# SBA Guarantee

Canonical URL: https://fundmyequipment.com/learn/glossary/sba-guarantee/
Last modified: 2026-05-29T19:39:17+00:00
Type: efin_glossary

## Summary

Portion of SBA loan guaranteed by federal government against default. Typically 75% to 85%.

## Content

SBA guarantee is the federal Small Business Administration's commitment to repay a portion of an SBA-eligible loan if the borrower defaults. The guarantee makes loans available to small businesses that might not qualify for conventional financing, by reducing the lender's downside risk.
How the guarantee works
The lender originates the full loan amount and disburses to the borrower. The SBA guarantees a portion (typically 50-85% depending on program and loan size). If the borrower defaults and the lender pursues collection, the SBA pays the lender for the guaranteed portion of any uncollected balance.
Guarantee percentages by program
ProgramSBA guarantee
SBA 7(a) loans up to $150K85%
SBA 7(a) loans $150K-$5M75%
SBA Express (up to $500K)50%
SBA 504 (debenture portion, ~40% of total)100% (within the SBA portion)
SBA Microloans (up to $50K)SBA-funded directly to intermediaries

Guarantee fee
SBA charges a one-time guarantee fee for the guarantee, financed into the loan typically:

Loans up to $150K: 0% fee
$150K to $700K: 3% of guaranteed portion
$700K to $1M: 3% of guaranteed portion
$1M to $5M: 3.5% of guaranteed portion + 0.25% additional on the portion above $1M

Why the guarantee matters

Lenders can lend to applicants who don't fit conventional underwriting (newer business, sub-prime borderline credit, thin financials)
Longer terms available (up to 25 years vs 5-7 conventional)
Lower rates than comparable conventional loans (lender risk-adjusted pricing reflects the guarantee)
Lower down payment requirements (10% vs 20-30% conventional)

Limitations

Personal guarantee required from 20%+ owners regardless of SBA guarantee
Slower underwriting (30-90 days for 7a, 60-120 for 504)
More documentation than conventional
SBA-specific use-of-funds restrictions