Guaranteed loans are primarily designed for small businesses. The interest rates for these loans are higher than for most other loans. There is also a guarantee fee that is usually three to four percent of the dollar amount on the guaranteed portion of the loan. Though there are numerous charges for a guaranteed loan, there are also numerous benefits.

Types of Guaranteed Loans

Guaranteed loans are usually offered by the Small Business Administration (SBA), the Business and Industry (B&I) loan program, or the Veterans Affairs (VA) program. The VA loan is less common than the other two options. These loans are only offered to recognized military veterans.

An SBA guaranteed loan guarantees up to 80 percent of the loan value if the loans are $100,000 or less. If loans are over $100,000, up to 75 percent of the loan is guaranteed. The maximum amount for a guaranteed SBA loan is $750, 000. SBA does not make loans and does not have grants. This organization simply evaluates businesses and guarantees loans from other financial institutions.

B&I guaranteed loans are designed for businesses in rural areas. Each guaranteed loan must be made by commercial lenders in the area of the business. Up to 90 percent of loans may be guaranteed by the B&I program. The loans may be used for industrial acquisitions, repair, construction, modernization, expansion, conversion, development, equipment, start-up costs, pollution control, marketing, and for refinancing certain projects.