What Are Current SBA Loan Rates?

Loans provided by the U.S. Small Business Administration (SBA) offer some of the best rates among all small business financing options. The SBA offers a variety of loan and line of credit programs, but its two most popular loan programs are the 7(a) and CDC/504 loans. We rounded up rates for the 7(a) and CDC/504 loan programs offered by the SBA (the rates listed here are not APRs).

SBA 7(a) Loan Rates as of January 2018

In the table below, we list the maximum interest rates for standard 7(a) loans. Interest rates on a 7(a) loan may be lower depending on whether the interest rate is fixed or variable and on what the lender charges.

7(a) Loan AmountLess Than 7 Year Repayment Term7 Year or More Repayment Term
$25,000 or less8.75%9.25%
$25,000 - $50,0007.75%8.25%
More than $50,0006.75%7.25%

The interest rates for the SBA CAPLines line of credit program are the same as the interest rates for the 7(a) loan above.

7(a) Express Loan Rates

The maximum interest rates for 7(a) Express loans are listed in the table below. Like standard 7(a) loans, 7(a) Express loans can have fixed or variable interest rates, which cannot exceed the maximums in the table below.

7(a) Express Loan AmountMaximum Interest Rates
$50,000 or less11.00%
More than $50,0009.00%

How Are 7(a) Loan Rates Calculated?

For standard 7(a) loans, the maximum interest rates are based on the Prime Rate plus additional interest charged by the lender. The additional interest is based on the loan amount and the repayment terms. 7(a) loan rates cannot exceed the rates in the table below.

7(a) Loan AmountLess Than 7 Year Repayment Term7 Year or More Repayment Term
$25,000 or lessPrime Rate + 4.25%

(4.50% + 4.25% = 8.75%)

Prime Rate + 4.75%

(4.50% + 4.75% = 9.25%)

$25,000 - $50,000Prime Rate + 3.25%

(4.50% + 3.25% = 7.75%)

Prime Rate + 3.75%

(4.50% + 3.75% = 8.25%)

More than $50,000Prime Rate + 2.25%

(4.50% + 2.25% = 6.75%)

Prime Rate + 2.75%

(4.50% + 2.75% = 7.25%)

As of December 2017, the Prime Rate is 4.50%.

Like standard 7(a) loans, 7(a) Express loans have interest rates based on the Prime Rate, but these interest rates are only based on the loan amount. 7(a) Express loans have maximum interest rates of the Prime Rate + 6.5% or Prime Rate + 4.5%.

7(a) Express Loan AmountMaximum Interest Rate
$50,000 or lessPrime Rate + 6.5%

(4.50% + 6.50% = 11.00%)

More than $50,000Prime Rate + 4.5%

(4.50% + 4.50% = 9.00%)

Guarantee Fees

Most SBA loans are made through an intermediary lender with a part of the loan amount guaranteed by the SBA. The SBA will guarantee up to 85% of 7(a) loans up to $150,000 and up to 75% of 7(a) loans of more than $150,000. The SBA will only guarantee up to 50% of 7(a) Express loans. 7(a) loans are subject to one-time guarantee fee charged by the SBA. Guarantee 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 guarantee fee, but have the option of passing this fee onto the borrower (and most do).

7(a) Loan AmountOne Year or Less Repayment TermMore Than One Year Repayment Term
$150,000 or less0.00%0.00%
$150,000 - $700,0000.25%3.00%
$700,000 - $5 million0.25%3.50%*

*For loans with guaranteed amounts over $1 million and terms longer than one year, the guarantee fee will be 3.5% of the guaranteed portion up to $1 million and 3.75% for the guarantee portion over $1 million.

For example, let’s say you are given a $400,000 five-year loan and the SBA guarantees 75% of this loan. The guaranteed portion of the loan would be $300,000 ($400,000 x 75%). Since your repayment term is longer than one year, the guarantee fee would be 3%. The total amount paid for the guarantee fee would be $9,000 ($300,000 x 3%).

Average SBA 504 Loan Rates as of January 2018

504 loans can only be used for real estate and long-term equipment purchases, and they come with 10 or 20 year terms. A 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 at least 10% as down payment, which is less than what’s required for a traditional real estate loan.

The interest rates set by the SBA are only for the CDC portion of the loan and are fixed. Banks may charge what they like for interest rates–however, since these loans are backed by real estate, interest rates will typically be on the lower end. The current estimated effective interest rates for the CDC loan are in the table below. Throughout 2011, the effective interest rates have been around 4% to 5% for both 10- and 20-year loans. The effective interest rates you see listed are estimates due to the complexity of calculating the rates. Actual rates may be slightly higher or lower.

CDC/504 LoanEffective Interest Rate

Interest rates for the 504 loan are typically lower than market rates, making them a competitive option for any small business owner. “It’s one of the best kept secrets in commercial finance if a business owner wants to buy property. It’s tough to get something better than the SBA 504 program,” said Chris Hurn, CEO of Fountainhead Commercial Capital.

How Are 504 Loan Rates Calculated?

Effective interest rates are calculated using a debenture/note rate and three annual fees. The debenture rate for the loan is based on market rates for U.S. Treasury yields and an additional spread (an interest rate swap rate). The note rate is the monthly equivalent of the debenture rate and is used to calculate the effective interest rate. The debenture rate for the 20-year 504 loan is based on the 10-year U.S. Treasury yield and swap rates. The 10-year 504 loan uses 5-year rates.

Since the debenture rates for the loans are based on fluctuating market rates, the debenture rate is set on a monthly basis. This means that the quoted effective interest rates for the CDC portion of the 504 loan will change monthly (however, once you get the loan, rates are fixed). “Effective rates are usually, as a good rule of thumb, about 150 to 200 basis points [1.5 to 2.0 percentage points] above the 10-year Treasury yield,” said Hurn.

When effective interest rates were set in November 2016, the 10-year U.S. Treasury yield was 2.08% and the comparable swap rate was 0.49%. This means that the debenture rate for the 20-year loan was 2.57% (2.08% + 0.49%). The current debenture rates for this month are in the table below.

CDC/504 LoanDebenture Rate

There are three annual fees that are included when calculating the effective interest rate: a servicing fee paid to the CDC, a servicing fee paid to the central servicing agent (currently Wells Fargo) and an annual fee paid to the SBA. The annual SBA fee is set at the beginning of each fiscal year, typically sometime in October.

Annual FeeRate
CDC servicing fee0.625%
Central servicing agent (CSA) fee0.100%
Borrower SBA fee0.642%*

*The Borrower SBA fee is 0.682% for debt refinancing loans.

The actual calculations for the effective interest rates are complex. Because of this, rates you see listed by CDCs are estimates of the actual effective interest rates, which are calculated by the CSA. It’s also important to note that one-time and upfront fees are not included in the effective interest rate.

While 7(a) loans can also be used for real estate, 504 loans are a better option for most borrowers. “It’s a terrific program for small business borrowers, especially in a market where we are at such low interest rates. Borrowers should be looking to lock in long-term fixed rate loans,” said Frank Keane, CEO of Eagle Compliance, the fiscal and selling agent for the 504 program.

Compare Small Business Loans

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