SBA Guarantee Fee Definition | Business Lending Glossary

Definition

A one-time fee charged on the guaranteed portion of an SBA 7(a) loan to fund the SBA's loan guarantee program, typically ranging from 2% to 3.75% of the guaranteed amount.

Explanation

The SBA guarantee fee is a government-mandated fee assessed when an SBA 7(a) loan is originated. It is charged on the guaranteed portion of the loan — not the full loan amount. For a $500,000 loan with a 75% guarantee ($375,000 guaranteed), the fee applies to the $375,000 guaranteed amount, not the full $500,000. The SBA charges the fee to the lender, but virtually all lenders pass it through to borrowers as a closing cost. Fee rates vary by loan size and term. For loans over $150,000 with terms over 12 months: 3% on the guaranteed portion of loans up to $700,000; 3.5% on guaranteed portions of $700,001 to $1 million; and 3.75% on guaranteed portions above $1 million. Loans of $150,000 or less pay a reduced 2% fee. For fiscal year 2026, the SBA has waived guaranty fees for 7(a) loans under $1 million — a significant benefit that the SBA has renewed annually in recent years but is not guaranteed to continue. In addition to the upfront guaranty fee, the SBA charges an annual service fee (currently 0.55%) on the outstanding guaranteed balance, incorporated into the effective loan cost throughout the term.

Example

A business borrows $750,000 under SBA 7(a) with a 75% guarantee ($562,500 guaranteed). In a year without a fee waiver, the guaranty fee is 3% on the guaranteed portion for loans in the $150,001 to $700,000 range: $562,500 times 3% equals a guaranty fee of $16,875. With the FY2026 waiver for loans under $1 million, this fee is eliminated entirely.

Why It Matters

The SBA guaranty fee can be the largest single closing cost on an SBA transaction, making it essential to understand before evaluating the economics of SBA financing. When the fee is waived — as in FY2026 for loans under $1 million — SBA loans become substantially more competitive versus conventional alternatives. Confirm the current fee schedule with your lender at the outset of any SBA transaction, as fee waivers and rate changes are announced annually at the start of each fiscal year.

Frequently asked questions

Can the SBA guaranty fee be financed into the loan?

Yes. The SBA guaranty fee can be included in the financed loan amount rather than paid out of pocket at closing. This is common practice, particularly for borrowers who have met their equity injection requirement but have limited additional cash for closing costs. Financing the fee increases the total loan balance and therefore the total interest paid over the loan term. The trade-off between paying the fee upfront versus financing it depends on your current cash position and how long you plan to hold the loan.