SBA Guaranty Fee
SBA Guaranty Fee, in short
The SBA guaranty fee is what SBA charges for backing a loan. On a 7(a) loan it is a tiered percentage of the guaranteed portion: up to 2% on loans of $150,000 or less, 3% to $700,000, and 3.5% above that, plus 0.25% on the guaranteed amount over $1 million. Lenders usually pass it to the borrower.
Also called SBA upfront feeSBA guarantee feeupfront guaranty fee
How the SBA guaranty fee works
SBA does not lend the money on a 7(a) loan. A bank or other lender does, and SBA promises to repay a share of the loss if the borrower defaults. The guaranty fee is the price of that promise. It is charged once, up front, on the guaranteed portion of the loan, not on the whole balance.
Guaranty Fee = Guaranteed Portion × Fee Rate (tiered by loan size)
The guaranteed portion is itself set by loan size: On a standard 7(a) loan SBA guarantees 85% of loans of $150,000 or less and 75% of larger ones (13 CFR 120.210); some programs, such as SBA Express, use a lower percentage, which changes the math below. Because the fee applies to that share, a $1,000,000 loan pays its fee on $750,000, not on $1,000,000.
The lender is the party that owes the fee to SBA. For a loan with a maturity over 12 months it is due within 90 days of SBA's approval. The lender may charge the borrower for it only after the lender has paid it to SBA (13 CFR 120.220). That is why the fee shows up on a term sheet or closing statement as a borrower cost even though SBA bills the lender.
The fee tiers
Congress sets the maximum in 15 U.S.C. 636(a)(18), and SBA publishes the fee actually charged in an information notice each fiscal year. For fiscal year 2026 (loans approved October 1, 2025 through September 30, 2026) SBA charged the maximums in the table; the tiers are the statutory ceiling.
| Loan amount (maturity over 12 months) | SBA guarantees | Fee rate on the guaranteed portion |
|---|---|---|
| $150,000 or less | 85% | 2% |
| $150,001 – $700,000 | 75% | 3% |
| $700,001 – $5,000,000 | 75% | 3.5%, plus 0.25% on the guaranteed portion above $1,000,000 |
Loans with a maturity of 12 months or less use a separate, much lower fee of one-quarter of one percent of the guaranteed portion. SBA also sets exceptions that change from year to year; for example, in fiscal year 2026 loans of $950,000 or less to manufacturers paid no upfront fee (SBA Information Notice 5000-872051). SBA issued a separate fee notice for fiscal year 2027, which covers loans approved from October 1, 2026 (Information Notice 5000-881797), so check the current notice, and whether any exemption applies to your business, before you rely on the table. SBA's fee notices also combine 7(a) loans approved for the same applicant and its affiliates within 90 days when calculating the fee. Your lender's term sheet should state the dollar amount.
Worked example: a $1,350,000 loan
This is the same example as on our SBA 7(a) loan page: a business buys a $1,500,000 building it will occupy with 10% down and a $1,350,000 loan. Assumptions for illustration only: a 25-year term and a 9.75% rate (Prime at 7.00% plus 2.75%), run through our SBA 7(a) calculator.
| Step | Calculation | Amount |
|---|---|---|
| Loan amount | $1,500,000 − $150,000 down | $1,350,000 |
| Guaranteed portion | 75% × $1,350,000 | $1,012,500 |
| Fee on the first $1,000,000 | 3.5% × $1,000,000 | $35,000 |
| Fee on the remaining $12,500 | 3.75% × $12,500 | $469 |
| Total guaranty fee | $35,469 |
The $35,469 is about 2.6% of the loan, not 3.5%, because the fee applies only to the 75% guaranteed share. The effective percentage of the loan rises with size. Using the same tiers:
| Loan amount | Guaranteed portion | Guaranty fee | Fee as % of loan |
|---|---|---|---|
| $100,000 | $85,000 | $1,700 | 1.70% |
| $500,000 | $375,000 | $11,250 | 2.25% |
| $1,350,000 | $1,012,500 | $35,469 | 2.63% |
| $3,000,000 | $2,250,000 | $81,875 | 2.73% |
What it costs to finance the fee
Most borrowers do not write a check for the fee. It is added to the loan, which makes it easy to ignore and expensive to carry. In the example above, the $1,350,000 loan has a payment of about $12,030 a month. Add the $35,469 fee to the balance ($1,385,469) at the same rate and term and the payment becomes about $12,346 — roughly $316 more every month.
Over 25 years the borrower repays about $94,800 more in total than without the fee, so a $35,469 fee costs about $59,400 in interest on top of itself. This is the arithmetic of any financed fee, and it is why it belongs in the cost comparison alongside the rate. If you can pay the fee in cash at closing, you avoid that interest; if cash is tight, financing it keeps your down payment available for the business. Note that most 7(a) rates float with Prime, so the interest portion will differ from this fixed-rate illustration.
Guaranty fee vs. annual service fee vs. other costs
- Guaranty fee — one time, on the guaranteed portion, tiered by loan size. Lender owes it; the borrower can be charged once the lender has paid it.
- Annual service fee — the lender pays SBA up to 0.55% a year of the guaranteed outstanding balance, and federal rules do not let it be passed to the borrower (13 CFR 120.220).
- Lender packaging and closing fees — separate from SBA. Packaging fees must be reasonable and customary for similar lenders in the area, and the lender must tell you in writing that services you do not want are optional (13 CFR 120.221). Ask for these in dollars.
