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As the Federal Reserve steadily raised the market prime rate, SBA loan rates rose accordingly.
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Current SBA 7(a) Loan Rates
|
SBA loan size |
upper limit interest rate |
|---|---|
|
Under $50,000 |
15%. |
|
$50,001 to $250,000 |
14.5%. |
|
$250,001 to $350,000 |
13%. |
|
Over $350,001 |
11.5%. |
|
*Prices are calculated using the current prime rate of 8.5%. Updated in March 2024. |
|
How to set SBA loan interest rates
The SBA sets interest rate guidelines for lenders that can help keep borrowing costs low for small business owners.
The interest rate on an SBA 7(a) loan is the prime rate plus the lender's spread, which changes daily based on Federal Reserve actions. The spread is negotiated between the borrower and the lender and can be a fixed or floating rate. However, the SBA places limits on the maximum spread that lenders can charge based on the size of the loan.
Here are the terms and conditions for SBA business loans and a breakdown of interest rates, including interest and fees.
SBA 7(a) interest rate
|
loan size |
Under $50,000 |
$50,001 – $250,000 |
$250,001 – $350,000 |
Over $350,001 |
|
upper limit interest rate |
*Prime + 6.5% |
*Prime + 4.5% |
*Prime + 4% |
*Prime + 3% |
|
*Prime rate as of March 2024 is 8.5%. |
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SBA 7(a) Loan Terms
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There is no minimum loan amount for 7(a) loans, and the maximum amount is $5 million.
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The SBA guarantees 85% of loans under $150,000 and 75% of loans over $150,000. However, the amount guaranteed is limited to $3.75 million.
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Qualifying for an SBA loan isn't easy. Learn about SBA loan requirements and see if it's right for you.
SBA loan fees
SBA 7(a) loans have two types of fees: a guarantee fee and an annual service fee. The guarantee fee covers the SBA's costs in the event of a default, and the service fee compensates the lender for originating and administering the loan.
The 7(a) loan guarantee fee is based on the loan amount and maturity date and applies only to the guaranteed portion of the loan. The lender will have to pay a security fee to her SBA, but some will pass that cost on to you. However, the SBA limits the maximum amount that can be charged.
The SBA sets and publishes the guarantee fee each year. Fees for fiscal year 2024, October 1, 2023 through September 30, 2024, are as follows:
Loans with a term of 12 months or less:
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Loans of $1 million or less: There is no guarantee fee.
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Loans of $1,000,001 or more: 0.25% of the guarantee portion.
Loans with a term longer than 12 months:
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Loans of $1 million or less: There is no guarantee fee.
-
Loans between $1,000,001 and $2,000,000: 1.45% of the guaranteed portion up to $1,000,000 and 1.7% of the guaranteed portion above $1,000,000.
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Loans of $2,000,001 or more: 3.5% of the guaranteed portion up to $1,000,000 and 3.75% of the guaranteed portion above $1,000,000.
CDC/504 loan
Business borrowers looking to purchase land, buildings, or major equipment with long-term fixed-rate financing can apply for an SBA 504 loan. These loans are funded in part by Certified Development Corporations, which are nonprofit organizations focused on local economic development. Loans require collateral (usually the property being financed) and a personal guarantee from the primary borrower.
CDC/504 SBA Loan Terms
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The 504 loans are available with terms of 10, 20, or 25 years.
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The loan limit is $5.5 million.
504 How to set loan interest rates
Small business owners seeking a 504 loan are looking for a down payment of at least 10% of the project cost. Traditional financial institutions such as banks pay 50% of the loan, and certified development companies pay up to 40%. The SBA guarantees him 100% of the CDC portion of the loan.
SBA 504 loan terms primarily consist of:
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Interest rate based on government bond interest rate.
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Guarantee fees paid to the SBA.
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Service fees paid to CDC.
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Fees paid to central service agents.
When you apply, you will be presented with an effective interest rate, which is the sum of these three fees and the government bond interest rate. However, you may also have to pay warranty fees, CDC fees, and some additional fees. This means that the total cost of borrowing money (or the annual percentage rate) is slightly higher than the effective interest rate.
