An instrument used to estimate the cost associated with the government backing of a Small Business Administration (SBA) loan. It is a financial tool that determines the upfront charge levied by the SBA for guaranteeing a portion of the loan amount. For instance, using this tool, a borrower can ascertain the guarantee fee applicable to a $500,000 loan with an 85% SBA guarantee.
This estimation is crucial in financial planning for small businesses seeking capital. Accurate calculation enables business owners to factor this cost into their overall borrowing needs, leading to better budgeting and financial decision-making. Historically, these fees have varied based on loan size, guarantee percentage, and economic conditions, influencing the attractiveness and accessibility of SBA loans.
