There’s a common misconception that the SBA lends directly to a small business owner. In fact, the loan is provided by a bank and the SBA provides the lender with a guarantee, meaning the SBA reimburses the lender for a portion of the loan in case of a default. It is that guarantee that allows lenders to offer up to 90% LTV on SBA loans. The SBA charges lenders a guarantee fee in exchange for guaranteeing a portion of the loan. Lenders in turn pass that fee on to borrowers. However, in most cases, the fees are included in the loan amount and are not required to be paid by the borrower out of pocket at closing.

It is important for borrowers to understand these fees. The SBA determines the fee for each program every year. The fees are the same no matter which lender provides the loan. The fees vary based on the loan amount and the long term and are broken down as follows: 

Loan AmountGuarantee Fee
$500,000 or less0.00%
$500,000 to $700,0000.55% of the guaranteed portion
$700,000 to $1,000,0001.05% of the guaranteed portion
$1,000,001 to $5,000,0003.5% of the guaranteed portion up to $1,000,000, plus 3.75% of the guaranteed portion over $1,000,000

The guarantee fee is calculated differently when you request multiple loans within 90 days of each other.

Let us walk through an example:

A small business owner who is acquiring a new property for her business, secures a $1 million SBA 7(a) loan with a 25-year term, which means that the SBA guarantee fee is 1.05%. However, the borrower is not responsible for paying 1.05% of $1 million – she only pays 1.05% on the guaranteed portion. The SBA guarantees 75% of all 7(a) loans over $150,000, therefore the loan is guaranteed for $750,000. She is responsible for paying 1.05% of $750,000, which comes to $10,500.

 Please note that for loans between $1,000,000 – $5 million, the fee is 3.5% of the first $1 million guaranteed ($25,000) plus 3.75% of the remaining guaranteed amount. 

What other fees can be expected with SBA loans?

Additional fees can include packaging, third-party legal fees, appraisal fees, and environmental report fees.

About 504 Advisors, Inc.

504 Advisors functions as a consultant and an advisor for our clients throughout the entire SBA & Real Estate financing process. As business owners and entrepreneurs, we understand how daunting business financing process can be, and use our two decades of experience in commercial finance to guide you through the financing options and the loan application process.

Our goal is to be your trusted financial partner and advisor, by providing our clients with access to capital and financing solutions necessary to run their business.

Capitalize on our relationships and find the best loan that fits your needs. For more information visit

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