SBA PPP Lender Fees: A Complete Guide to Calculation, Payment, and Forgiveness

Table of Contents#

1. What Are SBA PPP Lender Fees?
2. How Are SBA PPP Lender Fees Calculated?
3. When and How Are Lender Fees Paid?
4. Lender Fees and PPP Loan Forgiveness: What’s the Connection?
5. Common FAQs About SBA PPP Lender Fees
6. Conclusion
7. References

What Are SBA PPP Lender Fees?#

SBA PPP lender fees are payments made by the SBA to participating lenders (such as banks, credit unions, and fintech lenders) for originating, processing, and servicing PPP loans. These fees compensate lenders for the time, resources, and risk associated with underwriting and managing PPP loans—particularly given the program’s rapid rollout and high volume during the pandemic.

Importantly, borrowers do not pay these fees directly. Unlike traditional loans, where borrowers might incur origination fees, PPP lender fees are fully funded by the SBA, making the program cost-free for eligible small businesses.

How Are SBA PPP Lender Fees Calculated?#

The SBA uses a tiered fee structure to determine how much lenders earn for each PPP loan. The fee percentage varies based on the original loan amount, with higher percentages applied to smaller loans to incentivize lenders to serve small businesses (which often have higher processing costs relative to loan size).

Here’s the breakdown of the fee tiers, as outlined in SBA guidance (e.g., Interim Final Rules and PPP program updates):

Example Calculations#

To illustrate, let’s walk through a few scenarios:

1. **Small Loan ($200,000):** A lender originates a$200,000 PPP loan. Since this is ≤$350,000, the fee is 5$200,000.
   Fee = $200,000 × 0.05 =$10,000.

2. *Mid-Sized Loan ($1,500,000):** A$1.5M loan falls in the $350k–$2M tier, so the fee is 3% of $1.5M. *Fee =$1,500,000 × 0.03 = $45,000.

3. **Large Loan ($6,000,000):** A$6M loan exceeds $5M, so the fee is 1$6M. Fee = $6,000,000 × 0.01 =$60,000.

Key Notes on Calculation#

• Based on Original Loan Amount: Fees are calculated using the initial loan amount, not the forgiven amount or any subsequent modifications (e.g., loan increases under PPP 2.0).
• No Double-Dipping: If a borrower refinances a PPP loan (e.g., from a non-SBA lender to an SBA lender), the new lender is not eligible for additional fees unless the loan is modified to increase the amount.

When and How Are Lender Fees Paid?#

Lender fees are paid by the SBA directly to the lender after the loan is approved and disbursed to the borrower. The timeline for payment depends on how quickly the lender submits the necessary documentation to the SBA.

Step-by-Step Payment Process:#

1. Loan Disbursement: Once the lender approves the PPP loan and disburses funds to the borrower, they submit a "SBA Form 1502" (Lender’s Application for Payment of Guaranteed Loan Fees) to the SBA.
2. SBA Review: The SBA reviews the form to verify the loan amount, borrower eligibility, and compliance with PPP rules.
3. Fee Payment: If approved, the SBA typically processes the fee payment within 30–60 days. Fees are deposited directly into the lender’s designated bank account.

Exceptions and Delays#

• Loan Denials: If a loan is denied after disbursement (e.g., due to borrower ineligibility), the lender may be required to return the fee to the SBA.
• Fraud or Misrepresentation: If a lender or borrower is found to have committed fraud, the SBA can claw back previously paid fees.

Lender Fees and PPP Loan Forgiveness: What’s the Connection?#

A common misconception is that PPP loan forgiveness affects lender fees. However, lender fees are independent of loan forgiveness. Here’s why:

• Fees Are for Origination, Not Repayment: Lender fees compensate lenders for originating the loan, not for collecting payments or processing forgiveness. Even if a loan is fully forgiven, the lender still keeps the fee.
• Borrowers Don’t Pay Fees: Since fees are paid by the SBA, forgiveness (which cancels the borrower’s obligation to repay the loan) has no impact on the lender’s compensation.

Example: Forgiveness Scenario#

Suppose a borrower takes out a $100,000 PPP loan, and the lender earns a 5$5,000). If the borrower later has the entire $100,000 forgiven, the lender still retains the$5,000 fee. The SBA covers both the loan forgiveness (reimbursing the lender for the forgiven amount) and the lender fee.

Common FAQs About SBA PPP Lender Fees#

1. Do borrowers have to pay SBA PPP lender fees?#

No. Lender fees are paid directly by the SBA to the lender. Borrowers are not charged origination fees, closing costs, or other fees for PPP loans.

2. Are lender fees taxable for lenders?#

Yes. Lender fees are considered taxable income for the lender, as they are compensation for services rendered. Lenders should consult tax professionals to report these fees correctly.

3. Can a lender charge additional fees to the borrower?#

No. The SBA prohibits lenders from charging borrowers any fees for PPP loans, including application fees, origination fees, or servicing fees.

4. What happens to lender fees if a loan defaults?#

If a borrower defaults on a PPP loan, the SBA still guarantees the loan (up to 100% for PPP) and will reimburse the lender for the outstanding balance. The lender retains the origination fee, as it is unrelated to loan repayment.

5. Are lender fees the same for first-draw and second-draw PPP loans?#

Yes. The tiered fee structure applies to both first-draw (original PPP) and second-draw (PPP 2.0) loans, as outlined by the SBA.

Conclusion#

SBA PPP lender fees play a crucial role in the success of the PPP program, incentivizing lenders to participate and support small businesses. By understanding how these fees are calculated (tiered by loan size), paid (by the SBA post-disbursement), and unrelated to forgiveness, both lenders and borrowers can navigate the program with clarity.

For lenders, these fees represent a revenue stream for servicing PPP loans. For borrowers, the absence of direct fees makes PPP an accessible, low-cost financing option. As the PPP program evolves (e.g., through potential future iterations), staying updated on SBA guidance will remain key to understanding lender fee policies.

References#

• U.S. Small Business Administration. (2021). Paycheck Protection Program: Lender Information. SBA.gov
• SBA Interim Final Rule. (2020). Paycheck Protection Program; Lender Fees. 85 Fed. Reg. 20811 (April 15, 2020).
• Treasury Department. (2020). FAQs for Paycheck Protection Program (PPP) Loans. Treasury.gov