What is SBA Guarantee Fee?
The Short Answer
SBA Guarantee Fee explained simply
When a small business gets a loan that is backed by the Small Business Administration (SBA), the SBA charges a fee for this guarantee. This fee is usually a percentage of the guaranteed portion of the loan. It helps the SBA cover the costs and risks associated with guaranteeing loans, which encourages lenders to provide financing to small businesses that might otherwise struggle to get approved.
Real-World Example
Calculating the SBA Guarantee Fee
Let's say a small business gets a $500,000 SBA-backed loan. The SBA guarantees 75% of the loan, which is $375,000. If the SBA guarantee fee is 3% of the guaranteed portion, the fee would be $11,250 ($375,000 * 0.03). This fee is typically paid upfront or financed into the loan.
Why this matters
The SBA Guarantee Fee is an important cost to consider when getting an SBA loan. While it adds to the overall cost, the SBA guarantee often makes it possible for small businesses to secure financing they wouldn't otherwise qualify for. Understanding this fee helps you accurately budget for your loan and assess the true cost of borrowing.
Always factor the SBA Guarantee Fee into your total loan costs. It's a one-time fee, but it can be significant. Make sure you understand how it impacts your overall financing plan.
Always factor the SBA Guarantee Fee into your total loan costs. It's a one-time fee, but it can be significant. Make sure you understand how it impacts your overall financing plan.
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