Small Business Administration § 120.220 Fees that Lender pays SBA

Summary

Pages of 13 CFR, the 1-1-25 Edition, setting SBA rules on 7(a) loan interest rates and fees, from § 120.213 through § 120.220. A guaranteed loan may carry a reasonable fixed rate, and variable rates are capped over the base rate at 6.5 percentage points for loans of $50,000 and less, falling to 3.0 points for loans of more than $350,000; balloon payments are not allowed. The guaranty fee is one-quarter of one percent of the guaranteed portion for loans of twelve months or less, and for longer loans not more than 2 percent up to $150,000, 3 percent up to $700,000 and 3.5 percent above that, plus 0.25 percent above $1,000,000. Lenders also pay an annual service fee of up to 0.55 percent of the guaranteed balance, which cannot be charged to the Borrower. SBA collects no guarantee fee on SBA Express loans to businesses owned by a veteran or a veteran's spouse.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

Small Business Administration § 120.220

§ 120.213 What fixed interest rates may (2) For all 7(a) loans of more than
a Lender charge? $50,000 and up to and including $250,000,
(a) Fixed Rates for Guaranteed Loans. the maximum interest rate shall not
A loan may have a reasonable fixed in- exceed six (6.0) percentage points over
terest rate. SBA periodically publishes the base rate;
the maximum allowable rate in the (3) For all 7(a) loans of more than
FEDERAL REGISTER. $250,000 and up to and including
(b) Direct loans. A statutory formula $350,000, the maximum interest rate
based on the cost of money to the Fed- shall not exceed four and a half (4.5)
eral government determines the inter- percentage points over the base rate;
est rate on direct loans. SBA publishes and
the rate periodically in the FEDERAL (4) For all 7(a) loans of more than
REGISTER. $350,000, the maximum interest rate
shall not exceed three (3.0) percentage
§ 120.214 What conditions apply for points over the base rate.
variable interest rates? (e) Amortization. Initial amortization
A Lender may use a variable rate of of principal and interest may be recom-
interest for guaranteed loans under the puted and reassessed as interest rates
following conditions: fluctuate, as directed by SBA. With
(a) Frequency. The first change may prior approval of SBA, the Lender may
occur on the first calendar day of the use certain other amortization meth-
month following initial disbursement, ods, except that SBA does not allow
using the base rate (see paragraph (c) balloon payments.
of this section) in effect on the first [61 FR 3235, Jan. 31, 1996, as amended at 73
business day of the month. After that, FR 67101, Nov. 13, 2008; 87 FR 38908, June 30,
changes may occur no more often than 2022]
monthly.
(b) Range of fluctuation. The amount FEES FOR GUARANTEED LOANS
of fluctuation shall be equal to the
movement in the base rate. The dif- § 120.220 Fees that Lender pays SBA.
ference between the initial rate and the A Lender must pay a guaranty fee to
ceiling rate may be no greater than the SBA for each loan it makes. If the
difference between the initial rate and guarantee fee is not paid, SBA may ter-
the floor rate. minate the guarantee. Acceptance of
(c) Base rate. The base rate will be the guaranty fee by SBA does not
one of the following: the prime rate or waive any right of SBA arising from a
the Optional Peg Rate. The prime rate Lender’s negligence, misconduct or
will be that which is in effect on the violation of any provision of these reg-
first business day of the month, as ulations or the guaranty agreement or
printed in a national financial news- other loan documents.
paper published each business day. SBA (a) Amount of guaranty fee—(1) In gen-
may from time to time permit the use eral. Except to the extent paragraph
of alternative base rate options that (a)(2) of this section applies, for a loan
are widely adopted for small business with a maturity of twelve (12) months
commercial lending and will publish or less, the guarantee fee which the
notice of such alternative options in Lender must pay to SBA is one-quarter
the FEDERAL REGISTER. SBA publishes (1⁄4) of one percent of the guaranteed
the Optional Peg Rate quarterly in the portion of the loan. For a loan with a
FEDERAL REGISTER. maturity of more than twelve (12)
(d) Maximum Allowable Variable Inter- months, the guarantee fee is payable as
est Rates. The maximum allowable vari- follows:
able interest rates are set forth below, (i) Not more than 2 percent of the
with the initial maximum allowable guaranteed portion of a loan if the
rate for the loan determined as of the total amount of the loan is not more
date SBA receives the loan application: than $150,000;
(1) For all 7(a) loans of $50,000 and (ii) Not more than 3 percent of the
less, the interest rate shall not exceed guaranteed portion of a loan if the
six and a half (6.5) percentage points total amount of the loan is more than
over the base rate; $150,000 but not more than $700,000;

