An Overview of SBA Loan Fees

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, and lenders typically pass that fee onto borrowers.


The Economic Aid Act, passed by Congress in December 2020, modified the SBA 7(a), 504 and Microloan programs to help small businesses get the money they need during this difficult time. Part of that modification includes changes to the SBA loan fees. Subject to the availability of funds, beginning December 27, 2020, through September 30, 2021, for all 7(a) loans (including Community Advantage loans) approved, the SBA Guaranty Fee (Upfront Fee) is reduced to zero. This is a significant savings to small businesses who qualify. 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.


How much is the SBA 7(a) loan guarantee fee?

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 chart below provides an overview on what borrowers can expect to pay, based on loan amount and loan term.


This chart breaks down the fee structure for SBA 7(a) loans based on the amount borrowed.

Let’s walk through an example.


Kate, a small business owner who is acquiring an investment advisory firm, secures a $1 million SBA 7(a) loan with a 10-year term, which means that the SBA guarantee fee is 3.5%. But Kate is not responsible for paying 3.5% of $1 million – she is only paying 3.5% on the guaranteed portion. The SBA guarantees 75% of all 7(a) loans over $150,000, so Kate’s loan is guaranteed for $750,000. She is responsible for paying 3.5% of $750,000, which comes to $26,250.


For loans between $700,000 – $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.


How much is the SBA 504 loan guarantee fee?

The SBA charges 0.5% on the amount funded by the Certified Development Company (CDC) for all 504 loans. We encourage borrowers to discuss additional fees on 504 loans with their lender.


What other fees can be expected with SBA loans?

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.


With the new SBA loan enhancements, what are the savings opportunities on SBA fees?

For new loans approved between February 1- September 30, 2021, borrowers will not have to pay any SBA loan fees. There are significant savings opportunities associated with this, including three months of subsidy payments. For example, if our borrower Kate gets a $2,000,000 loan from Live Oak with a 10-year term, she will save over $98,000. That extra savings can then be reinvested in Kate’s business for a variety of growth purposes. See the chart below for a detailed breakdown of what fees will be waived for her loan. Please note that interest rates vary and the rate below is simply an example.


This chart shows what SBA loan fees would be waived in this SBA 7(a) loan example.


At Live Oak Bank, we are committed to the success of small business owners across the nation. With the enhancements to the SBA loan programs through the Economic Aid Act, our lending experts can help our borrowers take full advantage of the benefits, including no SBA fees. Reach out to Live Oak to learn more about the limited-time SBA loan enhancements.