[Olderguy]

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 lender search 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 (this can vary) 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 industry
experts, 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 that
while 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.

[Olderguy]

bump

[Yankeeman07]

Sorry to disagree with you but, Referral Fees are paid by the Bank and they all pay more than 1/4%
I submit to several SBA Lender Banks and they all have similar wording on the Referral Agreements

"The Referral Fees are not based on the SBA Guaranty Fee but on the interest
rate over Prime and whether the loan is a 25 year or 10 year loan. "

[Olderguy]

Sorry to disagree with you but, Referral Fees are paid by the Bank and they all pay more than 1/4%
I submit to several SBA Lender Banks and they all have similar wording on the Referral Agreements

"The Referral Fees are not based on the SBA Guaranty Fee but on the interest
rate over Prime and whether the loan is a 25 year or 10 year loan. "

Not sure we differ....referrals fees are usually 1% (but I have lenders paying 1 3/4 and 2%)....the 1/4% if the fee for financial service above $1M.

[Yankeeman07]

I'm suspecting the PSF amount was never disclosed to the Bank/SBA

[TheConfidentBroker]

SBAs are used in the bait n switch hook by MCA Brokers to pretend they offer a marketplace of services. 1/10 (from my research) of ISOs who have SBA Loans and Factoring on their websites are NOT partnered with the top 5 direct product partners and would not be accepted based on their presence, time in business, and background checks.

We desperately need a FINRA type system and approved SBA bank partners. Websites and marketing practices need to be standardized to an extent where anyone can't file an LLC overnight and pop up a one page APPLY NOW site.

Until then... any product someone has a "buddy that can do it" will do it.

[Olderguy]

The mortgage industry instituted licensing and nmls. Same should happen here.

[Incbiz440]

Not sure why the broker wrote his life story into the agreement. Irrelevant.

If the lender isn't aware then they didn't complete a 159 and the fee is moot.

I'm unsure if the SBA has the legal ability to force a return of fees (or invalidation of fees) - they have a programmatic ability to do so with banning future participation as a broker (or anything else) regarding SBA loans.

The SBA allows either a bank or client to pay a referral fee, and either the bank or the client to pay a packaging fee, but a broker can't charge both entities for the same service. I would characterize a "lender search service fee" as a referral fee, in which case a broker could charge the 3-2-.25 scale to the client, but not if the lender was also paying them a referral fee. The client could pay them as a packaging fee and the bank a referral fee, or vice versa.

I personally find the SBA's broker fee requirements to be a gigantic headache which I'm sure is their intention. And technically you can't have a "success fee" charged to a client because the SBA doesn't allow contingent-upon-approval/closing fees which otherwise is broker industry standard. But then it's best practice to not charge a client in advance for their services, so the SBA guidelines put a broker in a predicament if they are billing the client directly.

[Incbiz440]

SBAs are used in the bait n switch hook by MCA Brokers to pretend they offer a marketplace of services. 1/10 (from my research) of ISOs who have SBA Loans and Factoring on their websites are NOT partnered with the top 5 direct product partners and would not be accepted based on their presence, time in business, and background checks.

We desperately need a FINRA type system and approved SBA bank partners. Websites and marketing practices need to be standardized to an extent where anyone can't file an LLC overnight and pop up a one page APPLY NOW site.

Until then... any product someone has a "buddy that can do it" will do it.

Other than failing a background check or generally being ineligible to work with SBA programs, how many SBA lenders would decline based on TIB or "presence"? Many of the top/most aggressive SBA lenders don't have requirements of that nature for their programs, and many banks don't have programs at all - they just tell you to submit a w9 and invoice.