For loans of $25,000 or less, the maximum interest rate must not exceed Prime Plus 4.25 percent if the maturity is less than 7 years, and Prime Plus 4.75 percent, if the maturity is 7 years or more.
Variable rate loans may be pegged to either the lowest prime rate or the SBA optional peg rate. The optional peg rate is a weighted average of rates the federal government pays for loans with maturities similar to the average SBA loan. It is calculated quarterly and published in the "Federal Register." The lender and the borrower negotiate the amount of the spread which will be added to the base rate. An adjustment period is selected which will identify the frequency at which the note rate will change. It must be no more often than monthly and must be consistent, (e.g., monthly, quarterly, semiannually, annually or any other defined, consistent period).
For those applicants that meet the SBA's credit and eligibility standards, the Agency can guaranty up to 85 percent of loans of $150,000 and less, and up to 75 percent of loans above $150,000 (generally up to a maximum guaranty amount of $1,000,000). This standard applies to most variations of the 7(a) Loan Program. However, SBAExpress loans carry a maximum guaranty of 50 percent guaranty. The Export Working Capital Loan Program carries a maximum of 90 percent guaranty.
Fees Associated With Sba Loans
To offset the costs of the SBA's loan programs to the taxpayer, the Agency charges lenders a guaranty and a servicing fee for each loan approved. These fees can be passed on to the borrower once they have been paid by the lender. The amount of the fees is determined by the amount of the loan guaranty.
Effective October 1, 2002, when the loan amount is $150,000 or less, the guaranty fee will be 1 percent of the guaranteed portion. Lenders are permitted to retain 25 percent of this fee (25 basis points). This is only applicable to loans of $150,000 or less. For loans more than $150,000 but up to and including $700,000, a 2.5 percent guaranty fee will be charged. For loans greater than $700,000, a 3.5 percent guaranty fee will be charged.
This is a temporary reduction that is in effect for a two year period for all loans approved
on or after October 1, 2002. The annual on-going servicing fee for all 7(a) loans approved during the 2-year period beginning October 1, 2002, shall be 0.25 percent of the outstanding balance of the guaranteed portion of the loan. The legislation provides for this fee to remain in effect for the term of the loan.
DYNAMAX BUSINESS CREDIT
SBA Loan Programs part 8