–> First, SBA is reinstating the upfront guaranty fee charged on 504 loans, which is financed into the 504 loan
This fee had been eliminated years ago. It is going from zero back to its previous 50 basis points.
–> Second, SBA significantly reduced the ongoing monthly servicing fee paid to SBA
This fee keeps the SBA 504 loan program at zero cost to taxpayers. A reduction of this fee is a result of fewer defaults and a strong economy. The ongoing fee has decreased from .642% to .368% – a reduction of .274%. This results in a lower monthly payment for the life of the loan for SBA 504 borrowers approved for financing on or after October 1st, 2018.
The net effect of these fee changes means the small business borrower does get charged more up front, but they will quickly recoup that increase over the first years of their 504 loan term with reduced payments… resulting in paying less in 504 fees over the life of the loan.
If you have any questions on this or have a deal that would like to take advantage of the 504 fee savings in place right now – please give us a call at 605-882-5115!