What comprises debenture pricing and how are SBA costs calculated?
Processing, initiation and funding fees
There are a number of fees associated with obtaining an SBA 504 loan. These are one-time only expenses that are financed along with the debenture. The fees are made up of the following components:
A processing fee of 1.5% is paid to SPEDCO for marketing, screening, packaging, closing and general overhead.
The reserve/guaranty fee of 0.5% originally paid to the SBA to offset loan losses and program administrative expense has been eliminated as of 10/1/2007.
A $2,000 legal fee to pay for the CDC/SBA attorney to prepare an Opinion of Counsel for the transaction. This fee also pays for an Opinion that covers the borrower's transaction. Any excess fees will be used to help defray the costs of title insurance and recording documents.
A funding fee of .25% is collected for the Development Company Funding Corporation (DCFC) as the program's fiscal agent, for managing the overall mechanism of selling and funding the debentures, and negotiating and managing the monthly debenture process. This includes payment for printing costs and debenture pooling and certification costs.
A debenture underwriting fee of approximately .4% is paid to Harris Trust (.375% for 10-year loans) for security underwriting, marketing, the sales work done on a monthly basis and for the legal work connected with the monthly funding.
Call SPEDCO for more information on payments associated with an equity injection larger than 10%.
NOTE:
After receiving written SBA approval, the business must remit a $1,200 legal deposit that will be applied to legal and other closing fees. Closing fees, such as title insurance, recording fees and messenger fees, over and above $1,200 will be due on the date of the SBA loan closing meeting.
The business will be required to engage the services of an attorney to provide a legal Opinion of Counsel at the time of loan closing.
Finally, a Participation Fee equal to .5% of any Mortgages that are senior to the SBA Guaranteed Mortgage must be submitted in the form of a Certified Check at the time of the SBA closing.
