Did you know it’s illegal for a loan broker, loan agent, loan packager, consultant or referral source (aka loan intermediary) to charge you a fee associated with an SBA loan unless it’s disclosed on an SBA Form 159 and is signed and agreed to by you, the loan intermediary and the lender? This is a little known secret that borrowers seeking SBA financing, or who have already obtained SBA financing, usually don’t know about. What’s even more surprising is that most loan intermediaries not only don’t use this form to legally verify and request their fees, but they don’t even know it exists! Not only can a loan intermediary not collect a fee from you unless it’s listed on the SBA Form 159, but the SBA actually limits the amount of fees a loan intermediary can charge. It’s also not permissible for a loan intermediary to charge you any fee that is considered contingent:
The SBA does not allow contingency fees (fees paid only if the loan is approved) or charges for services which are not reasonably necessary in connection with an application.SBA Form 159 (04-18)
Additionally, any fee over $2,500 requires a detailed invoice to accompany the SBA Form 159. The invoice must breakdown the activities conducted by the loan intermediary which resulted in a fee being charged, how many hours the loan intermediary spent on your loan, and how much per hour was charged for his services.
Itemization and supporting documentation is required if the compensation paid exceeds $2,500. Itemization must include: 1) a detailed explanation of the work performed; and 2) the hourly rate and the number of hours spent working on each activity.SBA Form 159 (04-18)
Mandatory Fee Calculations and Limits
The SBA has rigid limits on how much a loan intermediary can charge, and also caps the total allowable fee at $30,000. However, a loan intermediary can’t arbitrarily charge you a $30,000 fee on any SBA loan, there are rules that must be met when charging an SBA loan fee. A loan intermediary can only charge a maximum of 2% of the loan amount up to $1 million. Over $1 million, the loan intermediary is allowed to charge 0.25% for each additional dollar up to the $30,000 maximum SBA allowed fee. For example, on a $2.5 million loan amount, a loan intermediary can charge a maximum of $23,750 [(2% x $1 million) + (.25% x the next $1.5 million)]. The SBA does allow loan fees up to 3% to be charged on loan sizes of $50,000 and under. Remember, if you are asked for a fee in connection with an SBA loan that has not been disclosed on an SBA Form 159 and agreed to by you; you are under no obligation to pay it.
When Out-of-Pocket Fees are Acceptable
Out-of-pocket due diligence and packaging fees requested by a direct SBA lender at loan commitment or approval, and that go toward third-party reports such as an appraisal, or environmental report are allowed. If you are working with a loan intermediary or loan provider that requests an out-of-pocket cost from you prior to closing, be sure the company has a written refund policy in the event your loan does not close, and that the fee does not exceed the $2,500 packaging fee limit set forth by the SBA. Additionally, any out-of-pocket fees will also need to be disclosed on an SBA Form 159 that is signed by you prior to closing.
Working with an experienced and reputable SBA lender or loan provider is highly important to make sure your transaction is handled appropriately and lawfully. There are loads of intermediaries that claim to have expertise in SBA financing but who will leverage the reputation, term sheet, or effort of a reputable lender or provider to unlawfully coerce a fee from you. Be sure any fees you are paying in connection with an SBA loan adhere to the guidelines outlined above and that are detailed on the SBA Form 159. The SBA lenders and providers featured on our site have been researched and vetted by us, and we highly recommend them to ensure your SBA loan goes smoothly.