SBA Loan Basics for Borrowers- The SBA Guaranty Fee

Effective October 1, 2013, the SBA guaranty fee for SBA 7(a) loans of $150,000 or less will be ZERO.

What is the SBA guaranty fee?

A lender must pay a fee to SBA for each loan guaranteed under the 7(a) program. This fee is known as the SBA Guaranty Fee.

Think of it as like an insurance premium. SBA uses these fees to pay for when they have to honor the guaranty for a lender.

The total loan amount determines the percentage that is used to calculate this fee. The guaranty fee is based on the guaranteed portion of the loan and not the total loan amount.

For Loans of $150,000 or less the guaranty fee is 0% of guaranteed portion

For Loans between $150,001 to $700,000 the guaranty fee is 3% of guaranteed portion

For Loans between $700,001 to $5,000,000 the guaranty fee is 3.5% of guaranteed portion up to $1,000,000 PLUS 3.75% of the guaranteed portion over $1,000,000

For example, the guaranty fee on a $150,000 loan with an 85% guaranty would be ZERO.

The guaranty fee on a $2,000,000 loan with a 75% guaranty ($1.5 million guaranteed portion) would be 3.5% of $1,000,000 ($35,000) PLUS 3.75% of $500,000 ($18,750), which totals $53,750.

While many think that this fee seems high in comparison to other financing options, they forget that the SBA loan is amortized over a longer term and NEVER has a balloon.