SBA loans include a guarantee from the U.S. government — meaning the SBA reimburses the lender for a portion of the loan in case of a default. Because of this guarantee, entrepreneurs have access to small business loans with more competitive rates and terms than many conventional loans. It’s important for borrowers to understand that the SBA charges lenders a guarantee fee in exchange for backing a portion of the loan. Lenders typically pass that fee on to borrowers.
To better understand how SBA loan fees work and what the savings opportunities could be, here is a breakdown of the most common questions about SBA loan fees.
The SBA determines program fees each fiscal year. These fees are universal no matter which lender you choose to work with. The fee is calculated by taking both the loan amount and the loan term into consideration. In general, larger loan amounts and longer terms equate to a larger fee percentage. However, the fee is only based on the portion the SBA guarantees.
The following table shows the guarantee fee on loans with a maturity that exceeds 12 months.
| Loan Amount | Guarantee Fee |
| $1,000,000 or less | 0.00% |
| $1,000,001 to $2,000,000 | 1.45% of the guaranteed portion up to $1,000,000, plus 1.7% of the guaranteed portion over $1,000,000 |
| $2,000,001 to $5,000,000 | 3.5% of the guaranteed portion up to $1,000,000, plus 3.75% of the guaranteed portion over $1,000,000 |
*Fees as of October 1st, 2023
Please note that the guarantee fee is calculated differently when you request multiple loans within 90 days of each other.
Let’s walk through an example.
Kate, a small business owner who is acquiring an investment advisory firm, secures a $1,500,000 SBA 7(a) loan with a 10-year term, which means that the SBA guarantee fee is 1.45% for the first $1 million and 1.7% on the remaining $500,000. But Kate is not responsible for paying 1.45% of $1 million or 1.7% of the remaining $500,000 – she only pays 1.45% and 1.7% on the guaranteed portion. The SBA guarantees 75% of all 7(a) loans over $150,000. She is responsible for paying 1.45% of $1,000,000 = $14,650 and 1.7% of $125,000 = $2,125 for a total of $16,625.
For loans $2,000,001 - $5 million, the fee is 3.5% of the first $1 million guaranteed ($35,000) plus 3.75% of the remaining guaranteed amount. This math can get confusing, so discuss the specifics with your Live Oak loan expert.
As we guide our borrowers through the loan process, Live Oak will walk them through any additional fees. Some of these include packaging, servicing and possibly prepayment penalty fees. We work diligently to educate our borrowers and ensure they fully grasp these fees.
At Live Oak Bank, we are committed to the success of small business owners nationwide. Learn more about small business loans and SBA loans from Live Oak.