SBA Loan Rates: Current Interest Rates

For many small-business borrowers, government-backed loans are the holy grail. SBA loan rates are some of the most competitive among lenders.

So keeping up on the SBA’s terms and rates is part of a smart approach to finding a business loan. The 7(a) loan is the Small Business Administration’s most popular product and offers a flexible sum of cash that can be used for anything from managing daily operations to purchasing new products and refinancing high-interest loans.

The SBA also sets interest rate guidelines for lenders, which helps keep the cost of borrowing low for small-business owners. Here’s a breakdown of SBA business loan rates and terms, including interest and fees.

SBA loan rates

SBA 7(a) loan terms:

• 7(a) loans do not have a minimum loan amount and max out at $5 million. The average SBA loan was around $374,000 in 2015.
• The SBA will guarantee 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.
• Nerd note: SBA loans aren’t easy to qualify for. Read up on SBA loan qualifications to make sure they’re right for you.

SBA 7(a) interest rates:

7(a) loan size (Repaid in less than 7 years)	$25,000 or less	$25,001 - $50,000	More than $50,000
Maximum Interest Rate	Prime + 4.25%	Prime + 3.25%	Prime + 2.25%

 

7(a) loan size (Repaid in more than 7 years)	$25,000 or less	$25,001 - $50,000	More than $50,000
Maximum Interest Rate	Prime + 4.75%	Prime + 3.75%	Prime + 2.75

The prime rate, hiked on Dec. 17, 2015, is 3.5%. For an SBA loan of less than $25,000 paid in less than seven years, for example, the maximum interest rate would be 7.75%.

Keep in mind that interest rates only make up part of your expenses. The true cost of borrowing is your annual percentage rate, or APR, which includes interest rates plus all fees associated with the loan.

How SBA loan rates are set: 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 charged by lenders based on the size and maturity of the loan. 

A lender providing an SBA loan may also calculate interest rates using the London Interbank Offered Rate one-month rate + 3% or the SBA’s optional peg rate instead of the daily prime rate.

Guaranty fees

7(a) loan guaranty fees are based on the amount of the loan and its maturity date, and only apply to the guaranteed portion of the loan. Lenders are required to pay the SBA the guaranty fee but may pass the expense on to you. However, the SBA has rules in place to limit the maximum amount you will be charged.

If your loan is less than $150,000, no guaranty fee is charged.

If your loan matures in less than a year and is more than $150,000, you’ll see a 0.25% guaranty fee.

However, if your loan is more than $150,000 and takes more than a year to mature, you’ll see a three-tier system:

• 3% guaranty fee on loans from $150,000 to $700,000
• 3.5% on loans from $701,000 to $1 million
• 3.75% on loans that are more than $1 million

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, they have less favorable APRs.

Find and compare small-business loans

NerdWallet has come up with a comparison tool of the best small-business loans to meet your needs and goals. We gauged lender trustworthiness, market scope and user experience, among other factors, and filtered lenders by categories that include your revenue and how long you’ve been in business.

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Jackie Zimmermann is a staff writer at NerdWallet, a personal finance website. Email: jzimmermann@nerdwallet.com. Twitter: @jackie_zm

To get more information about funding options and compare them for your small business, visit NerdWallet’s small-business loans page. For free, personalized answers to questions about financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.

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