Getting an SBA loan can be an exciting opportunity for financing your next big business milestone. Seen as an alternative to credit unions or other online loan options, they are a business financing path available to many U.S. businesses. Whether you’ve chosen an SBA 7(a) loan, an SBA 504 loan, or one of the smaller microloans, each program will have a different method for determining rates and repayment schedules. Here’s how you can figure out what your payment will be – often before you apply.
Figuring out your SBA loan payment
The best way to estimate what your monthly loan payment amount will be is to use a business loan calculator:
Using the SBA loan payment calculator
To make the best use of this tool, however, you’ll need a few additional pieces of information. The calculator requires the following:
- Loan amount
- Interest rate (as a percentage)
- Origination and application fees, if applicable
- Loan term (in months)
- Monthly Servicing Charge, if applicable
If one of the info fields doesn’t apply, just type “0” into the term loan calculator, and you’ll be able to calculate the estimated monthly payment amount for your loan.
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SBA loan payment by loan type
In addition to using the calculator, it’s wise to become familiar with the type of SBA loan you are interested in taking out. Each loan will have slightly different fees and payment terms. Some expenses don’t apply to all, and others may have special considerations that are unique to the loan. See the most common SBA loans for additional guidance.
SBA 7(a) Loan Fees
The SBA 7(a) loan is the offering most people know about. It has its own pricing model, and you should understand what the loan costs before you apply. The costs of a 7(a) loan include the following:
- Principal – Original amount of the loan
- Interest – The APR paid over time, as a variable rate between 7.75% and 10.25%, depending on the loan size and term and the preference of the private lender
- Guarantee fees – Additional fees charged for the guaranteed portion of the loan, usually up to 3.75%, except for smaller loans under $150,000
- Origination fees – Not all lenders charge these, and they can be waived in instances of veteran-owned businesses or those in extenuating circumstances
Since SBA 7(a) loan can be given in amounts up to $5 million and can take up to 25 years to pay back, your specific cost to borrow will vary greatly from the next person. The money may be used for a variety of business uses, including upgrading equipment, working capital, or paying off high-interest debt.
SBA 504 loan fees
Another type of loan is the category of SBA 504 loans. These are larger, and often more complicated. They can be used as owner-occupied commercial real estate loans or to purchase construction and fixed assets. These loans can go as high as $20 million, so be prepared for some large monthly loan payments!
Costs for the 504 loans (also called “CDC loans”) include:
- Interest – This loan type has an interest rate of 3.91 – 4.25%
- Down payment – If you’re buying real estate, expect to have 10% of the purchase price on hand before you apply for the loan
- Guarantee fees – Like the 7(a) loan, there are usually some type of guarantee fee with this product
- Origination fees – You won’t likely escape these, either
The value of a 504 loan, if you qualify, can be significant. They offer fixed-rate financing rates and generous repayment terms, usually 10-20 years in length. It’s a long-term financing option for hefty business assets that many companies clamor to be approved for and are a top reason for any business owner to keep their credit score in check throughout the lifetime of your business!
SBA Microloan fees
These loans have oversight from the Small Business Administration, but they leave more flexibility to the lender to decide interest rates and some qualification requirements. The SBA microloans are considered the most accessible, since even startups may qualify. The rates are currently 7.75% for loans over $10,000 and 8.50% for those under. The bank may not charge as much as this, however. These are maximums, and the lender holds the final call to what they put in your repayment contract.
You’ll have less time to repay the loan, as well. These loans rarely exceed six years. Since they don’t usually require collateral, however, they are an attractive option for businesses with few assets and a promising future. Microloans are a valid working capital option and a less-expensive option for large purchases than a credit card or some personal loans.
SBA loan interest rates
Of all the factors that determine your exact monthly loan payment, nothing has more influence than SBA loan rates. This can be the difference of a few dollars – or a few hundred dollars – depending on the size of your loan. While the SBA puts caps on the interest rate for the SBA loans, whether you are eligible for the lowest rates (and, therefore the smallest monthly payments for each loan size) depends on several factors.
Among them are:
- your credit score
- ability to repay,
- collateral amount,
- time in business
- net annual revenues
- sales forecasts and cash flow reports
- any personal guarantee
- unpaid invoices
- the type of business you do
Anything you can use to document your case should be provided. From unpaid customer invoices to tax returns, it’s up to you to appeal to each SBA preferred lender with the reasons why you qualify for their loan options.
Perhaps the most effective way to lower loan payments, however, is to get your business and personal credit scores into the excellent range. This will lower interest rates, payments, and the amount out of pocket over the life of the loan.
Additional SBA loan fees
Assuming you meet the SBA loan requirements, there may be additional fees to pay. These include SBA loan packaging fee and loan service fees.
Not all lenders charge these fees, and if you have doubts about the validity of a fee charge while applying for an SBA loan or other government small business loan, don’t be afraid to ask. You can reach out to reps at the Small Business Administration for help understanding how their loan programs work.
If you purchase real estate, additional fees apply, such as closing costs, attorney fees, inspection fees, title fees, appraisal fees, environmental report fees (lead or asbestos reports), and survey fees. (These may be rolled into your real estate loans.)
Where can I find an SBA 7a loan fee calculator?
The SBA 7(a) loan is just one loan offered by the SBA, and the calculator above takes the basic factors of your loan cost into consideration. It can tell you your estimated monthly payment with details provided by you, such as loan term, loan amount, and interest rate. It can be used for other SBA loans, as well. For specific fee costs and prepayment penalties (if any), consult your lender or the terms of your lending contract.
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