Reduction in SBA Loan Fee to Assist Small BusinessAssociation of Business Training
February 28, 2014 — 905 views
For small business concerns to remain feasible in any recovering economy, the access to capital should be the Small Business Administration's (SBA) priority. The application receiving any kind of commercial loan involves a few particular costs which may force borrowers to think twice before going to commit to a financial loan.
Small businesses most of the time require loans of smaller amounts, with the maximum amount being $350,000 to start their business. The bottom line is critical at this juncture, and a paucity of sufficient financial resources could become a barrier to growth.
SBA understands this scenario and thus started its mission is to assist small businesses to begin, grow and ultimately succeed. To this end, the entity has started two initiatives with the intention to eliminate a few borrower fees, thus, making the process easier and cheaper for small businesses to obtain the required financing.
One initiative, which began at end of 2013 fiscal year, set the fees of the borrower to zero on all the 7(a) loans of $150,000 or less and which originated on October 1, 2013 or after that. This initiative by the SBA is one of its latest efforts to make sure that they are reaching more entrepreneurs and business owners to assist them to tackle subsequent business challenges.
Benefits of the 7(a) Loan Program
SBA has launched the 7(a) Loan Program as its primary program aimed to assist start ups and existing small businesses to obtain the financing they require. This comes in handy when the business is not eligible for any kind of standard or conventional business loans. Three months after it was implemented, the elimination of fees imposed in loans of $150,000 and below have saved about $5 million of small business money all over the country. If a small business takes a loan of $150,000, it had to pay about $2,500 as fees, which can now be utilized to meet varied business expenses.
A similar effort has been started by the SBA to assist once-veterans-now-small business owners. The SBA started the SBA Veterans Advantage Initiative scheme from January 1, 2014, with borrowing fees being zero on loans of $350,000 or below via this program. It is hoped that it will yield considerable savings for the veterans who wish to begin or grow a business. It is observed that 73% of all SBA loans to veterans during the past 5 years were under $350,000.