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Because they are backed by the Small Business Administration, SBA loan rates tend to be lower than average business loan rates. These loans are more competitive and have a set maximum interest rate, although the exact rate you pay will depend on your lender and how much your business needs to borrow.
Current SBA 7(a) loan interest rates
SBA 7(a) loans, the most common type of SBA loan, are not one-size-fits-all. As with any business loan, the interest rate you’re offered will vary based on your business’s finances, your creditworthiness, the loan size and term, your industry and other factors.
That being said, the SBA does set a maximum rate lenders can charge. For fixed-rate SBA 7(a) loans, the maximum is the prime rate plus a set interest rate. For variable-rate loans, the maximum is the base rate plus a set interest rate determined by the loan’s maturity date.
|Loan amount||Fixed rate||Variable rate — Less than 7 years||Variable rate — 7+ years|
|$25,000 or less||Prime rate + 6% + an additional 2%||Base rate + 4.25%||Base rate + 4.75%|
|$25,000 to $50,000||Prime rate + 6% + an additional 1%||Base rate + 3.25%||Base rate + 3.75%|
|$50,000 to $250,000||Prime rate + 6%||Base rate + 2.25%||Base rate + 2.75%|
|$250,000 or more||Prime rate + 5%||Base rate + 2.25%||Base rate + 2.75%|
SBA Express and Export Express loans, SBA 7(a) loans with a faster funding timeline, have a slightly higher maximum rate. The max is prime plus 6.5 percent for loans of $50,000 or less, and Prime plus 4.5 percent for larger loans.
How SBA rates are set
SBA interest rates are set by the lender. So while there is a maximum rate based on how much you borrow and whether you opt for a variable or fixed interest rate, the actual rate you receive can vary widely. The type of SBA loan you apply for, the lender you work with and your business and finances will all influence your rates.
When you’re comparing loans, try using a business loan calculator to see how different rates will affect your monthly payments.
SBA loan fees
The SBA charges a guarantee fee between 0.25 percent to 3.5 percent of the guaranteed portion of your SBA 7(a) loan.
The fee is determined by the type of loan and the amount you borrow. Larger loan amounts will have a higher guarantee fee. Importantly, the fee is only assessed on the funding the SBA backs. With the SBA guaranteeing up to 85% of a loan — or 90% for Export Express loans — it can be hefty. But total costs may still be less than conventional loans.
For example, the SBA will guarantee up to 75 percent of a $500,000 loan. The guarantee fee of 3 percent would be assessed on the guaranteed portion ($375,000), resulting in a total fee of $11,250.
Certified Development Companies (CDCs) offer 504 loans with 10- to 20-year terms. These loans are designed to fund the construction or purchase of buildings, facilities and large equipment.
Rates are fixed based on loan amount and term. The SBA does not provide an exact range, which is determined by your lender, but does state that rates are pegged above current market rates for 5- and 10-year U.S. Treasury issues.
These loans also come with fees, including packaging and closing fees, servicing and underwriter’s fees, and late and prepayment fees.
FAQs about SBA loan interest rates
For an SBA 7(a) loan, an SBA lender may charge a prepayment penalty along with closing costs, late payment and referral fees. They can also charge a packaging fee of up to $5,000 for putting together your loan documents for the SBA to review. However, they are prohibited from charging origination fees and application fees.
SBA 7(a) loans last up to 10 years for working capital and equipment. Real estate loans have terms of up to 25 years.