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Question – How much are SBA loan fees for a 7(a) loan?
Our Response – On an SBA 7(a) loan there is a guarantee fee of approximately 3% of the guaranteed portion of loans less than $1,000,000 and approximately 3.75% of the guaranteed portion of loans exceeding $1,000,000. The guaranteed portion is currently 85% on loans under $150,000 and 75% over $150,000. So if you have a $500,000 loan, the SBA will guarantee 75% which means the guaranteed portion of the loan is $375,000. At 3% of the guarantee portion of the loan, fees would be approximately $11,250.
In addition to the guarantee fee, there is an annual on-going service fee of about 0.6% of the outstanding principal.
I do get questions about why the SBA even charges fees. The complaint is that the SBA is tax payer funded and they also get money by charging the bank additional interest, which is the on-going service fee.
Well nothing in life is free and the same goes for the SBA guarantees. Loaning money is risky and loaning money for business is especially risky. When the bank gets an SBA loan the bank is essentially getting insurance if the loan goes bad. The guarantee fee can be rolled into the total loan request. The on-going servicing fee can’t be directly charged to the borrower so the bank builds the cost into the interest rate.
While the SBA loan fees may seem steep if this cost is what it takes to get the bank to make a loan on your project, then it’s a small price to pay.