The Senate Committee on Small Business and Entrepreneurship introduced a bill this week that would give veteran small-business lending a long-term boost.
As Inc. reports, the Heroes Business Opportunity Act of 2023 permanently eliminates guaranty fees on 7(a) loans taken out by small businesses owned by veterans. The measure, which was announced a day before the committee’s hearing on veteran entrepreneurship, applies to guaranty fees on 7(a) loans of up to $1 million.
Guaranty fees are required to be paid in advance on the guaranteed portion of a Small Business Administration loan, which helps the SBA cover costs when borrowers default. The agency sets the fees each year and they typically range between 0.25% to 3.75%.
For 7(a) lending, the SBA usually guarantees about 75% to 85%, and it is on that portion of the loan that the guaranty fee amount is calculated. The Senate bill could potentially save veteran entrepreneurs thousands of dollars.