An Acquisition (or sale) has never been more attractive. 

In a move that was not previously announced, the SBA has issued a notice slashing lender service fees and loan “up front” fees through fiscal year (FY) 2023. The new fees are effective for all 7(a) loans approved on October 1, 2022, through and including September 30, 2023. All loan amounts are based on the gross loan approval amount, including the SBA-guaranteed and unguaranteed portions.

Each year SBA reviews certain fees payable to SBA by 7(a) lenders and borrowers to determine the appropriate fees to manage the estimated costs of the 7(a) loan program. The changes for the coming year are as follows:

The FY 2023 Lender’s Annual Service Fee, based on gross loan approval amount, including SBA-guaranteed and unguaranteed portions, will be: 

  1. a) For loans of $500,000 and less: 0.00%. 
  2. b) For loans of $500,001 to $5,000,000: 0.55% of the guaranteed portion of the outstanding balance of the loan.

Upfront Fees, except for Export Working Capital Program (EWCP) loans and SBA Express loans made to veteran-owned businesses, based on gross loan approval amount, will be:

  • For loans with a maturity that exceeds 12 months, the Upfront Fees are: 
    • For loans of $500,000 or less: 0.00%: 
    • For loans of $500,001 to $700,000: 0.55% of the guaranteed portion. 
    • For loans of $700,001 to $1,000,000: 1.05% of the guaranteed portion. 
    • For loans $1,000,001 to $5,000,000: 3.5% of the guaranteed portion up to $1,000,000, plus 3.75% of the guaranteed portion over $1,000,000. 
  • For loans with a maturity of 12 months or less, the Upfront Fees are: 
    • For loans of $500,000 or less: 0.00%. 
    • For loans $500,001 and greater: 0.25% of the guaranteed portion

The cost savings for borrowers can be significant. A $400,000 loan obtained under the current FY22 rate is subject to a 2.77% upfront fee. Assuming the borrower put down 25% as a down payment on the full amount, the upfront fee was $8,310 ($400,000 x 0.75 x 0.0277.)

The same loan taken out October 1 of this year would have zero due in upfront fees.

Loans that extend into FY 23 or are increased in FY 23 are subject to the fee schedule based on the rules in effect at the time the loan was originally approved. 

Loans made to veteran or military spouse-owned companies are not subject to upfront fees. 

What this means for you is that this might be the time to sell (or buy). The reduced fees mean that buyers will have extra cash to put into a deal, and the cost savings may bring more buyers into the market this coming year. If you’ve been thinking about selling your business, we suggest you take advantage of the one economic indicator that’s trending in the right direction for lenders and buyers. Interest rates may be rising steadily, but the SBA fee reduction may offset some of that burden and make this year a banner one for sellers and buyers. 

And if you do not want to sell, expanding through acquisition just became much more attractive.

For more details, contact our office at (352) 440-4604 or email [email protected]


Patrick LangeAbout the author: Patrick Lange

[email protected]

Patrick Lange is an experienced HVAC-specific business broker with Business Modification Group based in Horseshoe Beach, Florida. He has a unique background in financial planning and has even owned an HVAC business himself. This makes him well suited to working with some of the most successful HVAC business owners in the country. Specializing in companies with 1-10 million dollars in revenue, he maintains a network of buyers and sellers in the industry. He has sold more HVAC businesses than any other broker in the United States over the last three years and is currently the President of the Business Brokers of Florida (North Florida District.)