SBA Loan Up-Front Packaging Fee

by a searcher

1 month ago

It is my first time working through the SBA loan process. I have a term sheet from a lender, but am mildly concerned that they are asking for an up-front packaging fee that is (in part) refundable if the loan is not approved. There is already a significant amount of equity in the broker's escrow account. The language of the term sheet is below -- seems odd to me that a lender is asking for a borrower to essentially cover their costs up front. 

Anyone have thoughts?

"to process your loan request, you agree to pay us a packaging fee of $2,500. This fee shall be refunded, less any out of pocket expenses incurred by us if we are unable to approve the loan on the terms outlined. If we approve your loan request as outlined, the fee will be non-refundable."

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lender from California State University, Sacramento

As a 35-year seasoned SBA lender, when I issue a prequalification letter / financing proposal to a borrower, my Bank requires a good-faith deposit for our Packaging/Processing Fee ($1,500) plus all expected third-party fees (business valuation, personal real estate appraisal(s), etc.). In order for a file to get submitted to Underwriting for formal approval, purposes, I generally have to invest six to 10 hours into my Credit Presentation and file preparation. Without a borrower's commitment (i.e. good-faith deposit $), I don't want to invest that time. The good-faith deposit is a borrower's commitment that they are done shopping lenders, are committed to working together, and aren't simply wasting a lender's time (while still kicking tires).

1 month ago | like reply | 0 likes

lender from University of Missouri - Columbia

Yes this is standard as long as refundable. Agree with Brad.

1 month ago | like reply | 0 likes

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