Cash Flow Solutions

What to Know About SBA Loan Rates

The Small Business Administration (SBA) acts as a bridge between small business owners and lenders. While the SBA doesn’t offer loans directly, it does guarantee loans made by its lending partners. 

One thing that makes SBA loans so appealing to business owners is their loan rate. SBA loan rates are typically lower than the average interest rate of a small business loan. 

Not every business owner who applies for funding gets approved and even those who get the go-ahead don’t always receive the full SBA loan amount they requested. However, SBA loan interest rates make them a financing option that’s worth exploring. 

What is the current interest rate on an SBA loan? 

The interest rate that a business owner will pay for an SBA loan depends on the type of loan they have and the amount they borrow. Here’s a breakdown of SBA loan types and their corresponding interest rate range.  

Loan Type  Interest Rate Range 
SBA 7(a) Loan – Fixed rate  12.75% to 15.75% 
SBA 7(a) Loan – Variable rate  10.00% to 12.50% 
SBA Express Loan  12.25% to 14.25% 
SBA Microloans  8.00% to 13.00% 
SBA 504 Loan  5.99% to 6.45% 
Economic Injury Disaster Loan  1.88% to 3.04% 
Military Reservist Economic Injury Loan   4.00% 

SBA 7(a) loans that feature variable rates have a tiered structure. The rate that applies to a business’ loan will depend on the amount borrowed and the loan’s maturity term. Here’s how rates for these loans compare. 

Loan Amount  Max rate if maturity is less than 7 years  Max rate if maturity is more than 7 years 
$25,000 or less  Base rate + 4.25%  Base rate + 4.75% 
$25,000 to $50,000  Base rate + 3.25%  Base rate + 3.75% 
$50,000 or more  Base rate + 2.25%  Base rate + 2.75% 

Borrowing a larger amount at a shorter term will result in the lowest rate overall. Meanwhile, borrowers who take out smaller SBA loans and choose longer maturity terms pay the highest rates. 

Fixed-rate 7(a) loans use a different structure to determine rates. With these loans, the rate is based on the amount and the prime rate. 

Loan Amount  Interest rate 
$25,000 or less  Prime rate, plus 6.00%, plus the 2.00% permitted by 13 CFR 120.215 
$25,000 to $50,000  Prime rate, plus 6.00%, plus the 1.00% permitted by 13 CFR 120.215 
$50,000 to $250,000  Prime rate, plus 6.00% 
$250,000 or more  Prime rate, plus 5.00% 

*This rate information is accurate as of February 16, 2023. For the most up-to-date rates, visit the SBA’s page about terms and conditions. 

How are SBA loan rates calculated? 

Interest rates for SBA loans are determined by the lender but are subject to SBA maximums. As mentioned, SBA loan rates may be variable or fixed, depending on the type of loan. 

Variable rate SBA loans may be set according to the lowest prime rate, the LIBOR rate, or an optional peg rate. The optional peg rate is a weighted average of rates the federal government pays for loans that have maturities similar to the average SBA loan. This rate is calculated quarterly. 

The prime rate represents the rate banks charge their most creditworthy customers. That rate is influenced by the federal funds rate, which is set by the Federal Reserve. When the federal funds rate increases or decreases, the prime rate can follow suit, affecting the upper and lower limits for SBA loan rates for 7(a) and Express loans. 

SBA 504 loan rates are tied to Treasury bond rates. More specifically, rates are pegged slightly above the current market rate for five and 10-year U.S. Treasuries. SBA microloan rates can vary based on the lender and how well a borrower satisfies credit and revenue requirements. Rates for EIDL loans are capped using a statutory formula. 

SBA loan rate FAQ 

Do SBA loans have fixed rates? 

SBA loans, like other small business loan options, can have fixed interest rates. A fixed interest rate may be preferable to a variable rate if a business owner anticipates interest rates increasing during the life of the loan. Fixed rates won’t change, allowing for predictability with regard to monthly payments. It’s also easier to calculate the total cost of borrowing for an SBA loan or any other business loan when the rate does not fluctuate. 

What are the average terms on an SBA loan? 

The maturity date for an SBA loan reflects the repayment term. SBA maturities can vary based on several factors, including the borrower’s ability to repay the loan, the purpose of the loan, and the useful life of assets being financed. The maximum maturity for working capital loans, inventory loans, and equipment loans is 10 years. The maximum maturity for real estate loans extends up to 25 years. 

What funding options are available if a business can’t get an SBA loan? 

Getting approved for an SBA loan can be challenging, as there are many requirements that borrowers need to meet. However, there are SBA loan alternatives a business owner can pursue to get the capital they need for their business. Options for borrowing include small business loans from traditional banks or credit unions, online small business loans, a business line of credit, and small business credit cards. 

For a small business loan or line of credit, lenders typically consider time in business, type of industry, and annual revenue. The personal credit history of the business owner can also factor into determining the type of financing and the terms for which they can qualify. 

For new businesses, a business credit card may be easier to secure as they may be able to be obtained solely based on the business owner’s personal credit.  This may require the business owner to sign a personal guarantee to open the account. 

A loan or business line of credit may offer the borrower access to a larger amount of funds. They can also offer more favorable interest rates than credit card APRs. Taking time to compare small business loan options or business credit lines can help small business owners and entrepreneurs find the financing that best fits their needs and budget. 

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