The Economic Aid Act provides emergency enhancements to the SBA’s 7(a) loan program by offering reduced or no fees for the borrower. This includes waiving the largest borrower fee — the SBA Guaranty fee. Prior to the Economic Aid legislation, SBA 7(a) borrowers paid an SBA Guaranty fee in the amount of 3.5% of the first $1 million guaranteed ($35,000) plus 3.75% of the remaining guaranteed amount. For a $5-million loan, the fee would be $138,125, calculated as 3.5% of the first $1 million guaranteed ($35,000) plus 3.75% of the remaining guaranteed amount. This is a significant expense to the borrower and a competitive disadvantage for SBA 7(a) loans as opposed to conventional commercial loans.
An additional modification that will encourage SBA lenders to close more SBA 7(a) loans is a provision in the act that increases the amount of SBA 7(a) loans that is guaranteed by the U.S. government from 75% to 90%.