SBA guarantee fees help cover the SBA’s costs when a borrower defaults on a loan. Fees vary based on loan amount and repayment term.
Business lenders pay guarantee fees for loans they issue that are guaranteed under the SBA loan program. SBA guarantee fees are typically passed from the lender to the borrower and range from 0.25% to 3.75% of the guaranteed portion of the loan
Some lenders may roll the SBA guarantee fee into the total cost of the loan, allowing you to repay it as part of your monthly payment. Other lenders may deduct the fee from your loan proceeds before funding.
SBA guarantee fees are assessed for SBA 7(a) and 504 loans but not for SBA microloans. Guarantee fees help cover the U.S. Small Business Administration’s costs if a borrower defaults on a loan.
Did you know…
There is no difference between “guarantee” and “guaranty.” Although the former is more commonly used, the SBA sometimes uses the “guaranty” spelling in official documents.
The SBA evaluates and announces the cost of guarantee fees every fiscal year. For the 2024 fiscal year, which began Oct. 1, guarantee fees for 7(a) loans are:
The SBA also sets specific guarantee fees for the 504 loan program. 504 loans consist of funding from the borrower, a third-party lender and a Certified Development Company, or CDC. Guarantee fees are assessed on only the CDC portion of the 504 loan.
For the 2024 fiscal year, the fee is 0.0%; in other words, there is no fee. Unlike with 7(a) loans, the lender can charge the SBA’s annual service fee to the borrower. This fee is currently 0.364% of the outstanding balance of the loan
Veteran-owned businesses can qualify to waive the guarantee fees on SBA Express loans.
SBA guarantee fees are calculated based on the guaranteed amount of the loan as opposed to the total loan amount.
For example, if the SBA guarantees 75% of a $600,000 loan, it will cover a maximum of $450,000 if the borrower defaults. The guarantee fee is then calculated using the guaranteed amount.
Based on the SBA’s current fee structure, the fee on this loan would be 0.25% if the repayment term is 12 months or less — and 0.55% if the term is longer than 12 months.
The cost, therefore, is $1,125 or $2,475 (depending on the term).
If you’re having trouble calculating potential guarantee fees, you can reach out to your SBA lender for assistance. The SBA also provides an online calculator that may help.
The guarantee fee is one of several SBA loan fees you may have to pay. You could be charged other fees by the SBA, the bank or the CDC (for 504 loans). The SBA sets limits on what fees borrowers can be charged and how much those fees can be.
Here are some fees you may have to pay for an SBA loan, broken down by the type of loan.
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