In the last few weeks many loan brokers were trying to stay up to the minute on the latest developments with the SBA Disaster loans but more so the new Paycheck Protection Program in order to assist their clients. Now we have more details and an application!
The application for business owners is on the Treasury Departments site, link below. The SBA noted on its site April 3rd as the date for SBA approved lenders to start accepting applications.
They included applications for Lenders who want to be part of this program who weren't an approved lender before.
One notable details is the loans are at a .5% interest rate instead of the 4% floated around, and a maturity date of 2 years with 6 months payment deferment.
The main question brokers wanted an answer to was how can they be a part of this with getting compensated in some form. Well good news, a broker can!
However, its up to the lender to pay them and the amounts will differ depending on loan amount. Loan amount is 2.5x their average monthly payroll.
Here is the fee schedule for Agents:
Loans $350,000 and under: 1.00%
Loans greater than $350,000 to $2 million: 0.50%
Loans greater than $2 million: 0.25%
And here is what the Treasury Departments guidelines say for lenders:
"How will lenders be compensated? Processing fees will be based on the balance of the financing outstanding at the time of final disbursement:
Loans $350,000 and under: 5.00%
Loans greater than $350,000 to $2 million: 3.00%
Loans greater than $2 million: 1.00%
Lenders may not collect any fees from the applicant.
So it seems the split % from the lender isn't typical but the amount of work a broker or any agent or representative will do is somewhat minimal. Therefore the program should be adequate to promote to existing clients where at the very minimum a broker is offering a service to help them through this troubling time.
Many business owners will find the value in that plus if you are able to expedite this more than their own banker can, by having more than one option, then this could really be beneficial to them.
Here some additional details on who can apply if you haven't read the releases.
This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by coronavirus/COVID-19.
Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
Small businesses in the hospitality and food industry with more than one location could also be eligible at the store and location level if the store employs less than 500 workers. This means each store location could be eligible.
So go on and help out your clients!
Link to S.3548 - CARES Act