If you get an SBA 7(a) loan for your business, the guarantee doesn’t protect you from any losses. Instead it offers protection against losses to the commercial lender that provides the loan.
The loan guarantee gives a commercial lender an incentive to provide a loan for business, a real estate purchase and/or other uses that would be too risky for them without a guarantee from the US Government.
The SBA provides a guarantee for 75% of a loan amount greater than $150,000, and an 85% guarantee if the loan is $150,000 or less. For example, if a lender provides a loan of $200,000, the SBA guarantees they will not have any losses for up to 75% of the loan or $150,000, so their maximum potential loss is $50,000.
The maximum loan under the SBA 7(a) loan program is $5,000,000 and the maximum guarantee is $3,750,000.
Most lenders would not provide loans to small businesses unless they received a guarantee from the SBA, because of the high default rate and risk of potential loss to the lender.