Compare Small Business Loans
SBA loan rates are among the lowest available of all small business financing options. The U.S. Small Business Administration (SBA) offers a variety of loan and line of credit programs, but its two most popular are the 7(a) and CDC/504 loans. We’ve rounded up the rates for each, plus rates for those seeking emergency SBA funding (rates listed here are not APRs).
Current SBA Loan Rates
|SBA 7(a) Loans||SBA CDC/504 Loans||SBA Disaster Loan||PPP Loan|
|5.5% - 11.25%||About 2.81% - 4%*||2.75% - 3.75%||1% for portions not forgiven|
*Effective interest rate
Current SBA 7(a) Loan Rates
- Amounts up to $5 million.
- Terms up to 25 years, but most standard 7(a) loans for working capital or equipment purchases have a term of five to 10 years.
- For rates, see charts below.
The 7(a) loan is the SBA’s flagship loan program. There are several types of 7(a) loans available, including Standard 7(a) loans up to $5 million for general business expenses and 7(a) Express loans up to $1 million (through Dec. 31, 2020) for urgent funding needs. Beginning Jan. 1, 2021, SBA Express loans will once again be capped at $350,000.
The 7(a) program recently expanded to incorporate the Paycheck Protection Program, the emergency loan program for businesses impacted by the COVID-19 pandemic. PPP loans are available up to $10 million with the ability to be fully or partially forgiven. The maximum interest rate on PPP loans is 1% and repayment terms span five years with the option to defer payment for six months. Congress extended the PPP application deadline from June 30 to Aug. 8, 2020.
PPP loans are separate from the SBA’s Economic Injury Disaster Loan (EIDL), which is not forgivable but comes with the possibility of an advance up to $10,000 that does not need to be repaid. Small businesses may apply for an EIDL through Dec. 21, 2020, for funding up to $2 million which may be repaid over 30 years with payments deferred for the first year. The maximum interest rate for a small business is 3.75%. Nonprofits pay a maximum rate of 2.75%.
Current 7(a) Variable Rates
For non-emergency 7(a) loans, the SBA sets a maximum variable interest rate based on what banks charge. The current prime rate is 3.25% as of June 1, 2020.
Maximum Interest Rates for Variable 7(a) Loans
|7(a) Loan Amount||Less Than 7 Years||7 Years or Longer|
|$25,000 or less||7.5%||8%|
|$25,001 - $50,000||6.5%||7%|
|More than $50,000||5.5%||6%|
Keep in mind your variable interest rate may be lower depending on the interest rate your bank sets.
Maximum Interest Rates for Variable SBA Express Loans
|Loan Amount||Maximum Variable Interest Rate|
|$50,000 or less||9.75%|
|$50,000 or more||7.75%|
Current 7(a) Fixed Rates
Rates for standard 7(a) loans and Express loans may be fixed instead of variable. The SBA sets a cap for these rates as well.
Maximum Interest Rates for Fixed 7(a) and Express Loans
|Loan Amount||Maximum Fixed Rate|
|$25,000 or less||11.25%|
|More than $250,000||8.25%|
SBA Guaranty Fees for 7(a) Loans
The reason SBA loan rates are relatively low is because these loans are backed by the federal government. In exchange for a fee, which we’ll describe in greater detail below, the SBA guarantees a certain portion of each loan – if borrowers default, lenders are guaranteed to recoup a majority of their funds. The maximum amount they may get back depends on the type of loan and the amount:
- 85% of 7(a) loans up to $150,000.
- 75% of 7(a) loans of more than $150,000.
- 50% of 7(a) Express loans.
How the Guaranty Fee Works
The SBA charges a one-time guarantee fee, also known as a guaranty fee, in addition to an annual service fee. Guaranty fees are based on the loan amount and repayment term, but are only charged on the guaranteed amount of the loan. Lenders will initially pay the guaranty fee, but have the option of passing this fee onto the borrower. They cannot pass on the cost of the service fee but are able to collect expenses related to your loan closing.
Here are the guaranty fees for 7(a) loans that have repayment terms exceeding one year:
SBA 7(a) Guaranty Fee
|$150,000 or less||2% of guaranteed portion|
|$150,001 to $700,000||3% of guaranteed portion|
|$701,001 to $5 million||3.5% of guaranteed portion up to $1 million, plus 3.75% of the guaranteed portion over $1 million|
Short-term 7(a) loans with repayment terms less than one year are subject to a guaranty fee of 0.25% of the guaranteed amount. Express 7(a) loans for veterans or their spouses do not come with guaranty fees.
Guaranty Fee Example
Let's say you receive a $400,000 five-year loan and the SBA guarantees 75%. The guaranteed portion of the loan would be $300,000 ($400,000 x 75%). Since your repayment term is longer than one year, the guaranty fee would be 3%. The total amount paid for the guaranty fee would be $9,000 ($300,000 x 3%).
Current SBA 504 Loan Rates
- Amounts up to $5.5 million, primarily used for commercial real estate purposes, which can include construction, renovation and purchase of land and/or equipment.
- Terms of 10, 20 or 25 years.
- Rates and fees are complicated, but effective rates below give a general idea.
The SBA CDC/504 loan is actually composed of two separate loans: one from a bank for 50% or more of the loan amount and one from a Certified Development Company (CDC) for up to 40%. As a borrower, you will be responsible for paying the remaining 10% as down payment. In some cases, you may have to contribute as much as 20%.
How are SBA 504 Loan Rates Calculated?
The effective interest rates set by the SBA are only for the CDC portion of the loan and are fixed. Banks set their own rates for their portion of the loan, which may be fixed or variable, but cannot exceed an SBA interest rate cap, 6% over the prime rate, or 9.25% as of July 1, 2020.
SBA CDC/504 Loan Rates
|Term||Effective Interest Rate*|
*As of July 2020
Since these loans are backed by commercial real estate, interest rates will typically be on the lower end. Rates for 504 loans usually reflect the interest rate for five- and 10-year U.S. treasury bonds. Your actual rates may be slightly higher or lower.
Fees for 504 Loans
The SBA may charge multiple fees to CDCs and the banks or other third-party lenders, some of which may be passed along to borrowers. Borrowers pay about 3.5% of net proceeds in fees plus ongoing service and guaranty fees. Borrowers may also have to pay a one-time participation fee plus fees for: packaging, close and underwriting the loan.
NOTE: Calculating interest rates and fees for 504 loans is a complex process that relies on several factors. Any rates that you see CDCs sharing would be estimates of actual effective interest rates.
504 Loans vs. 7(a) Loans
While 7(a) loans can be used for a similar purpose, 504 loans are a better option for most borrowers looking to finance commercial real estate. “It’s a terrific program for small business borrowers, especially in a market where we are at such low interest rates,” said Frank Keane, CEO of Eagle Compliance, the fiscal and selling agent for the 504 program. “Borrowers should be looking to lock in long-term fixed rate loans.”