Data Source and Methodology

Authoritative Data Source: U.S. Small Business Administration (SBA), "SBA Loan Guaranty Program: Fees & Rates".
Reference: FY 2024 SBA 7(a) & 504 Loan Guaranty Fees.
Source Link: SBA.gov Fees & Rates

All calculations for loan amortization and estimated guarantee fees are based strictly on the formulas and tiered fee structures published by this source. This calculator uses the standard amortization formula and applies SBA-published fee percentages based on loan type and amount.

The Formulas Explained

The monthly payment (M) is calculated using the standard loan amortization formula. The SBA Guarantee Fee is calculated first (based on a tiered structure) and added to the principal to determine the Total Loan Amount (P).

$$ M = P \frac{r(1+r)^n}{(1+r)^n - 1} $$

Glossary of Terms

  • Loan Amount (Principal): The initial capital you are borrowing, before fees.
  • Annual Interest Rate (APR): The yearly interest rate charged by the lender.
  • Loan Term: The total time (in years) you have to repay the loan.
  • SBA Loan Type: The specific SBA program (7(a) or 504). This determines the guarantee fee structure.
  • Est. SBA Guarantee Fee: A mandatory fee paid to the SBA, which protects the lender against default. This calculator assumes the fee is financed (rolled into the loan).
  • Total Loan Amount: The sum of the initial principal and the financed SBA Guarantee Fee. This is the amount used for the amortization calculation.
  • Monthly Payment: The fixed amount you will pay each month, covering both interest and principal.
  • Total Interest: The sum of all interest payments over the entire life of the loan.

How It Works: A Step-by-Step Example

Let's say you need a $250,000 SBA 7(a) loan for 10 years at 8.5% APR.

  1. Calculate SBA Fee: Based on current SBA 7(a) rules, a loan of $250,000 falls into a 3.0% fee tier (for loans $150,001 - $700,000).
    Fee = $250,000 * 0.030 = $7,500
  2. Determine Total Loan Amount (P): This fee is typically financed. P = $250,000 (Principal) + $7,500 (Fee) = $257,500
  3. Find Monthly Rate (r) and Term (n): r = 8.5% / 12 months = 0.007083 n = 10 years * 12 months = 120 payments
  4. Calculate Monthly Payment (M): Using the formula with P = $257,500, r = 0.007083, and n = 120, the monthly payment is: M = $3,263.15

Your total cost will be $3,263.15 * 120 = $391,578, which includes the $250,000 principal, the $7,500 SBA fee, and $134,078 in total interest.

Frequently Asked Questions

What is the SBA Guarantee Fee?

The SBA Guarantee Fee is a charge levied by the Small Business Administration. It's paid by the lender and typically passed on to the borrower (often by financing it into the loan). This fee compensates the SBA for the risk it takes by guaranteeing a portion of the loan, which is what encourages lenders to provide favorable terms to small businesses.

Is the SBA fee always financed?

While it is most commonly financed (rolled into the total loan amount), borrowers can sometimes opt to pay the guarantee fee in cash at closing. This calculator assumes the fee is financed, which is the standard scenario for payment calculation. Paying it in cash would lower your monthly payment.

What's the main difference between an SBA 7(a) and 504 loan?

A 7(a) loan is the most common and flexible type, usable for a wide range of business purposes, including working capital, refinancing debt, or purchasing inventory. A 504 loan is specifically designed for fixed-asset purchases, such as real estate or large equipment, and has a different structure (involving a bank and a Certified Development Company, or CDC).

Does this calculator include bank origination fees?

No. This calculator estimates the SBA Guarantee Fee only. Your lender may have additional one-time costs, such as loan packaging fees, origination fees, or closing costs. You should request a full loan estimate from your lender for a complete picture of all costs.

What is the maximum SBA loan amount?

For the 7(a) program, the maximum loan amount is $5 million. For the 504 program, the maximum typically ranges from $5 million to $5.5 million for the 504 portion of the loan, depending on the project type.

Why is my interest rate variable?

Many SBA loans, especially 7(a) loans, have variable interest rates tied to a benchmark like the Prime Rate. This calculator uses a fixed rate for estimation. If your loan is variable, your monthly payment will change if the benchmark rate changes.

Tool developed by Ugo Candido. Finance content reviewed by the CalcDomain Editorial Board.
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