On the paper slip, I read the bill (with a little help from Google Translate): 

• One goulash.

• One beer.

• One basket of bread

• A table service charge

Okay. Check, check, then…wait, what’s all this? (Still with me? Here we go.)

Hidden fees.

No matter if you’re lunching in Bohemia or taking a loan to grow your small business (told you it’s related!), hidden charges can sour your experience — and totally throw your budget out of whack.

Hidden Fees for SBA 7(a) Loans

Like my fateful lunch, SBA loans have fees that come as part of the package. While these aren’t hidden outright, some of them can be less visible. To avoid confusion and have a good understanding of your loan, it pays to know what these fees are.

Note: Not all of these fees apply to every situation and every loan.

Guaranty Fees

Simply put, the guaranty fee is a charge set by the SBA, often passed onto borrowers by lenders. The reason behind this fee lies in the assurance the SBA provides to lenders: By guaranteeing a significant portion of the loan, the SBA shoulders some of the risk. This gesture makes lenders more inclined to approve larger loan amounts or greenlight loans that might otherwise seem a little bit risky.

Guaranty fees follow a schedule, depending on the length of the loan term and the loan amount. For loans with terms of more than a year, the fee breakdown is on the table below, effective October 1, 2023:

Loan amount	Upfront fee (% of guaranteed portion)
$1 million or less	0.00%
$1 million to $2 million	1.45% of the portion up to $1 million, plus 1.7% of anything above $1 million
More than $2 million	3.5% of the portion up to $1 million, plus 3.75% of anything above $1 million

For shorter-term loans of less than a year, there’s no guaranty fee for amounts under $1 million, and 0.25% of the guaranteed part of a loan above that.

Prepayment Penalties

You’ll be assessed a fee if you pay off a longer-term SBA loan well ahead of schedule. Prepayment fees are only attached to SBA 7(a) loans with terms of 15 years or more, and they only apply when you pay down 25% or more of your balance within three years of the loan being disbursed. The step-down schedule is below:

Year	Percent of Prepayment Amount
First year	5%
Second year	3%
Third year	1%

Note that if you pay a big chunk (or all) of your loan off in year four, there’s no penalty.

Closing Costs

This isn’t any single fee, but rather a combination. Depending on what you’re using your SBA loan for, some of these won’t apply to you.

• Attorney fees

• Broker fees

• Appraisal fees (for real estate or heavy equipment)

• Environmental report costs (for real estate)

There’s no good way to give you an estimation of these fees in advance. They vary greatly and depend on your location, the nature of your business, and even the complexity of your loan package.

And note that just because these are considered “closing” costs doesn’t mean they’re payable only if the loan closes. If you need an environmental report, rest assured that you’ll be charged for it once the report is ready. Same goes for appraisals.

My recommendation is to project these costs out as soon as you bring in assistance. This way you can avoid any nasty surprises.

Other Costs

Now we’ll get into the weeds a bit. Many of these costs will not apply to your SBA 7(a) loan, but it’s helpful to cover them. 

When in doubt, ask your lender for clarification. It’s much better to be surprised by what’s on the menu than what’s on the bill.

Late Fees

It happens, I know. It’s great to set a calendar reminder just to ensure you don’t miss a loan payment. If you do miss one? Expect a fee of no more than 5% of your regular monthly payment if you’ve passed your grace period.

Reporting Fees

This isn’t going to be applicable to every lender you might work with, so it’s good to establish up front if reporting fees are part of your loan package. These fees are often charged to cover a lender’s administrative efforts in getting detailed financial or operational overviews of your business.

Renewal Fees

Renewal fees are most commonly seen on revolving lines of credit. Not every lender will assess a fee, but some do if you wish to renew after the initial term expires. These fees are used to cover the costs associated with checking into the financial stability and creditworthiness of your small business.

Lender-Specific Fees

No matter what, you’ll need to ask your lender which fees are applicable to your situation. Each lender operates differently, and it’s important to clearly understand what charges lie ahead.

Meanwhile, in Prague…

So back in Prague, I’m still sitting there, staring at the bill. I know I haven’t eaten any bread, and a 20% table charge seems a bit extreme.

I flag down the waiter again. I tell him that I didn’t eat any bread, and I ask about the 20% service charge.

He just tells me that it’s totally normal, and I have to pay for it. The bread fee is for all customers, and I could’ve just asked for bread if I’d wanted any (if only that’d been the point). As for the service charge, that’s just a standard practice in the area.

Just like that, my wallet gets a little bit lighter.

It can work a bit like that with your lender, too, if you go in with eyes wide shut. Just because you don’t know or ask about fees doesn’t mean you’re not responsible for them.

My advice? Talk to our team about your small business’s financing needs. We’ll let you know exactly what fees are involved (regardless of the lender you go with) and how to ensure you’re getting the right loan for your business.

In this article:

1. Hidden Fees for SBA 7(a) Loans
2. Guaranty Fees
3. Prepayment Penalties
4. Closing Costs
5. Other Costs
6. Late Fees
7. Reporting Fees
8. Renewal Fees
9. Lender-Specific Fees
10. Meanwhile, in Prague…
11. Get Financing