A Beginner’s Guide to Small Business Loan Fees

Why You Need to Pay Attention to Fees

It’s possible to get funding without paying a myriad of unnecessary small business loan fees. If you’re not careful, you could end up paying thousands more than you need to. Additional fees, which are often hidden in the fine print, can harm your pocketbook and your business.

Let’s consider a $49 monthly administrative fee. You may think you’re paying for the lender’s time to monitor and manage your loan. But the reality is that most of the company’s processes are automated, and there isn’t an actual person looking at your account unless you call for customer service.

Through the duration of a 7-year loan, at $49 per month, you would end up paying $4,116 in administrative fees for a service that cost your lender less than $100.

So read your terms carefully and understand what it is you’re getting into before you sign on the dotted line.

FAQs

When are SBA loan fees supposed to be paid?

It depends on the type of fee. For upfront costs like an appraisal or business valuation, you’ll need to pay as part of your loan deposit. Any lender-related costs, such as title fees and loan packaging fees, are due at closing. Your SBA guarantee fee is typically rolled into the loan balance and is paid out of your monthly payments. 

What happens if you don’t pay the fees?

If you can’t pay the upfront or closing costs, the loan agreement won’t be finalized and you won’t receive any disbursed funds. If you fall behind on your SBA loan payments, which include the guarantee fee, you could default on the loan and the account could go to collections.

Can the guarantee fee ever increase?

SBA guarantee fees began for loans made on September 30, 2021, or later. Currently, the rates range from 0.25% to 3.5% of the guaranteed amount. Any future changes won’t affect loans already in place.

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