What closing costs are included in a business loan?

Business loan closing costs typically run 2–8% of the loan amount and include an origination fee, SBA guarantee fee (government-backed loans), legal fees, appraisal, title insurance (real estate deals), UCC filing fees, and documentation fees — most are deductible under IRS Section 162.

Business Loan Closing Costs: The Complete List

Unlike consumer mortgages, commercial loan closing costs vary widely depending on loan type, size, and whether real estate is involved. Here is every cost category you should budget for before closing.

Origination fee: 0.5–3% of the loan amount, paid to the lender at closing
SBA guarantee fee: 3.5% of the SBA-guaranteed portion for 7(a) loans over $150,000 (statutory; set by SBA annually)
Lender's legal fees: $1,000–$10,000 depending on deal complexity — borrower pays lender's counsel in most commercial deals
Appraisal: $500–$5,000 for commercial real estate; required for SBA 504 and real estate-secured 7(a) loans
Environmental Phase I Site Assessment: $2,000–$4,000 for commercial real estate transactions (required by most lenders)
Title insurance: required for commercial real estate deals; premium varies by property value and state
UCC filing fees: $50–$500 per filing per state for lien perfection on personal property collateral
Documentation / processing fees: $200–$2,000 for administrative preparation of loan documents
Escrow and recording fees: $200–$1,000 for recording mortgage/deed of trust with county recorder

SBA Guarantee Fee — The Largest Variable Cost

For SBA 7(a) loans, the guarantee fee is the largest variable closing cost and is set annually by SBA policy. For FY2025, the fee is 3.5% of the SBA-guaranteed portion for loans of $150,000–$700,000 and 3.75% for loans above $700,000. The SBA can waive or reduce guarantee fees by congressional action (this occurred during COVID relief periods). The fee is paid by the lender but almost always passed to the borrower — budget for it explicitly. For an SBA 7(a) loan with $500,000 guaranteed at 75%, the guaranteed portion is $375,000 — meaning the fee is $13,125 at 3.5%.

Tax Deductibility of Closing Costs

Under IRS Section 162, most business loan closing costs are deductible as ordinary and necessary business expenses — either immediately (if treated as a current business expense) or amortized over the life of the loan as loan origination costs. The IRS generally requires that loan origination fees and points be amortized over the loan term rather than deducted in full in year one. Legal fees paid for business loan documentation are separately deductible as professional services. Consult a CPA for the specific treatment of your transaction — real estate closing costs, SBA guarantee fees, and appraisal fees each have different deductibility timelines.

Example: SBA 7(a) Closing Cost Budget

A Dallas manufacturer borrows $750,000 via SBA 7(a). SBA covers 75% of this loan ($562,500 SBA-backed portion). Budget: origination fee 1.5% = $11,250; SBA guarantee fee 3.75% on $562,500 = $21,094; legal fees = $3,500; appraisal (equipment only, no RE) = $0; UCC filing = $250; documentation fee = $500. Total closing costs: approximately $36,594 — or 4.9% of the loan amount.

The SBA guarantee fee is non-negotiable and set by statute. It applies to the SBA-backed portion of the loan, not the full loan amount. On an SBA 7(a) loan above $700,000, budget for 3.75% of the SBA-backed portion at closing — this is a real cash outlay, not a financed cost.

Sources

SBA guarantee fees for 7(a) loans are set by the SBA Administrator annually under authority granted by the Small Business Act. For FY2025, the fee is 3.5% for loans $150K–$700K and 3.75% for loans above $700K on the guaranteed portion. — U.S. Small Business Administration — SBA SOP 50 10
IRS Publication 535 (Business Expenses) states that loan origination fees paid by a business borrower are generally amortized over the life of the loan under the effective interest method — not deducted in full in the year of origination. — IRS Publication 535 — Business Expenses
Environmental Phase I Site Assessments (required by most commercial real estate lenders) cost $2,000–$4,000 on average and assess whether a property has recognized environmental conditions that could impair value or create liability. — ASTM International — E1527-21 Phase I ESA Standard
The Federal Reserve's Survey of Terms of Business Lending (E.2) found that origination fees and other upfront charges on commercial and industrial loans ranged from 0.5% to 3.0% of the loan amount depending on loan size and borrower credit quality. — Federal Reserve — Survey of Terms of Business Lending (E.2)

Key takeaways

Budget 2–8% of the loan amount for total closing costs on a business loan — the range is wide because real estate deals (appraisal, title, Phase I) add $5,000–$15,000+ over non-RE deals.
The SBA guarantee fee is the largest variable cost on government-backed loans — 3.5–3.75% of the SBA-backed portion, not the full loan amount.
Most business loan closing costs are deductible under IRS Section 162, either immediately or amortized — track them carefully and discuss treatment with your CPA.
Legal fees for commercial loan documentation are paid by the borrower for lender's counsel — budget $1,000–$10,000 depending on deal complexity.
Ask for a closing cost itemization in writing before committing — lenders are required to disclose these, and surprises at closing are avoidable.