Invalid PSF's
Merchant reaches out to me about a $80,000 bill he got from a broker for $3M SBA loan. He said all the broker did was refer him to a bank who handled the whole transaction.
The PSF is invalid and not legal as far as the SBA is concerned and isn't justified for a referral. This is because the SBA doesn't recognize or allow any service fee for ANY SBA loan.
The merchant signed the SBA note which clearly states something like: "I did not pay a lender search service fee for this loan".
The lender will pay the broker a 1% referrral fee and that is all the broker is entitled to for this transaction.
The wording on the PSF is just not something that is in the best interests of the merchant or this industry. You get paid by the lender for a referral and the loan may allow a broker fee if applicable. If you can't survive on that, please go find another industry to ply your trade.
If you did supply services for compiling documents and assisting in the process, then yes you are deserving of a fee which the SBA allows on their form 159.
The allowed amount is 2% up to $1M and 1/4% for amounts above $1M.
The PSF has the following wording:
"The Broker specializes in factoring and debt financing, aiming to provide insightful guidance through collaboration. Leveraging an exclusive network of lending professionals and industryexperts, I offer comprehensive services aimed at sourcing the best funding options for my clients. Unlike brokers who connect clients with a single or short list of lenders, I leverage my extensive network to secure the most suitable financing solutions. It's important to note thatwhile I am compensated for my services by my clients, I also receive compensation from the lenders with whom funding is arranged. This dual compensation structure enables me to keep my fees low, and remain impartial and focused on securing optimal financing terms for my clients.Transparency is paramount in my practice, and I am committed to openly communicating this arrangement to ensure clarity and trust throughout our partnership."
Sooner or later this industry will be regulated and I hope that all of this nonsense goes away.
Steve Benjamin
Professional Business Loans
522 ContessaIrvine, CA 92620
Broker, Underwriter, general business loan expert
949.228.1050
Great info @STEVE BENJAMIN !!
While most states don't have licensing requirements, yours (and mine) does. Was this a CA loan? Borrower can (and should) report the broker to CDFPI and the SBA if the broker isn't adhering to SBA rules.