- Third-party costs — appraisal, environmental report, title and recording.
Unlike an origination fee or points, the guaranty fee is set by SBA, not by the lender, so there is nothing to negotiate on the SBA side. (On loans of $150,000 or less the lender may keep up to 25% of the fee, but the total is still SBA's.) What you can negotiate is the lender's own fees, which sit next to it on the same closing statement. For the full list of SBA 7(a) charges by loan size, see our SBA 7(a) loans page.
Guaranty fees on SBA 504 loans
A 504 loan has two lenders, so the fee works differently. SBA guarantees the debenture that funds the second mortgage, made through a Certified Development Company (CDC), and charges SBA's guaranty fees on that CDC portion only. They are normally rolled into the debenture and repaid in the CDC payment. Our SBA 504 loans page has the fee table, and SBA 7(a) vs. 504 compares the total cost of the two programs.
Why lenders and borrowers care
For the lender, the fee is a cost of using the guarantee, which is why it sits on the guaranteed share. For the borrower it matters in three ways.
- It is part of the real cost of the loan. Two offers with the same rate are not the same if one finances a $35,000 fee and the other does not. Compare them by total cost, the way you would compare APR.
- It affects your cash to close or your payment. Pay it in cash and your cash to close rises; finance it and your monthly payment and total interest rise.
- It can influence loan size. Because the fee steps up above $150,000 and $700,000 and again above a $1,000,000 guaranteed share, a loan just over a threshold costs more than one just under it. If the project can be right-sized without a real loss, it is worth knowing where the thresholds are before you set the request.
What to watch for
- Ask which fiscal year's notice applies. SBA publishes the fee for each fiscal year, and exceptions such as the manufacturing exemption can appear or disappear. The fee for your loan follows SBA's approval date, not the date you apply or close.
- Get every fee in dollars on the term sheet. The guaranty fee should be a line item with the formula behind it. If you see a percentage of the full loan amount, ask how it was calculated, because the statutory fee applies to the guaranteed share.
- Know the refund rule. On loans over 12 months, SBA refunds the fee if nothing has been disbursed and the lender requests cancellation in writing. If a deal falls through before funding, ask the lender to do so.
- Do not mix it up with the personal guarantee. The fee pays for SBA's guarantee to the lender. It does not replace the personal guarantee that SBA requires from owners of 20% or more of the business.
- Separate SBA's fee from the lender's. Only the SBA piece is fixed. Packaging, closing and servicing fees are the lender's, and they are where you have room to compare and negotiate.
Is an SBA loan still cheaper with the fee?
That depends on the alternative, so put the fee into the same comparison as everything else. In the examples above it adds 1.70% to 2.73% of the loan once; the financed-fee numbers show what it does to the payment ($316 a month in the example). Longer terms lower the monthly payment on the same balance, which is the usual reason borrowers accept the fee, but only a side-by-side of rate, term, down payment and fees shows which offer costs less. Our article on SBA vs. conventional loans walks through that comparison. For how the fee is treated on your taxes, ask your CPA.
If you have an SBA term sheet and want the fee, the payment with and without it financed, and the competing offer on one page, send it to us and we will lay them side by side.
Sources: 15 U.S.C. 636(a)(18) (guarantee fee maximums); 13 CFR 120.210 (guaranty percentages); 13 CFR 120.220 (fees the lender pays SBA: due dates, refund, annual service fee); 13 CFR 120.221 (fees the lender may collect from the applicant); SBA Information Notice 5000-872051, 7(a) Fees Effective October 1, 2025 for Fiscal Year 2026; SBA Information Notice 5000-881797, FY 2027 7(a) Program Fees. Payment figures computed with the BestLoanUSA SBA 7(a) calculator logic at the stated illustrative assumptions.
Frequently asked
Who pays the SBA guaranty fee?
The lender owes the fee to SBA. Federal rules let the lender charge it to the borrower, but only after the lender has paid it to SBA. In practice most lenders pass it through and many let the borrower finance it into the loan. Ask your lender whether it will be deducted from proceeds, paid at closing or added to the balance.
How much is the SBA guaranty fee?
For a 7(a) loan with a maturity over 12 months, the statutory maximums are 2% of the guaranteed portion for loans of $150,000 or less, 3% for $150,001 to $700,000, and 3.5% for loans above $700,000, plus an additional 0.25% on the guaranteed portion above $1,000,000. SBA announces the fee actually charged each fiscal year; fiscal year 2026 used these maximums, and a separate notice covers loans approved from October 1, 2026. Loans with a maturity of 12 months or less pay 0.25%.
Is the SBA guaranty fee refundable?
Sometimes. On loans longer than 12 months, SBA refunds the fee if no loan funds have been disbursed and the lender asks SBA in writing to cancel the guarantee. After money has gone out, the fee is not refunded.
Is the guaranty fee the same as the annual service fee?
No. The guaranty fee is a one-time upfront charge on the guaranteed share at approval. The annual service fee is a separate recurring charge on the guaranteed outstanding balance, capped at 0.55% a year on 7(a) loans, and federal rules do not allow the lender to pass it to the borrower.
Does an SBA 504 loan have a guaranty fee?
SBA charges its own upfront and ongoing guaranty fees on the CDC debenture portion of a 504 loan, set in a separate annual notice. They are normally financed into the debenture instead of paid in cash at closing.