On February 17, 2009, President Obama signed
into law the American Recovery and Reinvestment
Act of 2009 (the “Recovery Act”) (P.L. 111-5).
Section 501 of the Recovery Act authorizes SBA
to reduce or eliminate certain fees on 7(a) and
504 loans. The purpose of this Notice is to
announce the implementation of fee eliminations
in the 7(a) Loan Program and the 504 Development
Company Program. A notice on this subject will
also be published in the Federal Register.
Fee Eliminations
7(a) Loan Guarantee Fee Eliminations:
For 7(a) loans approved by SBA on or after
February 17, 2009, SBA will temporarily
eliminate the Small Business Act section
7(a)(18)(A) fees (upfront guaranty fees) for all
eligible loans, including those made with higher
SBA guarantees (up to 90%) as provided in
section 502 of the Recovery Act. For eligible
loans approved between February 17, 2009 and the
date of this notice, the Agency will make funds
available to refund payments for these fees.
The Agency is developing a refund mechanism.
SBA expects to be able to begin issuing refunds
by approximately May 1, 2009. If borrowers have
already paid lenders for the fee on eligible
loans, lenders must reimburse the borrowers from
the SBA refund.
Consistent with the prioritization for fee
eliminations or reductions in the Recovery Act,
the on-going guaranty fee set forth in section
7(a)(23) of the Small Business Act will continue
to apply. In addition, SBA’s ¼ point guaranty
fee set forth in 13 CFR 120.220(a) for loans
with maturities of 12 months or less will
continue to apply.
SBA will eliminate upfront guaranty fees until
the aggregate dollar amount of 7(a) loans made
under this authority exhausts the funds
dedicated to that purpose. SBA currently
estimates that program level will be
approximately $8.7 billion. Depending on loan
volume in the 7(a) program, SBA estimates that
it will be able to eliminate upfront guarantee
fees on loans approved through approximately
December 31, 2009.
504 Development Company Program Fee
Eliminations:
For eligible loans approved through the Agency’s
section 504 Development Company Program on or
after February 17, 2009, SBA will temporarily
eliminate two program fees: 1) Third-Party
Participation Fees (Small Business Investment
Act Section 503(d)(2) fees codified at 13 CFR
120.972); and 2) CDC Processing Fees (13 CFR
Section 120.971(a)(1) fees). Consistent with
the Recovery Act’s temporary elimination of CDC
Processing Fees, CDCs will no longer be allowed
to collect deposits from small business
applicants that would have gone towards payment
of the CDC Processing Fee upon loan approval
under 13 CFR 120.935. SBA will reimburse the
CDCs for the waived CDC Processing Fees.
SBA will eliminate the Participation Fee and the
CDC Processing Fee until the aggregate dollar
amount of 504 loans made under this authority
exhausts the funds dedicated to that purpose.
SBA currently estimates that program level will
be approximately $3.6 billion. Depending on
loan volume in the 504 program, SBA estimates
that it will be able to eliminate these fees on
loans approved through approximately December
31, 2009.
Prohibition on Use of Funds
Section 1604 of the Recovery Act states that
none of the funds appropriated or otherwise made
available in this Act may be used by any State
or local government, or any private entity, for
any casino or other gambling establishment,
aquarium, zoo, golf course, or swimming pool.
Further guidance will be issued on this subject
in the near future.
Additional Requirements
The provisions of the Small Business Act and the
Small Business Investment Act applicable to the
7(a) and 504 programs and the regulations
promulgated thereunder will continue to apply to
loans made under the Recovery Act.
