SBA Guarantee Fee: An Overview and Cost Breakdown

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.
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What is the SBA guarantee fee?

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 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.

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How much are SBA guarantee fees?

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:

Loan amount

SBA guarantee

Guaranteed loan amount

SBA guarantee fee if loan term is 12 months or less

SBA guarantee fee if loan term is more than 12 months

$1,000,000 or less

75% of the loan.

$750,000.

0.0%.

0.0%.

$1,000,001 to $2,000,000

75% of the loan.

$750,000.75 to $1,500,000.

0.25%.

1.45% of the guaranteed portion of the loan up to and including $1,000,000, plus 1.70% of the guaranteed portion of the loan over $1,000,000.

$2,000,001 to $5,000,000

75% of the loan.*

$1,500,000.75 to $3,750,000.

0.25%.

3.50% of the guaranteed portion of the loan up to and including $1,000,000, plus 3.75% of the guaranteed portion of the loan over $1,000,000.

*The maximum amount the SBA guarantees on a 7(a) loan is $3.75 million.

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.

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How are SBA guarantee fees calculated?

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.

Other SBA loan fees

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.

SBA 7(a) loan fees

Type of fee

Cost

Overview

Packaging fee

Lenders may charge packaging fees consistent with those they charge on similarly-sized, non-SBA commercial loans. If the fees are charged based on a percentage of the loan amount, they may not exceed what the lender typically charges for similar loans, or the following, whichever is less:

  • 5% on loans $150,000 or less;

  • 3% for loans in excess of $150,000;

  • The maximum fee that may be charged on a percentage basis is $30,000.

Fee charged by a lender or broker for putting together your loan application.

Flat fee

$2,500.

The SBA permits lenders to charge this flat fee on each loan.

Extraordinary servicing fee

No more than 2% per year on the outstanding loan balance.

Fee charged by the lender for monitoring the value of collateral or for other special servicing needs.

Out-of-pocket expense fee

Varies.

Fee charged by the lender for appraising collateral, assessing environmental costs and other closing costs.

Late payment fee

No more than 5% of the payment amount.

Fee charged by the lender when the borrower misses a scheduled loan payment by more than 10 days.

Prepayment fee

5% of the prepayment amount during the first year, 3% the second year and 1% the third year.

Penalty that the SBA charges when a borrower pays 25% or more of the loan in any one year during the first three years after disbursement. This fee applies only to 7(a) loans with a term of 15 years or longer.

SBA 504 loan fees

Type of fee

Cost

Overview

Borrower's deposit

$2,500 or 1% of the CDC portion of the loan.

A fee that the CDC can charge at the time of application. If the application is declined, the deposit will be refunded within 10 business days. If the application is approved, it can be applied toward the processing fee.

Processing or packaging fee

No more than 1.5% on the CDC portion of the loan.

Fee charged by the CDC for processing your loan application.

Closing fee

Varies.

Fee charged by the CDC to reimburse itself for appraisals, legal work and other miscellaneous closing costs.

Annual servicing fee

0.4405% of the outstanding loan balance.

Annual fee charged by the CDC to cover ongoing overhead costs associated with your loan.

Late payment fee

5% of the late payment or $100, whichever is greater.

Fee charged by the CDC when a borrower makes a loan payment after the 15th of the month.

Underwriter’s fee

0.375% on 10-year loans; 0.4% on 20- and 25-year loans.

Fee charged by the CDC or their agent for evaluating your loan application.

Prepayment fee

The prepayment penalty is based on the principal balance of the loan multiplied by the interest rate. The penalty declines by 1/10th of the interest rate annually for the first 10 years.

Fee charged by the CDC when a borrower pays off their loan early.

Learn more about getting an SBA loan

This article originally appeared on Fundera, a subsidiary of NerdWallet.

Frequently asked questions

Eligible veteran-owned businesses can have their guarantee fees waived on SBA Express loans. Currently, guarantee fees on 504 loans and 7(a) loans of $1 million or less are 0.0%.

No, SBA guarantee fees are not tax-deductible. Interest you pay on your loan, however, may qualify for a business tax deduction.

The SBA does not issue its loans directly. Instead, the loans issued by lending partners — like banks and credit unions — are partially guaranteed by the SBA. An SBA guarantee means that the SBA will cover the guaranteed portion of the loan balance if a borrower defaults.