The SBA guaranty fee is a one-time charge SBA makes for guaranteeing a 7(a) loan. It is calculated on the guaranteed portion, not the full loan: 85% of loans of $150,000 or less, 75% above that, capped at $3.75 million of guaranty per borrower. SBA sets the rate each fiscal year, starting 1 October, in tiers by loan size, with a separate lower rate for loans of 12 months or less. The lender pays SBA and passes the fee to the borrower, who can usually finance it into the loan.
- What it is
- A one-time upfront fee SBA charges for its 7(a) guaranty
- Charged on
- The guaranteed portion of the loan, not the full amount
- Rate set by
- SBA, each fiscal year from 1 October, tiered by loan size and maturity
- Who pays SBA
- The lender, which may charge it to the borrower
- Can it be financed?
- Usually yes, as part of the loan's use of proceeds
- Separate from
- The annual service fee, which the lender pays and cannot pass on
Step one: find the guaranteed portion
SBA does not lend the money on a 7(a) loan. The lender does, and SBA guarantees part of it: if the loan defaults, SBA pays the lender its guaranteed share of the loss. The guaranty fee is SBA's charge for that promise, so it is calculated on the part SBA is promising to cover. The first step in working out the fee is therefore finding the guaranteed portion.
| Loan | SBA guaranty | Fee is charged on |
|---|---|---|
| 7(a) loan of $150,000 or less | 85% | The guaranteed 85% share |
| 7(a) loan above $150,000, up to $5 million | 75% | The guaranteed 75% share |
| Any 7(a) borrower | Capped at $3.75 million in total | No more than $3.75 million of guaranty |
| SBA Express loan, up to $500,000 | 50% | The guaranteed 50% share |
In plain numbers: a loan of 2,000,000 at the 75% guaranty has a guaranteed portion of 1,500,000. The fee is a rate applied to 1,500,000. A loan of 100,000 at the 85% guaranty has a guaranteed portion of 85,000. At the top of the program, a loan of $5 million carries the maximum $3.75 million guaranty. Because an SBA Express loan carries a smaller guaranty, the same loan amount produces a smaller guaranteed portion for the fee to apply to; see SBA 7(a) vs SBA Express.
Step two: apply the rate for the loan's size and maturity
SBA publishes the guaranty fee rates in a notice before each fiscal year, which starts on 1 October. The rate is tiered by loan size: smaller loans pay a lower rate on their guaranteed portion, larger loans a higher one, and on the largest loans a higher rate again applies to the part of the guaranteed portion above a threshold. It is also split by maturity: loans of 12 months or less pay a separate, lower rate, and loans with longer maturities, which is almost every acquisition, refinance or real estate loan, pay the tiered rates.
The rate that applies is the one in force for the fiscal year in which SBA approves the loan. A loan approved on 30 September and one approved on 1 October can carry different fees. SBA has in some years reduced or waived the fee for particular groups, such as smaller loans or certain borrowers, to encourage lending; whether any relief applies depends on the notice in force when your loan is approved. Your lender's term sheet or loan authorization will state the exact fee.
The guaranty fee is set by SBA, not negotiated with the lender. Two SBA lenders quoting the same loan should show the same guaranty fee; differences in cost come from rate, lender fees and third-party costs.
Who pays it, and when
SBA charges the fee to the lender. The lender is allowed to pass it on to the borrower, and in practice it almost always does. The lender pays SBA after the loan is approved and collects from the borrower, usually at closing.
The borrower can usually finance the fee into the loan, listing it as a use of proceeds. That keeps it out of the cash the buyer must bring, but it makes the loan slightly larger, and a larger loan has a slightly larger guaranteed portion. In an acquisition, the fee counts in total project costs, so it also nudges up the 10% equity injection SBA requires for a complete change of ownership. The sources and uses table should show it on its own line.
On loans of $150,000 or less, SBA lets the lender keep a share of the upfront fee to encourage small-loan lending. That does not change what the borrower pays.
The annual service fee is different
Alongside the upfront guaranty fee, SBA charges lenders an annual service fee on the outstanding guaranteed balance for as long as the loan is outstanding. The lender pays it and may not charge it to the borrower. It is one of the reasons a lender's interest rate on an SBA loan is what it is, but it will not appear on the borrower's closing statement. Borrowers sometimes confuse the two when comparing offers.
How it compares with the other costs of an SBA loan
In a year when SBA charges the full fee, it is usually the biggest single fixed cost on a 7(a) loan above the smallest sizes. The others depend on the deal.
| Cost | Who sets it | When it arises |
|---|---|---|
| SBA upfront guaranty fee | SBA, by fiscal-year notice | Every 7(a) loan with a guaranty, tiered by size and maturity |
| Lender fees | The lender, within SBA's limits | Packaging and closing fees vary by lender and loan |
| Business valuation | An independent qualified appraiser | Required when the amount financed, less appraised real estate and equipment, exceeds $250,000, or buyer and seller are related |
| Financial due diligence and quality of earnings | Accountants | From 1 October 2026, due diligence on every change of ownership, and a quality of earnings report on acquisitions of $3 million or more excluding real estate |
| Real estate appraisal and environmental reports | Third parties | When real estate is financed or taken as collateral |
| Legal, title and filing costs | Attorneys and filing offices | Most loans, more on real estate and acquisitions |
| Agent or adviser compensation | The agent, disclosed on SBA Form 159 | When someone is paid to help obtain the loan |
| Prepayment cost | SBA rule | On loans of 15 years or more, prepaying more than 25% in the first three years costs 5% of the prepaid amount in year one, 3% in year two and 1% in year three |
Transparent charges nothing before a loan closes, and on SBA loans the lender pays Transparent, not the borrower; that compensation is disclosed on SBA Form 159. The rate side of the comparison is on SBA loan rates and the maximum interest rate on a 7(a) loan, and the way to weigh fees against rate is in interest rate vs all-in cost.
The 504 program charges differently
An SBA 504 loan is built differently, with a bank loan, a CDC debenture and the borrower's contribution, typically 50%, 40% and 10%. SBA's 504 fees are built around the CDC's debenture rather than a guaranteed portion of a bank loan, and they come with CDC and closing fees of their own. When comparing a 7(a) loan with a 504 structure for real estate, compare the whole set of fees for each, over the time you expect to hold the loan, rather than the headline guaranty fee alone.
Common questions
- Is the SBA guaranty fee charged on the whole loan?
- No. It is charged on the guaranteed portion: 85% of a 7(a) loan of $150,000 or less, 75% above that, and never more than $3.75 million of guaranty. The rate itself is set by SBA for each fiscal year.
- Can I roll the guaranty fee into my SBA loan?
- Usually, yes. It can be listed as a use of proceeds and financed. In an acquisition that makes it part of total project costs, so it slightly increases the loan and the required equity injection.
- Does the guaranty fee change every year?
- It can. SBA sets the rates for each fiscal year, which begins on 1 October, and the rate for your loan is the one in force when SBA approves it. Your lender will quote the current figure.
- Is the guaranty fee refundable if I pay the loan off early?
- No. It pays for the guaranty SBA issued when the loan was made. Early repayment of a long loan may also carry SBA's prepayment cost in the first three years; see the SBA prepayment penalty page.
- Why do two SBA lenders quote different closing costs if the fee is fixed?
- The guaranty fee for the same loan should be the same. Differences come from the lender's own fees, the third-party reports each lender requires, and whether the fee is financed or paid in cash.