One thing to know about the 504 loan program is that it is a zero subsidy program. This means taxpayers don't pay for potential losses. Instead, losses are covered by fees paid by the borrowers that use the program.
Just like program interest rates have adjusted to pre-pandemic levels, SBA loan fees will also adjust, and the increase was announced by SBA last week. However, it is important to note that even with an increase from FY 2022, the fees will still be slightly lower than what they were in FY 2021. These fees will go into effect for loans approved after September 30, 2022.
- The SBA Guaranty Fee (a one-time fee) will be zero basis points for both regular 504 loans and the debt refinance without expansion 504 loans. This is a reduction from 0.50% in FY 2022.
- The Ongoing SBA Guarantee Fee will be:
- 44.05 basis points for regular 504 loans
- 45.59 basis points for Debt Refinance Without Expansion
- Both are just under 20 basis point increases from fees last year.
Essentially this new fee structure lowers the borrower's up-front one-time fees that get rolled into the final gross debenture amount but increases the fully effective interest rate by just under 20 basis points that the borrower pays over the life of the loan. And as mentioned previously, these ongoing fees that determine the final interest rate are still lower than those paid in FY 2021.