What is SBA Form 159 and why does my broker sign it?

SBA Form 159 is the Fee Disclosure Form and Compensation Agreement. On an SBA 7(a) or 504 loan, it lists every person paid to help you get the loan, such as a broker, loan packager or consultant, and exactly what each one is paid and by whom. You, the lender and the agent all sign it, and the lender reports it to SBA.

It is one of the strongest fee protections in business lending. On an SBA loan, nothing a broker earns should come as a surprise, because it all sits on this one form.

Why Form 159 exists

Section 13 of the Small Business Act, at 15 U.S.C. 642, requires SBA to know who is paid to help a business obtain an SBA guaranteed loan and how much. Form 159 is how that happens. The current version is dated August 2021. Coleman Report notes SBA released a redesigned form on September 14, 2018, which added the rule against paying an agent twice for the same service and the refund certifications.

SBA calls anyone in this role an "agent". That includes loan packagers, brokers, referral agents, consultants, accountants and attorneys who are paid for representing you or the lender on the loan.

When it is required

According to the form's instructions, Form 159 is required whenever an agent is paid by you or by the SBA lender to assist with the loan application. Covered services include loan packaging, preparing financial statements for the application, and consulting, broker or referral services.

A separate form is used for each agent who is paid. One agent providing several services can list them all on a single form.

Some people are exempt and do not need a form:

• Your accountant preparing statements for normal business purposes
• Attorneys handling the loan closing
• Appraisers and environmental professionals employed by the lender
• Lender service providers working under an agreement SBA has reviewed
• Real estate agents paid a sales commission on a property purchase

What the form shows

Each Form 159 names the agent, its business and address, the services performed and the compensation for each. Two rules make it precise:

Itemization above $2,500. If the total paid to one agent is more than $2,500, the fees must be itemized with a detailed explanation of the services and the basis for the charge, such as an hourly rate or a percentage of the loan, with supporting documents. Coleman Report notes this means the hours spent and the rates charged for each activity.

Who pays is stated. The form shows whether you are paying the agent, the lender is paying the agent, or both are paying for different services.

The rules that protect you

The August 2021 form carries several rules worth knowing:

1. No double dipping. The form states that an agent may not be compensated by both the applicant and the SBA lender for the same service.
2. Lender employed agents are paid by the lender. If the lender hired the agent, the lender pays the fee and cannot pass it to you.
3. Refunds for unreasonable fees. Both the lender and the agent certify they will refund you any fee SBA deems unreasonable or prohibited.
4. Fees must be real. The lender certifies the fees are reasonable, are not a standardized charge and comply with program requirements.
5. Exclusion check. The lender certifies it checked the federal SAM database to confirm the agent has not been barred from federal programs.
6. Sign last. Your certification states that the listed fees are the only ones paid, and you should not sign until every fee is disclosed.

The certifications carry weight. The form warns that a false certification can lead to criminal prosecution under 18 U.S.C. 1001, and that violations can lead SBA to suspend or revoke the privilege of doing business with SBA under 13 CFR Part 103.

How the form reaches SBA

The lender keeps the signed original in the loan file. Under the instructions on the current form, a signed copy goes to SBA electronically through its capital access system. For 7(a) loans it is uploaded through E-Tran Servicing within two monthly Form 1502 reporting cycles. For 504 loans it is uploaded within 30 calendar days after the debenture funds.

SBA Information Notice 5000-1200, an earlier procedure, required lenders to submit every 7(a) Form 159 after the first disbursement, including forms covering packaging fees the lender charged and agent fees the lender paid. The method has changed, but the principle has not: SBA sees every agent fee on every guaranteed loan.

How SBA brokers are usually paid

On SBA deals, a broker or loan agent is paid in one of two ways:

• By the lender. The lender pays a referral or packaging fee out of its own pocket. You do not pay it, and it cannot be charged back to you.
• By you. You pay the agent for packaging or consulting, typically at closing from loan proceeds or your own funds, for work that is itemized on the form.

Either approach is legitimate when it is disclosed. What Form 159 rules out is the same service being paid twice, or a fee that appears at closing that nobody told you about. Our guide to how business loan brokers get paid compares the models across loan types.

What to check before you sign

Use Form 159 the way it was designed, as your fee receipt:

1. Ask for it early. A good SBA broker tells you its fee and who pays it at the first meeting, and can show you a blank Form 159.
2. Match it to the closing statement. Every amount on Form 159 should match the settlement sheet line for line.
3. Look for one form per agent. If a broker and a separate packager both worked on your loan, you should see two forms.
4. Read the services. The described work should match what the agent actually did for you.
5. Ask about anything not listed. Your signature certifies the listed fees are the only ones. If someone asked you for money outside the form, raise it with the lender before closing.

SBA loans on the register

SBA brokers and loan agents are listed on the register with their loan types, a register number and a last checked date. Search the register for SBA loans, read our guide to SBA loan brokers and loan agents, or check a broker's standing before you share your documents. Verified entries show fees in writing, so you can compare them with Form 159 at closing.