Typical Small Business Loan Fees

January 22, 2019 · 4 minute read

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Typical Small Business Loan Fees

An idea can’t become a business without the capital to get it off the ground. But a small business loan can certainly help turn a business idea into a reality.

And small business loans are for more than startups. Whether hiring more employees or purchasing more equipment or inventory, small business loans can provide the capital to make it happen.

In 2018, the average Small Business Administration (SBA) loan from the 7(a) loan program was for $417,316 . How big should your loan be? A great first step in determining loan amount is to assess the needs of the business you are trying to launch.

Do you need heavy equipment or specialized technology? How much space or staff will you employ? All aspects of your proposed business should be looked at. The next step is to look at past sales projections and confirm that you can afford the loan payments and fees associated with that loan amount.

A small business loan is not a decision that you should take lightly. There’s more to the loan than just the loan itself—the rates and fees that can be associated with a small business loan can make it much costlier than you expected. But what are the reasons you’d choose a small business loan in the first place?

Why Choose a Small Business Loan?

A small business loan may be right for you if:

•  You want to build business credit, allowing you to qualify for larger loans in the future

•  You want to scale your business

•  You want to improve your business with new equipment

•  You have the financial foundation to manage your loan debt

Small Business Loan Rates and Fees

Here are common fees associated with small business loans:

Application Fee

Lenders incur certain fees when processing your application (e.g. credit checks and property appraisals). This fee covers those costs.

Origination Fee

Lenders use origination fees to cover their administrative costs, like all the phone calls, emails and interviews it takes to finalize a small business loan. This fee varies from lender to lender.

Check Processing Fee

If you’re paying back your loan via check, you could to pay a fee to cover the time and personal labor it takes to process a check.

Guarantee Fee

If you’re taking out a loan through the Small Business Administration (SBA), you’ll have to pay a guarantee fee . This is because while the SBA guarantees loans, it doesn’t make loans, and thus, generally assesses a fee for its involvement.

Late Payment Fee

Like many loans, small business loans typically charge a fee when you make a late payment.

Underwriting Fee

The process of underwriting can be tedious. Your lender needs to comb through your business’ finances and review market research and historical trends. The underwriting fee covers the cost of underwriting.

Prepayment Fee

Some lenders charge you for paying your loan too early. They do this because they lose money in interest charges when you pay your loan principal before it’s due.

Read Next: Debt Financing a Small Business or Startup

Additional Funding Options

If these fees don’t sit well with you, there are other options.

Family and Friends

Many people start their business with money borrowed from family and friends. Using them as initial investors can help you stay out of debt, meaning that you can wait to get a small business loan when you need to borrow a larger sum. However, going into business with loved ones is a risk and could sour the relationship if things go south.


A number of small businesses have successfully been funded through sites like Kickstarter , GoFundMe and Indiegogo . A great idea with a strong marketing plan could generate enough excitement and financial support to get things going. However, crowdfunding sites require a percentage of the funding received and there’s a risk of idea theft or plagiarism.

Credit Card

Credit cards are a quick route to getting capital for your business without a lengthy application process. However, interest rates may be high and carrying significant credit card debt could potentially impact your credit score.

Getting Your Finances Ready for Small Business Ownership

Getting ready to open your own small business? Of course, everyone’s finances are different, but there are ways to make sure you’re prepared for the ups and downs of small business ownership.

First off, make sure you are diligently saving an emergency fund with at least three to six months of expenses. If you have a family or dependents, you may want to save even more to cover various family emergencies (knock on wood).

You may also want to make sure you’re not carrying credit card debt when you start your small business. By wiping out your credit card debt, it’s also one less thing to worry about when you’re trying to make your business turn profit. If you are carrying credit card debt, consolidating with a personal loan may help you pay it off faster and at a lower interest rate.

About SoFi

Getting ready to start your own small business? Keep SoFi in mind throughout your entrepreneurial journey. SoFi is a modern finance company that offers personal loans, student loan refinancing, and home loans, among other products.

And becoming a SoFi member gets you access to our community events and invaluable team of financial advisors.

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