269
§ 120.221 13 CFR Ch. I (1–1–25 Edition)

(iii) Except as provided in paragraph (12) months, SBA will refund the guar-
(a)(1)(iv) of this section, not more than anty fee if the Lender has not made
3.5 percent of the guaranteed portion of any disbursement and the lender re-
a loan if the total amount of the loan quests in writing the refund and can-
is more than $700,000; and cellation of the SBA guaranty.
(iv) An additional 0.25 percent of the (d) Lender’s retention of portion of
guaranteed portion of a loan if the guaranty fee. With respect to a loan
total amount of the loan is more than with a maturity of more than twelve
$1,000,000. (12) months, where the total loan
(2) For loans approved October 1, 2002, amount is no more than $150,000 Lender
through September 30, 2004. For a loan may retain not more than 25 percent of
with a maturity of twelve (12) months the guaranty fee.
or less, the guarantee fee which the (e) If the guarantee fee is not paid,
Lender must pay to SBA is one-quarter SBA may terminate the guarantee. The
(1⁄4) of one percent of the guaranteed Borrower may use working capital loan
portion of the loan. For a loan with a proceeds to reimburse the Lender for
maturity of more than twelve (12) the guarantee fee. Acceptance of the
months, the guarantee fee is: guarantee fee by SBA shall not waive
(i) 1 percent of the guaranteed por- any right of SBA arising from the
tion of the loan if the total loan Lender’s misconduct or violation of
amount is not more than $150,000, any provision of this part, the guar-
(ii) 2.5 percent of the guaranteed por- antee agreement or other loan docu-
tion of a loan if the total loan amount ments.
is more than $150,000, but not more (f) Lender’s annual service fee payable
than $700,000, and to SBA—(1) In general. Except to the ex-
(iii) 3.5 percent of the guaranteed tent paragraph (f)(2) of this section ap-
portion if the total loan amount is plies, the lender shall pay SBA an an-
more than $700,000. nual service fee in an amount not to
(3) For loans approved under section exceed 0.55 percent of the outstanding
7(a)(31) of the Small Business Act (SBA balance of the guaranteed portion of
Express loans) to veterans and/or the each loan. The service fee cannot be
spouse of a veteran. SBA will not collect charged to the Borrower. SBA may in-
a guarantee fee in connection with a stitute a late fee charge for delinquent
loan made under section 7(a)(31) of the payments of the annual service fee to
Small Business Act to a business cover administrative costs associated
owned and controlled by a veteran or with collecting delinquent fees.
the spouse of a veteran. (2) For loans approved from October 1,
(b) When the guaranty fee is payable. 2002, through September 30, 2004. The
For a loan with a maturity of twelve lender shall pay SBA an annual service
(12) months or less, the Lender must fee equal to 0.25 percent of the out-
pay the guaranty fee to SBA electroni- standing balance of the guaranteed
cally within 10 business days after re- portion of each loan. The service fee
ceiving SBA loan approval. The Lender cannot be charged to the Borrower.
may only charge the Borrower for the SBA may institute a late fee charge for
fee after the Lender pays the guaranty delinquent payments of the annual
fee. For a loan with a maturity in ex- service fee to cover administrative
cess of twelve (12) months, the Lender costs associated with collecting delin-
must pay the guaranty fee to SBA elec- quent fees.
tronically within 90 days after SBA
[61 FR 3235, Jan. 31, 1996; 61 FR 11471, Mar. 20,
gives its loan approval. The Lender 1996, as amended at 68 FR 51680, Aug. 28, 2003;
may charge the Borrower the fee after 68 FR 56554, Oct. 1, 2003; 76 FR 63546, Oct. 12,
the Lender has made the first disburse- 2011; 82 FR 39502, Aug. 21, 2017; 87 FR 38908,
ment of the loan. The Borrower may June 30, 2022; 88 FR 21899, Apr. 12, 2023]
use the loan proceeds to pay the guar-
anty fee. However, the first disburse- § 120.221 Fees and expenses that the
ment must not be made solely or pri- Lender may collect from a loan ap-
marily to pay the guaranty fee. plicant or Borrower.
(c) Refund of guaranty fee. For a loan Unless otherwise allowed by SBA
with a maturity of more than twelve Loan Program Requirements, the

270

File and source

File: c03-17b.pdf
Size: 155,592 bytes
SHA-256: 29fd2bffd92c7448ba02d858ab43e5905bb5e486d2830da264a4d4daf00ea9a8
Our copy: c03-17b.pdf
Original: www.govinfo.gov