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Key Takeaways
Interest rates on SBA 7(a) loans range from 11.50% to 16.50%, depending on whether it's a fixed-rate or variable-rate loan. The SBA caps interest rates to make loans available to financially distressed businesses. Loans over $1 million must take into account the SBA loan fee, which is charged for guaranteeing and servicing the loan.
As the Federal Reserve continues to raise interest rates to combat inflation, business owners are looking for affordable ways to get the financing they need to fund their operations. SBA loans are guaranteed by the U.S. Small Business Administration and have maximum interest rates that are much lower than other loans. Interest rates on SBA loans tend to be lower than the average business loan rate, but the actual interest rate your business receives will vary depending on the lender and the loan amount.
Bankrate Insights
New SBA rule changes went into effect in May 2023, aimed at streamlining the lending process and increasing access to underserved markets.
SBA 7(a) Loans
SBA 7(a) loans are the most common type of SBA loan. There are several types of 7(a) loans, including:
Most SBA loans, regardless of the lender, are subject to maximum fixed or variable interest rates. The only exceptions are export working capital loans, which do not have a maximum interest rate limit. Below are the maximum interest rates for all other types of 7(a) loans:
Bankrate Insights
Based on data from the SBA's Weekly Lending Report, the average loan size for an SBA 7(a) loan in fiscal year 2024 is $422,772 as of February 26, 2024. And the majority of these loans are being funded in the most populous states: California, Florida, and Texas.
Interest Rate: SBA 7(a) Variable Rate Loan
7(a) Loan Amount Maximum Interest Rate Up to $50,000 15.00% $50,001 to $250,000 14.50% $250,001 to $350,000 13.00% Over $350,000 11.50%
SBA loan rates are current as of February 2024 and are calculated at the current prime interest rate of 8.50%.
Interest Rate: SBA 7(a) Fixed Rate Loan
7(a) Loan Amount Maximum Fixed Rate Up to $25,000 16.50% $25,000 to $50,000 15.50% $50,001 to $250,000 14.50% Over $250,000 13.50%
SBA loan rates are current as of February 2024 and are calculated at the current prime interest rate of 8.50%.
Bankrate Insights
SBA 7(a) loans are the most common, but SBA Microloans and Community Advantage Loans have relaxed eligibility criteria, making them more accessible to businesses with limited revenue and lower credit scores.
How the SBA 7(a) Rate is Determined
Like any business loan, interest rates on SBA loans vary depending on your company's financial situation, your credit score, the size and term of your loan, the lender you work with, your industry, and other factors.
The SBA sets maximum interest rates for fixed and variable loans, so any SBA 7(a) loan you select cannot exceed the set interest rate. Maximum fixed interest rates are published on the SBA's FTAwiki. For variable rate loans, the maximum interest rate is the base rate plus the set interest rate, which is determined by the loan's maturity date.
Loan Amount Variable Rate Up to $50,000 Base Rate + 6.5% $50,001 to $250,000 Base Rate + 6.0% $250,001 to $350,000 Base Rate + 4.5% Over $350,000 Base Rate + 3.0%
The base rate for a variable loan is based on either:
Prime Rate: An interest rate based on the federal funds rate set by the Federal Reserve. Optional Pegged Rate: An interest rate published quarterly by the SBA.
When comparing loans, use a business loan calculator to see how different interest rates will affect your monthly payments.
SBA 7(a) Loan Fees
With an SBA 7(a) loan, you won’t have to pay processing fees, funding fees, application fees, or other typical fees found with other business loans. However, you will still have to pay a guarantee fee and an annual servicing fee.
The guarantee fee helps cover the SBA's costs if the loan defaults, and the servicing fee is compensation to the lender for participating in and issuing the SBA loan.
Most SBA loans are guaranteed up to 85 percent for loans under $150,000 and up to 75 percent for loans over $150,000. Express loans are guaranteed up to 50 percent, and Export Express loans are guaranteed up to 90 percent.
SBA Annual Service Fee
According to the SBA, the annual servicing fee for fiscal year 2024 (which begins Oct. 1, 2023) will be based on the total loan amount.
Loan Amount New Loan Fee Up to $1,000,000 0% $1,000,001 to $5,000,000 0.55% of the guaranteed portion of the outstanding loan balance
SBA Guarantee Fee
The SBA guarantee fees for loans repaid within 12 months based on FY 2024 are as follows:
Loan amount Guarantee fee for loan periods of less than 12 months Up to $1,000,000 0% $1,000,001 or more 0.25% of the guaranteed portion
The SBA guarantee fees for loans taking more than 12 months to repay based on FY 2024 are as follows:
Loan Amount Guarantee Fee for Loans Over 12 Months Up to $1,000,000 0% From $1,000,001 to $2,000,000 1.45% of the guaranteed portion up to $1,000,000, plus 1.70% for amounts over $1,000,000 From $2,000,001 to $1,000,000 3.50% of the guaranteed portion up to $1,000,000, plus 3.75% for amounts over $1,000,000
CDC/504 Loan
SBA 504 loans are available through Certified Development Companies (CDCs). CDCs are certified by the SBA to regulate nonprofits and promote local economic development. CDCs can help you gather the information you need for a 504 loan and find the right lender.
A 504 loan is a long-term, fixed-rate loan to help grow your business. It can be used for major fixed assets, such as purchasing real estate like land, buildings, machinery, and equipment. However, it cannot be used for working capital.
CDC/504 Loan Terms
504 loans have loan terms of 10, 20, or 25 years. The maximum loan amount for a 504 loan is $5.5 million. Like SBA 7(a) loans, maximum interest rates and additional fees apply to 504 loans.
How SBA 504 Loan Interest Rates Are Set
Businesses are required to make a 10 percent down payment on a 504 loan. From there, CDC funds 40 percent of the loan and the selected lender funds 50 percent. The SBA guarantees the 40 percent that CDC funds.
Lenders set the loan terms and interest rates but follow SBA standards. The interest rate on a 504 loan is typically 3% of the total debt and is determined by the current market interest rate on the 10-year U.S. Treasury note. Fees on a 504 loan can be included in the loan amount.
Frequently Asked Questions About SBA Loan Interest Rates
Is getting an SBA loan a good idea?
Compared to other business loan options, SBA loans are lower risk because they have capped interest rates, lower fees, and are guaranteed by the Small Business Administration. If your business qualifies for an SBA loan, you'll have access to resources, a variety of loan types, and longer repayment terms.
Is it hard to get an SBA loan?
SBA loans can be difficult to obtain because they often require a great deal of documentation to show you can repay. Each lender also sets its own requirements that a business must meet in order to apply, such as a business's annual revenue, how long it's been in business, and a minimum credit score. These requirements can be out of reach for some small businesses, such as startups. However, some lenders, such as those offering SBA microloans, set the bar lower.
What is the loan term for an SBA loan?
Loan terms vary depending on the type of loan, but most SBA 7(a) loans typically have loan terms of 5, 10 or 25 years.
What other fees can SBA lenders charge?
For SBA 7(a) loans, SBA lenders may charge a prepayment penalty, in addition to closing costs, late fees, and introduction fees. They may also charge a packaging fee of up to $5,000 to cover the costs of putting together your loan documents so the SBA can review them. However, they are prohibited from charging origination or application fees.