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. But 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:
Prime rate
Optional peg rate
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 3% to 8% above the base rate. Use the following table to compare rates for different loan sizes and term lengths. The current (April 2, 2024) Wall Street Journal Prime Rate is 8.5%.
Amount
Maximum Fixed Rate
$25,000 or less
Prime +8%
$25,000 – $50,000
Prime +7%
$50,000 – $250,000
Prime +6%
Greater than $250,000
Prime +5%
Amount
Maximum Variable Rate
Up to $50,000
Prime + 6.5%
$50,000 to $250,000
Prime + 6.0%
$250,000 to $350,000
Prime + 4.5%
Greater than $350,000
Prime + 3.0%
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.
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 the same as SBA 7(a) loans.
SBA Community Advantage loan rates
The SBA Community Advantage loan program was created to help businesses in underserved markets. These loans were capped at $350,000. Interest rates were negotiated by the lender but were subject to the SBA’s maximums. This program was sunsetted in October 2023. Lenders under this program are now licensed as Community Advantage Small Business Lending Companies in the 7(a) loan program and will continue to provide access to financing to underserved communities.
Typical SBA loan fees.
In addition to paying interest on SBA loans, borrowers may also pay an upfront SBA Guaranty Fee.
Upfront fee on SBA 7(a) loans.
This fee is based on the approved loan amount, including both the guaranteed and the unguaranteed portions.
Loans with 12-month maturity or less
Loan Amount
Fee
$1 million or less
0%
$1 million+
0.25% of the guaranteed portion
Loans with more than 12-month maturity
Loan Amount
Fee
$1 million or less
0%
$1 million – $2 million
1.45% of the guaranteed portion
$2 million+
3.5% of guaranteed portion up to $1,000,000 PLUS 3.75% of the guaranteed portion over $1,000,000
Frequently asked questions
SBA loan rates vary depending on several factors, including the type of SBA loan, the size, and the maturity date. The current prime rate (as of April 2, 2024) is 8.5%. That means SBA 7(a) loan fixed rates can range between 13.5% and 16.5% depending on your loan terms.
There are no interest-free SBA loans. Direct lenders will always charge interest on SBA loans. During the early days of the COVID-19 pandemic, there was some temporary relief passed for business owners with existing SBA loans. This allowed for the SBA to pay for six months of principal, interest, and fees for borrowers with 7(a), 504, or microloans. However, the cutoff date was for loans approved by September 27, 2020.
An SBA loan could come with either a fixed rate or a variable rate. The interest rate structure varies depending on which one you pick. Compare loan offers from multiple lenders to make sure you have as many options to choose from as possible.
To calculate monthly payments for your SBA loan, visit our SBA loan calculator. Need help finding the best interest rate for your SBA loan or other business term loan?
Apply with Lendio today!
Quickly compare loan offers from multiple lenders.
Applying is free and won’t impact your credit.
Apply now
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.
*The current prime rate, as of June 2024, is 8.5%. These interest rates apply to all loans within the 7(a) program, including SBA Express loans. Export working capital program loans are the only exception to this rule; lenders have the ability to set their own interest rates on EWCP loans.
These loans are usually based on the WSJ prime rate and the lender's margin, meaning that when the prime rate increases, so does the interest rate on the loan. This can cause a significant increase in the total cost of the loan for small business owners.
Interest rates for 7(a) loans are negotiated between the borrower and the lender, but are subject to SBA maximums, which are pegged to the prime rate or an optional peg rate. Interest rates may be fixed or variable.
Mortgage rates are expected to go down in the second half 2024. Depending on which forecast you look at for housing market predictions in 2024, 30-year mortgage rates could end up between 6.5% and 7% by the end of the year.
The interest rate on federal direct undergraduate loans will be 6.53%. That's the highest rate in at least a decade, according to higher education expert Mark Kantrowitz. The undergraduate rate for the 2023-2024 year is 5.5%.
In FY 2021, the 7(a) loan program had a default rate of 1.02 percent and a charge-off rate of 0.15 percent. These rates are significantly lower than the FY 2018 default rate of 9.04 percent and charge-off rate of 4.75 percent.
Do SBA loans require a down payment? Yes, the minimum SBA loan down payment requirement is 10% for 7(a) and 504 loans, although this amount can vary based on a business's cash flow and collateral. For example, weak cash flow or low-value collateral can increase the down payment requirement to 30% of the loan amount.
SBA loan rates vary depending on several factors, including the type of SBA loan, the size, and the maturity date. The current prime rate (as of June 1, 2024) is 8.5%. That means SBA 7(a) loan fixed rates can range between 13.5% and 16.5% depending on your loan terms.
Refinancing your SBA loan with a different lender can help you secure repayment terms that better fit into your financial situation. Doing so can result in lower monthly repayments, a reduced interest rate or an extended loan term.
Average business loan interest rates range from 6.13% to 12.36% at banks. Online loans may have higher rates. Bank and SBA loans tend to offer the lowest interest rates, but require strict requirements to qualify.
What is the current SBA 7(a) loan interest rate? The current SBA 7(a) loan interest rate is 11.25% for loans of $50,001 and up, 12.25% for loans of $25,001 to $50,000, and 13.25% for loans of $25,000 or less. The Current prime rate is 8% as of May 2023.
Whether or not you should be paying off an SBA loan early will depend largely on if you would be stuck paying a penalty and how large that penalty is. If you can pay the penalty and still end up saving money on interest, it could justify the prepayment. Not all loans penalize you for prepaying a loan.
Other features include high loan amounts of up to $5 million and more extended repayment periods of anywhere from five to 10 years – or even 25 years for real estate-related financing. You'll find that SBA 7(a) interest rates are either variable or fixed.
The 30-year fixed mortgage rate is expected to fall to the mid-6% range through the end of 2024, potentially dipping into high-5% territory by the end of 2025. However, recent economic developments have led some forecasters to believe that rates will remain elevated at around 7% for the remainder of this year.
Do SBA loans require a down payment? Yes, the minimum SBA loan down payment requirement is 10% for 7(a) and 504 loans, although this amount can vary based on a business's cash flow and collateral. For example, weak cash flow or low-value collateral can increase the down payment requirement to 30% of the loan amount.
If your loan's terms exceed 15 years, you'll have to pay a prepayment penalty. Generally speaking, the purpose of the penalty is to allow your lender and the SBA to recoup the interest they'll lose. The fee you'll pay will depend on the timing of your prepayment.
Introduction: My name is Dan Stracke, I am a homely, gleaming, glamorous, inquisitive, homely, gorgeous, light person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
 Stock Forecast, Price Targets and Analysts Predictions - TipRanks.com)