SBA is Taking Action to Increase Access to Capital for Smallest Businesses

The U.S. Small Business Administration (SBA) is taking measures to increase access to capital among the smallest of businesses. Effective October 1, 2022 thru September 30, 2023, there will be zero SBA guaranty fees on 7(a) loans of $500,000 or less. For SBA 7(a) loans, the guaranty fee is assessed on the portion of the loan that the SBA guarantees. Normally, this fee can be up to 2.77% for loans of $500,000 and less. The move seeks to increase access to capital for the smallest of businesses who are typically seeking smaller loan amounts. This change will benefit both small businesses and lenders and is set to make a significant impact on lending in the Houston District. To date, about 60% of loans in the SBA Houston District were for amounts of $500,000 or less. Based on historical and projected data, this change could save businesses in the Houston District over $4 million dollars collectively.

Mark Danford, President, and CEO of Waterstone LSP, an SBA Lender Service Provider (LSP), described what this change means for borrowers. “Benefits vary, but the savings on the guaranty fee on a $500,000 loan is about $10,388. This is over $10,000 in potential working capital to the business. Every small business owner would rather spend $10,000 towards the production of revenue than for loan fees,” said Danford.

Small businesses will not be the only ones benefitting from this change. Lenders also stand to save on the production of smaller loans. Norma Velazquez Harris, Senior Vice President & SBA Group Manager at Third Coast Bank, explained that this change lowers the cost for lenders to underwrite and service smaller loans. “By removing the Annual Service Fee for the lender and the borrower’s SBA Upfront Fee on loans of $500,000 or less, SBA created a huge incentive for banks to increase the number of small SBA loans and provide increased support to smaller businesses.”

Export loans and loans for veteran owned businesses are also subject to special fee relief during the same time period. To prepare to apply for a loan, businesses are encouraged to visit with an SBA Resource Partner, including SCORE, the Texas Gulf Coast Small Business Development Center Network, WBEA Women’s Business Center, and the Greater Houston Women’s Chamber of Commerce Women’s Business Center. Businesses who are searching for an SBA approved lender, can visit the Houston District website to view a list of lenders or use the SBA Lender Match tool to connect with potential lenders. The Houston District Office regularly hosts Lender Matchmaking events where businesses are paired with local lenders in scheduled 15-minute one-on-one sessions. Visit the Houston SBA website to view a full schedule of upcoming events.

Useful links:

SBA Houston District Office webpage

SBA Funding Programs

Local Resource Partners by Zip Code

Houston District Lender List