On Tuesday, July 23, 2024 the SBA issued Information Notice 5000-858936, 7(a) Fees Effective October 1, 2024, for Fiscal Year 2025 (dated July 23, 2024). The new fees will be effective for loans approved by SBA during the period October 1, 2024 through September 30, 2025.
This Notice announces (A) the 7(a) Lender’s Annual Service Fee (also known as the “Lender’s Annual Service Fee”) and (B) the SBA Guaranty Fee (also known as the Upfront Fee) for 7(a) loans for fiscal year 2025 (FY 2025), and the exceptions to those fees authorized for FY 2025 for the 7(a) loan program.
(A) The FY 2025 lender’s Annual Service Fee (Lender’s Annual Service Fee) based on gross loan approval amount, including SBA-guaranteed and unguaranteed portions, will be:
- For loans of $500,000 and less – zero (0.00%).
- For loans of $500,001 to $1,000,000: 0.17% of the guaranteed portion of the outstanding balance of the loan.
- For loans of $1,000,001 to $5,000,000: 0.55% of the guaranteed portion of the outstanding balance of the loan.
- Lenders may not pass the Annual Service Fee on to the Borrower.
(B) SBA Guaranty Fee (Upfront Fee): Except for Export Working Capital Program (EWCP) loans and SBA Express loans made to veteran-owned businesses, the FY 2025 Upfront Fee, based on gross loan approval amount, including SBA-guaranteed and unguaranteed portions, will be:
- For loans with a maturity that exceeds 12 months, the Upfront Fees are:
- > For loans of $1,000,000 or less: 0.00%.
- > For loans of $1,000,001 to $5,000,000: 3.5% of the guaranteed portion of the loan up to and including $1,000,000, plus 3.75% of the guaranteed portion of the loan over $1,000,000.
- For 7(a) loans with a maturity of 12 months or less (Short-term loans):
- > For loans of $1,000,000 or less: 0.00%
- > For loans $1,000,001 and greater: 0.25% of the guaranteed portion.
Multiple 7(a) loans made within 90 days of each other:
When two or more 7(a) loans (with maturities exceeding 12 months) are approved for an applicant, including its affiliates, within 90 days of each other, the loans are considered as one loan for the purpose of determining the percentage of guaranty and the Upfront Fee calculation. This rule applies regardless of whether the loans were approved by the same or different Lenders.
Annual Service Fee for multiple 7(a) loans within 90 days: The Annual Service Fee is set for each loan on a standalone basis without respect to any other loans made (i.e., the loans are not aggregated).
Upfront Fee calculation for multiple 7(a) loans within 90 Days: The applicable Upfront Fee for the subsequent loan(s) will equal the amount of the fee that would have been charged had the loans been combined, less the fee that was paid or is due to be paid on the first loan approved. The fee will never be a negative amount.
Lenders are not permitted to split loans for the purpose of avoiding fees. These rules apply regardless of whether the loans were approved by the same or different Lenders.
What Are SBA Loan Rates For Accounting Practice Acquisition Loans?
The interest rate you’ll pay on your SBA practice acquisition loan will depend on the program you’ve chosen, the amount you’re seeking to borrow, and the repayment terms you’ll return the borrowed amount within. It will also depend on the daily prime rate, which will fluctuate based on the actions of the Federal Reserve.
Your SBA lender will offer a fixed or variable interest rate depending on your desired program. Fixed interest rates are static throughout the term of your loan, whereas variable interest rates will change based on the prime rate, the LIBOR rate, or the SBA Optional Peg Rate, which is “a weighted average of rates the federal government pays for loans with maturities similar to the average SBA loan,” according to the SBA.
While the maximum rate is set by external factors, your specific interest rate will be determined by your lender based on your business’s information.
SBA 7(A) Loan Amounts, Terms and Uses
The SBA 7(A) program is one of the most popular of their different programs. With a maximum borrowing amount of $5 million and repayment terms ranging from 10 to 25 years, this financing option is used by accounting business owners for various reasons, including asset purchases, working capital management, and business expansion / acquisition.
Can SBA 7(a) Loan Rates Be Lower Than Other Business Loans?
The government backing of SBA 7(a) loans significantly reduces the risk for lenders, making them more willing to offer loans at competitive rates. Additionally, the rate structure established by the SBA ensures that these loans remain affordable for small business owners.
3 Tips to Secure a Better Rate on Your SBA Loan
- Improve your credit score: Before applying for a loan, take steps to boost your credit score. This might include paying down debts, ensuring no errors on your credit report, and building a longer credit history.
- Consider a longer maturity: If feasible for your business, opting for a longer-term loan can secure a lower interest rate.
- Provide collateral: Secured loans, or those backed by an asset, often have lower interest rates since they present less risk to lenders.
Getting Started on Your 2024/2025 Practice Acquisition Loan with an SBA PLP Lender
Whether you are buying an accounting practice through us, one of our competitors, or working directly with a Seller, we can help secure a loan for you.
To reduce your potential lost time working with an inexperienced local bank who may say they process a variety of SBA loans, ABA Advisors can refer you to our network of national SBA PLP lenders that specialize in accounting practice acquisition loans.
This PLP / Preferred Lender Program gives lenders the final credit decision on making SBA loans, streamlining the entire process and potentially cutting out the 4-to-6 week SBA approval process. Not just anyone can become an SBA Preferred Lender, though. This designation only comes to lenders who process and service SBA loans efficiently for years
ABA Advisors has years of experience and ongoing relationships with several of these national and regional lenders that provide both conventional and SBA guaranteed loans. We do more than just give you a list of lenders to call and hope it all works out. We guide you through the entire process from start to finish.
This can even include approaching and working with more than one lender when necessary.
Click here to learn more about how ABA Advisors can help you with financing. Or you can click here to go to our Contact Us page and send us a message to contact you at your convenience.
For financing questions contact Chuck Hayes – President – ABA Advisors – 317-546-7720 direct – ch@acctsales.com