What The SBA Guaranty Fee Is and Why It Exists
Overview |
Unlike conventional bank financing, SBA loans are structured around a risk-sharing model. A bank provides the loan proceeds, and the U.S. Small Business Administration guarantees a portion of the loan if the borrower defaults. In most standard SBA loans, the SBA or Federal Government typically guarantees up to 75% of the loan amount. The SBA guaranty fee exists to support this structure.
When the SBA provides a federal guaranty, it is assuming a portion of the lender’s credit risk. The guaranty fee helps fund the SBA loan program and offset losses across the broader SBA Program.
Specifically, the SBA guaranty fee is a one-time fee charged by the SBA when it agrees to guarantee part of an SBA loan. The fee is paid to the SBA, not the bank. In the majority of SBA transactions, the fee is included in the loan amount and financed over the life of the loan, most commonly over a 10-year or 25-year term depending on the use of loan proceeds.
What The Guarantee Fee is:
A one-time SBA program fee
Typically financed into the loan amount
Calculated based on the SBA-guaranteed portion of the loan
What The Guarantee Fee is Not:
Interest
A recurring or annual charge
A lender fee
The non-negotiable fee is set by the SBA and applies consistently across all SBA lenders.
How the Fee Is Determined
The SBA guaranty fee is determined based on two primary factors:
The total loan size
The percentage of the loan guaranteed by the SBA
Larger loans generally result in higher guaranty fees because the SBA is guaranteeing a larger dollar amount of risk. In many cases, the fee is calculated using tiered or blended rates, meaning different portions of the guaranteed amount may be charged at different percentages.
The specific fee percentages and thresholds are established by the SBA and may change over time based on policy updates or legislation.
Try It Yourself |
Using Our Guaranty Fee Calculator
This page includes a built-in calculator designed to help you quickly estimate the SBA guaranty fee for a potential SBA loan.
Most borrowers do not see the guaranty fee clearly explained until late in the loan process. This calculator is meant to change that. By entering a proposed loan amount, you can see an estimated guaranty fee based on current SBA fee structures and how the fee is typically applied and financed in real SBA transactions.
The goal is simple: to give you clarity early, before you are deep into conversations with lenders. Whether you are comparing financing options, sizing a loan, or trying to understand total project costs, the calculator provides a straightforward way to set expectations upfront.
The estimate shown reflects how the SBA guaranty fee is commonly calculated.
Our Approach
At Funding Compass Co, we focus on explaining how SBA financing actually works. That includes why certain costs exist, how they are typically structured, and what borrowers should expect throughout the process. Our goal is to provide clear, practical guidance so business owners can make informed decisions with confidence.
P.S. If you know a business owner, CPA, banker, broker, or attorney who might find this useful, feel free to pass it along. They can subscribe here.
