Bread-and-butter Banking: SBA loan fee changes won’t largely impact SWMO, experts say

Jeff Killian: Creating strong connections with local small businesses is paramount for SBA lenders.

Some things never change in the world of small business lending. Come rate changes, fee increases or even a global pandemic, business owners across the nation return to loans from the U.S. Small Business Administration and the banks that provide them to keep the dream alive.

In fiscal year 2024, Missouri small businesses continued to rely upon SBA lending and benefited from lower upfront fees for some loans. Looking into 2025, businesses seeking loans of more than $1 million can anticipate fees to rise. However, local experts don’t anticipate the fee change to have a large impact for Springfield-area businesses where loans usually stay beneath that threshold.

In a market where the competition only grows tougher with the removal of a 40-year moratorium against non-bank lenders, lenders are leaning into the bread and butter of small-scale lending, bolstering client relations and creating robust bank-wide teams that are well-educated on the program.

2024 trends
According to the SBA 2024 Capital Report, more than $56 billion went to small businesses and disaster relief funding nationwide in fiscal year 2024, with the annual capital portfolio increasing by 7% from 2023. That included $1.5 billion for Black-owned businesses, $3.3 million for Latino-owned businesses and $5.6 billion to majority women-owned businesses. Construction business customers led in the 7(a) program in 2023 and 2024, the report found. This is the first time since 2008 that the SBA has seen more than 100,000 small business financings – an increase of 22% from 2023 and 50% from 2020.

Missouri SBA loans increased by 26% from 2020 with 1,124 total loans in 2024 alone. Since 2020, $554.6 billion has gone to Missouri small businesses, a 30% increase in dollar amount. According to Kansas City Fed data, while conventional small business lending decreased in fiscal year 2024, attributed to high interest rates, SBA lending increased.

“It was a good time for SBA lending in a fee aspect, which made SBA lending much more of a cheaper option from a fee standpoint,” said Jeff Killian, senior vice president and SBA director at Regent Bank. “Repayment terms have always been a strength of that program. I think some of what you saw was loans that originally a bank would have booked conventionally went to SBA.”

Regent Bank, an SBA preferred lender, was ranked as the second largest small-business lender in the Springfield metro area with a statewide volume of $19 million in fiscal year 2024. Killian credits this success to the team’s in-depth understanding of the program and a local reputation that yields word-of-mouth business.

Creating strong connections with local small businesses is paramount for SBA lenders, said Killian, and opportunities continue to grow with record-breaking numbers for new startups. From 2021 to 2024, 19 million new business applications have been filed nationwide with an average monthly loan count of 3,110 – double the amount in 2020. The COVID pandemic also put SBA lending front and center because of the Paycheck Protection Program. Increasing operations costs and entrepreneurial drive could also contribute to the increase, said Killian.

“It costs more to operate anymore. For any business that is looking to buy new pieces of equipment, it’s going to cost them more today than it would have a few years ago to get that accomplished,” he said. “I think the pandemic changed the way a lot of people work and the way people think about work. I think that might have sparked the entrepreneurial spirit in people to go out and do it on their own.”

Melvin Steele is a regional business consultant specializing in startup financials at Missouri State University’s Efactory and Missouri Small Business Development Center at the West Plains campus. Steele said his clientele has not slowed – come fee change, shifting rates or global pandemics. Small business will always be a backbone of community growth and contribute to a robust economy, he said.

“If you look at increases in employment, if you look at the number of [small] businesses out there … the contribution is something you can’t do without,” he said. “There is a demand for small business loans, and I know that it still remains strong.”

2025 fee impacts
The SBA announced that in fiscal year 2025, it will increase fees for loans between $1 million and $2 million. Previously, fees were approximately 1.45% on the first million and 1.7% for the second million. That has now increased to between 2% and 3.5% for the first million and approximately 3.75% for each additional million up to $5 million.

Fees for both 7(a) and 504 loans less than $1 million continue to be waived for the second consecutive year, however. The SBA also increased its small loan limit from $350,000 to $500,000. According to the SBA 2024 Capital Report, small dollar loans of less than $150,000 have doubled since 2020 and increased by 33% since 2023. Because the average SBA loan size in the area generally stays beneath the $1 million threshold, Killian said he does not anticipate much impact from the fee changes for local businesses. According to SBA data, the average loan amount for Missouri lenders in fiscal year 2024 was nearly $476,000.

Christopher Buschjost, vice president of government guaranteed lending at OakStar Bank, also does not anticipate that the fees will cause a measurable impact.

“When fees reduced, we saw high volume, and, even putting the fees back on again, which is just between $1 and $2 million here, we haven’t seen any reduction,” Buschjost said. “I don’t foresee us having that happen.”

OakStar ranked as the Springfield Metro area’s top SBA lender with approximately $59.5 million in statewide loans and $32 million Springfield MSA loans in 2023. In fiscal year 2024, it saw a $73.5 million approval amount. Already in fiscal year 2025, that number, according to SBA data, is approximately $13.7 million with 26 approved loans. Buschjost said to add two: He reported 28 approved loans for $14.8 million.

Even increased prime rates in previous years didn’t stall SBA lending, Buschjost said. The 7(a) Wall Street Journal prime has decreased to its current 7.75% plus margins ranging between maximums of 0% to 6.5%. Margins rarely go over 3%, however, said Buschjost.

Small businesses continue to reach for SBA loans as their go-to option, agreed Steele. His startup clients go straight to SBA loans as their most desired option.

“In a lot of cases, it’s the guarantee that they like,” he said. “People are just generally going to ask for an SBA loan because they know and think they will get a better deal.”

Market competition
Competition could increase for SBA lenders with the Small Business Lending Companies’ reversal of its 40-year moratorium on non-bank lenders, such as nonprofits, providing SBA loans. According to the SBA 2024 Capital Report, more than 40 of these new non-bank lenders have already joined the game.

Killian isn’t worried. Competition isn’t new to banks. Statewide, SBA lenders for 7(a) and 504 loans have increased in the past five years with 120 lenders reported in SBA data for fiscal year 2020 and 139 in fiscal year 2024. Banks can cope with competition, Killian said; however, he worries about the risk to businesses taking loans from non-bank lenders.

“I don’t think most banks are going to be afraid of competition. We are used to that,” he said. “The part that makes me hesitant with that is there were a lot of non-bank lending partners that got into the PPP program. There were many cases of fraud or not doing their due diligence.”

A November report from the SBA identified $14.2 billion in suspected fraudulent loans from non-bank PPP lenders, a rate five times that of bank lenders. Approximately 43% of those allegedly fraudulent loans were made by fintech or other State Regulated Finance Companies.

At the end of the day, staying competitive is about learning your customers’ needs and being the best at filling that need, said Buschjost. That may be an SBA loan, or it could be something else, such as a conventional or United States Department of Agriculture loan. However, the goal remains the same.

“Our main goal has not changed. Our main goal is service to customers and small businesses in the area,” he said. “We’re supposed to be a jack-of-all-trades when understanding every industry we’re lending to. So it’s interesting to talk to business owners and owners you’ve never talked to in that industry and really find out what’s behind it. … They’re really trying to tell you the passion they have for their business and why they are here and why they are asking for money. Those are always fun stories to me.”