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As the Federal Reserve has steadily increased the market prime rate, SBA loan rates have climbed accordingly.
Nevertheless, government small-business loans are still the holy grail for many business owners. And SBA loan interest rates continue to be some of the most competitive among lenders.
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Current SBA 7(a) loan interest rates
SBA loan size | Maximum interest rate |
|---|---|
$50,000 or less | 15%. |
$50,001 to $250,000 | 14.5%. |
$250,001 to $350,000 | 13%. |
$350,001 or more | 11.5%. |
*Rates calculated with the current prime rate of 8.5%. Updated September 2024. | |
Keeping up on the Small Business Administration’s terms and rates is part of a smart approach to finding a small-business loan.
The 7(a) loan is the SBA’s most popular product and offers a flexible sum of cash for a variety of uses, including managing daily operations, purchasing new products and refinancing high-interest loans.
Business borrowers also find low-cost financing for land and other major purchases with SBA 504 loans.
How SBA loan rates are set
The SBA sets interest rate guidelines for lenders, which helps keep small-business owners' borrowing costs low.
Interest rates for SBA 7(a) loans are the daily prime rate, which changes based on actions taken by the Federal Reserve, plus a lender spread. The spread is negotiated between the borrower and the lender, and can result in either fixed or variable interest rates. However, the SBA caps the maximum spread lenders can charge based on the size of the loan.
A lender providing an SBA loan may also calculate interest rates using the one-month London Interbank Offered Rate plus 3% or the SBA’s optional peg rate instead of the daily prime rate.
Here’s a breakdown of SBA business loan terms and rates, including interest and fees.
SBA 7(a) interest rates
Loan size | $50,000 or less | $50,001 - $250,000 | $250,001 - $350,000 | $350,001 or more |
Maximum interest rate | *Prime + 6.5% | *Prime + 4.5% | *Prime + 4% | *Prime + 3% |
*The current prime rate, as of August 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.
Remember that interest rates make up only part of your expenses. Your APR reflects your true cost of borrowing, including your interest rate and all fees associated with the loan.
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SBA 7(a) loan terms
7(a) loans do not have a minimum loan amount and max out at $5 million.
The SBA guarantees 85% of your loan if it’s less than $150,000 and 75% if it’s more than $150,000. However, it limits guarantees to $3.75 million.
SBA loans aren’t easy to qualify for. Learn about SBA loan requirements to make sure they’re right for you.
SBA loan fees
SBA 7(a) loans come with two types of fees: guarantee fees and annual service fees. Guarantee fees cover the SBA’s costs in case of default, while service fees compensate lenders for making and administering loans.
7(a) loan guarantee fees are based on the loan amount and maturity date and apply only to the guaranteed portion of the loan. Lenders are required to pay the SBA the guarantee fee, but some pass the expense on to you. However, the SBA limits the maximum amount you will be charged.
The SBA sets and announces guarantee fees every fiscal year. For the 2024 fiscal year, which runs from Oct. 1, 2023 to Sept. 30, 2024, the fees are as follows:
Loans with terms of 12 months or less:
Loans of $1,000,000 or less: No guarantee fee.
Loans from $1,000,001 and up: 0.25% of the guaranteed portion.
Loans with terms exceeding 12 months:
Loans of $1,000,000 or less: No guarantee fee.
Loans from $1,000,001 to $2,000,000: 1.45% of the guaranteed portion up to $1,000,000, plus 1.7% of the guaranteed portion over $1,000,000.
Loans from $2,000,001 and up: 3.5% of the guaranteed portion up to $1,000,000, plus 3.75% of the guaranteed portion over $1,000,000.
CDC/504 loans
Business borrowers looking to buy land, buildings or major equipment with long-term, fixed-rate financing can apply for SBA 504 loans. These loans are partially funded by certified development companies, nonprofit organizations focused on community economic development. The loans require collateral, typically the assets that are being financed, as well as personal guarantees from the principal borrowers.
CDC/504 SBA loan terms
504 loans are available in 10-, 20- or 25-year terms.
The maximum loan amount is $5.5 million.
How 504 loan rates are set
Small-business owners seeking a 504 loan are on the hook for a down payment of at least 10% of the cost of the project. A traditional lender, such as a bank, puts up 50% of the loan, and a certified development company puts up as much as 40%. The SBA guarantees 100% of the CDC portion of the loan.
SBA 504 loan terms are primarily made up of the following:
An interest rate based on the Treasury bond rate.
A guaranty fee that is paid to the SBA.
A servicing fee that is paid to the CDC.
A fee paid to the central servicing agent.
When applying, you'll be quoted an effective interest rate, which is the sum of those three fees and the Treasury bond rate. However, you'll may also have to pay a guaranty fee, CDC fee, as well as some additional fees, meaning your total cost of borrowing (or annual percentage rate) will be slightly higher than your effective rate.
The bottom line on SBA loan rates
SBA loans give you the best interest rates, though the application process can be complicated and time-consuming. If you find yourself in need of money fast, numerous online lenders can help you get the capital you need. However, their business loan rates may be less favorable.
