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What Is the SBA Guaranty Fee?
Borrowers must pay a guaranty fee for their small business loan depending on the loan proceed amount.
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Borrowers must pay a "guaranty fee" within 90 days of approval of an SBA loan. This fee is waived for qualified applicants in the Veterans Advantage program who obtain financing under $150,000. For all other borrowers, the guaranty fee corresponds to the amount of the loan.
For example, for loans between $150,001 and $700,000, the fee is 3% of the guaranteed portion. For loans between $700,001 and $5 million, the fee is 3.5% of the guaranteed portion for up to $1 million, and 3.75% of the guaranteed amount for more than $1 million.
Guaranty fees aim to shift the burden of administrative costs onto the borrower and away from the taxpayer. Entrepreneurs can use the proceeds of their SBA loans to pay the guaranty fee, and don't need to come up with these additional funds out of pocket.
Have any questions about how the fees work for your specific financing needs? Complete the form below — we'll be in touch with your answers.
Related Questions
What is the purpose of the SBA guaranty fee?
The purpose of the SBA guaranty fee is to shift the burden of administrative costs onto the borrower and away from the taxpayer. The fee can be based on either the dollar amount of the guaranteed portion of the SBA loan, or the repayment term of the SBA loan. The SBA guarantee fee can range from 0% to 3.75% of the SBA guaranteed loan amount, and can be included in the borrower’s overall SBA loan proceeds.
For example, for loans between $150,001 and $700,000, the fee is 3% of the guaranteed portion. For loans between $700,001 and $5 million, the fee is 3.5% of the guaranteed amount for up to $1 million, and 3.75% of the guaranteed amount for more than $1 million.
If the SBA guarantee fee is based on the repayment term of the SBA guaranteed loan, any loan with a term of 1 year or less will have a 0.25% guarantee fee, while all other terms begin at 3% and differ based on the amount of the guaranteed portion of the loan.
How much is the SBA guaranty fee?
The SBA guaranty fee can be based on either the dollar amount of the guaranteed portion of the SBA loan, or the repayment term of the SBA loan. The SBA guarantee can be 75% to 85% of your loan and the guarantee fee owed by the borrower can range from 0% to 3.75% of the SBA guaranteed loan amount. The good news is, this fee can be included in the borrower’s overall SBA loan proceeds -- so you don’t have to worry about paying it upfront.
Here’s a couple of examples:
- For a $150,000 loan, the SBA guaranty fee is $2,550 or 2% of the guaranteed portion (85%).
- For a $5,000,000 loan (75% SBA guaranty of $3,750,000), the loan fee is $138,125 calculated as 3.5% of the first $1 million guaranteed ($35,000) plus 3.75% of the remaining guaranteed amount.
If the SBA guarantee fee is based on the repayment term of the SBA guaranteed loan, any loan with a term of 1 year or less will have a 0.25% guarantee fee, while all other terms begin at 3% and differ based on the amount of the guaranteed portion of the loan. The length of repayment terms can vary and be as high as 10 years for working capital loans or 25 years for commercial real estate loans.
What is the difference between the SBA guaranty fee and the SBA loan fee?
The SBA guaranty fee is a fee that is passed on to the borrower by the lender when the SBA guarantees a loan. The fee is based on either the dollar amount of the guaranteed portion of the SBA loan, or the repayment term of the SBA loan. The SBA loan fee is a fee that borrowers must pay within 90 days of approval of an SBA loan. This fee corresponds to the amount of the loan and aims to shift the burden of administrative costs onto the borrower and away from the taxpayer.
For example, for loans between $150,001 and $700,000, the SBA guaranty fee is 3% of the guaranteed portion, while the SBA loan fee is 3% of the guaranteed portion for up to $1 million, and 3.75% of the guaranteed amount for more than $1 million.
The good news is, the SBA guaranty fee can be included in the borrower’s overall SBA loan proceeds, so you don’t have to worry about paying it upfront.
How does the SBA guaranty fee affect the cost of a loan?
The SBA guaranty fee is passed on to the borrower by the lender and can be included in the borrower’s overall SBA loan proceeds. The fee can be based on either the dollar amount of the guaranteed portion of the SBA loan, or the repayment term of the SBA loan. For example, for loans between $150,001 and $700,000, the fee is 3% of the guaranteed portion. For loans between $700,001 and $5 million, the fee is 3.5% of the guaranteed portion for up to $1 million, and 3.75% of the guaranteed amount for more than $1 million. The SBA guaranty fee aims to shift the burden of administrative costs onto the borrower and away from the taxpayer. Entrepreneurs can use the proceeds of their SBA loans to pay the guaranty fee, and don't need to come up with these additional funds out of pocket.
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What are the benefits of paying the SBA guaranty fee?
The SBA guaranty fee is beneficial to small business owners because it shifts the burden of administrative costs away from the taxpayer and onto the borrower. Additionally, the fee can be included in the borrower’s overall SBA loan proceeds, so they don’t have to worry about paying it upfront. The fee can range from 0% to 3.75% of the SBA guaranteed loan amount, depending on the amount of the loan and the repayment term.
For example, for loans between $150,001 and $700,000, the fee is 3% of the guaranteed portion. For loans between $700,001 and $5 million, the fee is 3.5% of the guaranteed portion for up to $1 million, and 3.75% of the guaranteed amount for more than $1 million. Additionally, any loan with a term of 1 year or less will have a 0.25% guarantee fee, while all other terms begin at 3% and differ based on the amount of the guaranteed portion of the loan.
Sources:
- www.sbaexpress.loans/sba-express-glossary/what-is-the-sba-guaranty-fee
- www.sba7a.loans/sba-7a-loans-small-business-blog/how-does-the-sba-guarantee-loans
- https://www.sba.gov/sites/default/files/lender_notices/5000-1352.pdf
- /sba-express-glossary/2017/5/12/what-is-the-sba-veterans-advantage-program
- /sba-7a-loan-for-working-capital
- /sba-7a-loan-for-commercial-real-estate/