The Engine of Main Street: Understanding Guarantees, Rates, and the FY 2025 Fee Waivers.
The SBA has waived the upfront guaranty fee for all 7(a) loans of $1,000,000 or less. This can save borrowers up to $25,000 in closing costs.
How the government guarantee works for you.
The SBA doesn't lend directly; it acts as an insurer. By guaranteeing a portion of the loan, it incentivizes banks to lend to businesses that might otherwise be denied.
Maximum spreads lenders can charge over the Prime Rate (7.00%).
| Loan Amount | Max Spread | Effective Max Rate |
|---|---|---|
| $50,000 or less | + 6.50% | 13.50% |
| $50,001 - $250,000 | + 6.00% | 13.00% |
| $250,001 - $350,000 | + 4.50% | 11.50% |
| $350,001 or more | + 3.00% | 10.00% |
*Note: Strong borrowers (A-paper) often secure rates below these caps, e.g., Prime + 1.5% (8.50%).
You don't need to be "high risk" to qualify.
By law, the SBA cannot guarantee a loan if the business can obtain reasonable credit elsewhere. However, this test is nuanced. You may still qualify if:
The Engine of Main Street: Understanding Guarantees, Rates, and the FY 2025 Fee Waivers.
The SBA has waived the upfront guaranty fee for all 7(a) loans of $1,000,000 or less. This can save borrowers up to $25,000 in closing costs.
How the government guarantee works for you.
The SBA doesn't lend directly; it acts as an insurer. By guaranteeing a portion of the loan, it incentivizes banks to lend to businesses that might otherwise be denied.
Maximum spreads lenders can charge over the Prime Rate (7.00%).
| Loan Amount | Max Spread | Effective Max Rate |
|---|---|---|
| $50,000 or less | + 6.50% | 13.50% |
| $50,001 - $250,000 | + 6.00% | 13.00% |
| $250,001 - $350,000 | + 4.50% | 11.50% |
| $350,001 or more | + 3.00% | 10.00% |
*Note: Strong borrowers (A-paper) often secure rates below these caps, e.g., Prime + 1.5% (8.50%).
You don't need to be "high risk" to qualify.
By law, the SBA cannot guarantee a loan if the business can obtain reasonable credit elsewhere. However, this test is nuanced. You may still qualify if: