An Overview Of SBA Loan Interest Rates
SBA loans can be an incredible financial resource for business owners who want to grow or sustain their companies. Understanding SBA loan interest rates is an important part of determining just how helpful this type of financing can be since costs vary based on many different factors. Explore the most popular SBA loan programs and their rate structures to find out which one is the best fit for your company.??
How SBA Loan Interest Rates Work
SBA loan rates are regulated by the U.S. Small Business Administration. Private lenders negotiate their own rates with each individual borrower. However, the offered loan rate cannot exceed the maximum set by the SBA for each loan program.?
The maximum is tied to a base rate, which can be one of the following:
In most cases, however, you’ll find that lenders use a prime rate as the base rate. The borrower is then charged a percentage over that base rate. That amount depends on the loan amount, the type of SBA loan, and the loan maturity date.?
Current SBA Loan Rates
Here is how each SBA interest rate breaks down based on the loan program and other details.?
SBA 7(a) Loan Rates
SBA 7(a) loans can be used for general working capital needs and have interest rates that can either be variable or fixed. Fixed rates have a higher premium but never change, even if the base rate increases over time. SBA 7(a) rates range from 2.25% to 8% above the base rate. Use the following table to compare rates for different loan sizes and term lengths.
SBA 504 Loan Rates
SBA 504 loans are designed to purchase assets that help with job creation or business growth, such as new facilities, machinery, or renovating an existing property. These loans are available through certified development companies (CDCs) and offer fixed interest rates.
You can apply for either a 10-year or a 20-year repayment period. The SBA 504 rates are incrementally pegged above the current rates for 5-year and 10-year U.S. Treasury issues. The rate typically totals 3% of the loan amount.?
SBA Microloan Loan Rates
Microloans from the SBA help newer small businesses with startup or expansion costs. Borrowers can get approved for up to $50,000, although the average loan size is $13,000. The maximum repayment term is six years. Expect SBA microloan rates to range from 8% to 13%.?
SBA Express Loan Rates
SBA Express loans allow for a shorter approval time, so you can get faster access to capital. In fact, you’ll get an initial response within 36 hours. The maximum loan amount is capped at $500,000, and rate maximums are broken down into the following two categories:
SBA Community Advantage Loan Rates
The SBA Community Advantage loan program was created to help businesses in underserved markets. These loans are capped at $350,000. Interest rates are negotiated by the lender but are subject to the SBA’s maximums of:
Prime rate + 6.5% for loans $50k or less
Prime rate + 6% for loans $50k-$250K
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Prime rate + 4.5% for loans $250k-$350k
Economic Injury Disaster Loan Rates
Economic Injury Disaster Loans (EIDL) are available to small businesses, agricultural cooperatives, and most nonprofit organizations located in a declared disaster area. The loans have no interest accrual for the first 12 months with no pre-payment penalties. Interest rates for these loans can’t exceed 4%.
Typical SBA Loan Fees
In addition to paying interest on SBA loans, borrowers may also pay fees both upfront and annually throughout the loan term. The fee depends on the loan amount.?
Upfront Fee
This fee is based on the approved loan amount, including both the guaranteed and the unguaranteed portions.
Ongoing Fee
Lenders may also charge an ongoing service fee for SBA loans over $500,000. The fee amounts to 0.55% of the guaranteed portion of the outstanding loan balance.
Need help finding the best interest rate for your SBA loan or other business term loan?
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Information provided on this blog is for educational purposes only and is not intended to be business, legal, tax, or accounting advice. The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of Lendio. While Lendio strives to keep its content up to date, it is only accurate as of the date posted. Offers or trends may expire or may no longer be relevant.