The simple version

A 7(a) loan comes from a bank, and the Small Business Administration (SBA) guarantees part of it. The borrower pays an upfront fee for that guarantee.

The fee is a percentage of the guaranteed part, not the whole loan. That is why a fee listed as 3% costs less than 3% of what you borrow.

The numbers

• New 7(a) fees are effective October 1, 2026 for fiscal year 2027 (SBA Information Notice 5000-881797, dated September 3, 2026)
• For loans with a maturity over 12 months, the upfront fee is 2% of the guaranteed portion for loans of $150,000 or less, and 3% for loans of $150,001 to $700,000 (SBA)
• For loans of $700,001 to $5,000,000, it is 3.5% of the guaranteed portion up to $1,000,000, plus 3.75% of the guaranteed portion above that (SBA)
• Loans of $700,000 or less to manufacturers, certain food supply chain businesses, and businesses in rural areas have a 0% upfront fee (SBA)
• Loans with a maturity of 12 months or less carry a 0.25% upfront fee on the guaranteed portion (SBA)
• For most 7(a) loans, SBA guarantees up to 85% of loans of $150,000 or less and up to 75% of larger loans (SBA)
• Lenders also pay SBA an annual service fee of 0.55% of the outstanding guaranteed balance and may not pass it on to the borrower (SBA)
• The maximum 7(a) loan amount is $5 million (SBA)

Why the guaranteed part matters

The guarantee means that if the borrower defaults, SBA covers an agreed share of the lender's loss. The fee pays for that protection, so it is priced on the protected amount.

The loan size still decides which rate applies. The rate is then applied only to the guaranteed share.

The Real Cost lens on three loan sizes

These examples assume the maximum guarantee, a term longer than 12 months, and no fee exception.

• $100,000 loan: 85% guaranteed is $85,000. A 2% fee is $1,700, which is 1.7% of the loan.
• $500,000 loan: 75% guaranteed is $375,000. A 3% fee is $11,250, which is 2.25% of the loan.
• $2,000,000 loan: 75% guaranteed is $1,500,000. The fee is 3.5% of the first $1,000,000, or $35,000, plus 3.75% of the next $500,000, or $18,750, for $53,750, about 2.69% of the loan.
• The same $500,000 loan to a manufacturer has no upfront fee this year.

The useful number to compare is the fee in dollars and as a share of the full loan, alongside the interest rate. The posted percentage alone overstates the fee.

What this means

The fee schedule changes each federal fiscal year, which starts October 1. A loan approved in September and one approved in October can carry different fees.

The exceptions matter as much as the rates. For a manufacturer or a rural business borrowing $700,000 or less, the upfront fee is zero this year.

What this is NOT

This article explains how the SBA 7(a) upfront fee is calculated. It does not recommend any loan, lender, or financing choice, and it is not a quote. The examples assume the maximum guarantee, a term over 12 months, and no fee exception; actual guarantee percentages, fees, and interest rates are set loan by loan. It does not cover SBA Express, Export Working Capital, Working Capital Pilot, or 504 loans, which have their own fee rules, or rules for multiple loans approved within 90 days. Fee details come from SBA's notice for loans approved between October 1, 2026 and September 30, 2027.

Sources

• U.S. Small Business Administration, Information Notice 5000-881797, FY 2027 7(a) Program Fees: https://legacy.sba.gov/document/information-notice-5000-881797-fy-2027-7a-program-fees
• U.S. Small Business Administration, SBA lenders, 7(a) terms, conditions and eligibility: https://www.sba.gov/sba-lenders
• U.S. Small Business Administration, 7(a) loans: https://www.sba.gov/funding-programs/loans/7a-loans