The Small Business Administration has eliminated fees on loans of $150,000 or less. The upshot: A small business owner who receives a $150,000 loan guaranteed by the SBA’s 7(a) loan program will save more than $2,500.
“This is an attempt to reach out to more of the smaller borrowers, who are looking for a smaller dollar amount, often for a startup, to make sure that it’s easier and less expensive for them to get an SBA loan,” said Dennis Melton, director of the U.S. Small Business Administration’s St. Louis District Office. “We want to make sure that we’re not abandoning the smaller borrower.”
The change in the loan program gets rid of an upfront fee and an ongoing service fee for loans of $150,000 or less, which may prove most advantageous to small business borrowers in a state such as Vermont, where the size of the average 7(a) loan was only $132,000 for the fiscal year ending Sept. 30, 2013.
More SBA 7(a) loan numbers from the last fiscal year, including available figures for Missouri and Kansas:
- The overall dollar amount of 7(a) loans nationally was $17.9 billion, with an average loan size of $375,000 (46.406 total loans).
- The overall dollar amount of 7(a) loans in Missouri was $425,532,700, with an average loan size of $393, 647 (1,081 total loans).
- Breaking it down further in the Show Me State: The overall dollar amount of loans in the St. Louis District was $211,358,800, with an average loan size of $445,904 (474 loans); the overall dollar amount of loans in the Kansas City District was $110,529,700, with an average loan size of $431,756 (256 loans); and the overall dollar amount of loans in the southwest area of the state served by the Springfield branch office was $103,644,200, with an average loan size of $295,282 (351 loans).
- The overall dollar amount of 7(a) loans in Kansas was $142,664,100, with an average loan size of $346,272 (412 total loans).
“Part of our job is to get out there and work with the lenders,” said Michael Aumack, economic development specialist for the U.S. Small Business Administration’s Wichita District Office. “We want them to realize it’s a great program, and they can offer more of these loans.”
The SBA’s 7(a) loan program helps startups and small businesses with the fewest employees obtain financing when they may not otherwise meet criteria for loans through typical lenders. The SBA doesn’t make direct loans, but guarantees loans that are completed and supervised by commercial lending institutions.