Due to the current credit crisis many borrower are considering SBA 7(a) loans for the first time and are surprised on how the third party fees add up.  And this is without the notorious SBA guarantee fees, as they have been temporally waived via President Obama's Stimulus Package.  The SBA guarantee fee is normally 2.75% of 75% of the loan amount...  This is temporally gone. 

Borrowers that compare a conventional commercial mortgage to the SBA 7(a) loan will find many additional fees that they may have never heard of.  For example, packaging fees, though not required are typically charged by all banks.  Sometimes this service is hired out to a third party, other times putting together the file is handled by the bank loan officer.  The typical packaging fee is $2,000 - $5,000, depending on the complexity and size of the loan request. 

Attorney review fee is also a little known fee that is charged on almost all SBA 7a loans.  This fee is on top of title fees.  The bank or lender is essentially hiring a third party attorney to review the closing docs, to protect their interests.  It normally ranges between $3,000 - $5,000. 

Other more typical fee such as title, appraisal and environmental will normally be on the high side.  Most banks that do SBA loans, will use the third party vendors with the best credentials and therefore demand the highest price.   For example a typical appraisal for an SBA loan will cost $3,500 - even if the loan request is small at say $300,000. 

Despite the high fees that are associated with SBA loans, they are still very popular - why?   A couple of reasons.  One, they provide the highest level of leverage in the industry.  As property value decline, this increase in financing (up to 85% on refinances) is often a business life saver.   Two, they are viable and are actively funding.  This is a huge point and should not be blown off.  It's estimated that 80% of conventional lenders have stopped funding loans.  The 20% that are lending are only considering the very best loan requests.    

Three, besides the fees, these can be really good loan programs with solid terms.  Like low rates (currently in the 5%'s), long amortization periods (normally 25 years) and flexible underwriting standards.   Because of these reasons, many business owners tolerate the fees and go forward with the loan. 

Jeff Rauth is President of Commercial Finance Advisors, Inc.  They close commercial mortgages throughout the US from $400,000 - $10,000,000.  248 885-8797.  Commercial Real Estate loans