Getting an SBA loan can be an excellent way to finance your next big business milestone, whether you receive an SBA 7(a) loan, an SBA 504 loan, microloan, or received an Economic Injury Disaster Loan. Each program carries different interest rates and repayment schedules for your SBA loan payments.
As a general rule, though, you can expect this type of small business financing to have attractive terms and predictable monthly payments.
Figuring Out Your SBA Loan Payment
Your loan payment will depend on the type of loan, length of loan and the interest rate applicable at the time the loan is made. However, you can estimate what your monthly loan payment amount for a basic term loan using a business loan calculator:
Understanding How the SBA Loan Calculator Works
This is a standard term loan calculator for a fixed-rate loan with a fixed-repayment period. To make the best use of this tool, you’ll need some information about your proposed loan:
- 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 information 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.
You’ll also be able to see an Annual Percentage Rate (APR) to compare costs. Total interest can be calculated by subtracting fees from the total financing cost.
You’ll also be able to see an Annual Percentage Rate (APR) to compare costs. Total interest can be calculated by subtracting fees from the total financing cost.The SBA 7(a) loan is just one loan offered by the SBA, and the term loan calculator takes the basic factors of your loan cost into consideration to help you understand your SBA payment for a term loan. It can give an estimated monthly payment with details provided by you, such as loan term, loan amount, and interest rate. Keep in mind that if your loan carries a variable interest rate, your payments may change as rates change.
However, it is not meant to provide an exact monthly payment for your SBA loan and should not be relied upon as such. For specific costs, consult your lender or the terms of your loan contract.
SBA Loan Payment by Loan Type
In addition to using the SBA loan calculator, it’s wise to become familiar with the type of SBA loan you are interested in. 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 most popular loan program. Loan proceeds may be used for any number of specific purposes, including: new construction, expansion or renovation, or to purchase land or buildings; to purchase equipment, fixtures, leasehold improvements; working capital; for a seasonal line of credit, inventory or starting a business; or even to refinance debt for compelling reasons. Each lender must follow SBA guidelines but may impose their own requirements as long as they don’t discriminate against borrowers on a prohibited basis.
This means you may need to check with different financial institutions in order to find the right lender for your qualifications.
The costs of a 7(a) loan include the following:
- Principal – Original amount of the loan
- Interest – Variable rates are based on the prime rate. Fixed 7(a) loan rates are tied to the prime rate, SBA Optional Peg Rate or Libor (though Libor is being phased out). (Find current SBA loan rates here.)
- Guaranty (or guarantee) fees, also called the Upfront Fee. SBA guarantees protect the lender. The 7(a) upfront fees* for loans approved in FY 2023 (between October 1, 2021, through September 30, 2023) are:
- For loans with a maturity that exceeds 12 months, the SBA guaranty fees are:
- For loans of $500,000 or less: 0%
- For loans of $500,001 to $700,000: .55% of the guaranteed portion.
- For loans of $700,001 to $1,000,000: 1.05%
- For loans of $1,000,001 to $5,000,000: 3.5% of the guaranteed portion up to $1,000,000, plus 3.75% of the guaranteed portion over $1,000,000.
- For loans with a maturity of 12 months or less:
- For loans of $500,000 or less: 0% of the guaranteed portion.
- For loans of $500,001 or more: .25% of the guaranteed portion.
- For loans with a maturity that exceeds 12 months, the SBA guaranty fees are:
The maximum loan amount for an SBA 7(a) loan is $5 million and the maximum repayment period is 25 years, though most loans carry a repayment term of up to 10 years. Loan funds may be used for a variety of business uses, including upgrading equipment, working capital, for a seasonal line of credit, inventory, or even to pay off high-interest debt in certain cases.
SBA Express loans made to veteran-owned small businesses carry an upfront fee of $0.
*Export Working Capital Loans have a separate fee schedule.
SBA Express Loan Fees
The most popular SBA loan program (in terms of dollars funded), SBA Express loans offer up to $500,000 with faster approval. Both term loans and lines of credit are available under this program and these SBA loan funds may be used for the same purposes as 7(a) loans.
Rates may be negotiated with the borrower, but the SBA sets maximum rates. The lender may charge up to 4.5% over the Prime rate on loans over $50,000 and up to $550,000 and up to 6.5% over the Prime rate for loans of $50,000 or less, regardless of the maturity of the loan.
The repayment period varies. Term loans follow the same maximum loan maturities as 7(a). Lines of Credit (LOCs) go up to 10 years including a term out period where no more credit may be drawn.
SBA 504 Loan Fees
SBA 504 CDC loans tend to be larger and can be used for a variety of purposes, including to purchase land or primarily owner-occupied commercial real estate, building new facilities, refinancing non-government guaranteed commercial mortgage debt, or to purchase fixed assets for expansion or modernization. These loans draw on three sources of funds: a Community Development Corporation (CDC) lends up to 40% of total project costs, a financial institution (such as a bank) lends up to 50%, and the borrower contributes 10-20%. There is no maximum loan amount but the maximum SBA debenture is $5 million for most loans.
With these loans you’ll have two payments: one for the CDC portion of the loan and the other for the private lender portion of the loan. Talk with a 504 lender for more details. TMC Financing offers a 504 loan calculator you may find helpful.
Costs for 504 loans include:
- Interest – There are two interest rates that will be charged: the fixed interest rate for the CDC portion of the loan which is guaranteed by the SBA, and the interest rate for the bank portion of the loan which may be fixed or variable and can vary from lender to lender. See 504 loan rates here.
- Guaranty fees – The upfront guaranty fee is currently 0% for FY2023.
- The annual service fee is 0.4405%. 504 Debt Refinance without Expansion loans carry an additional fee of 0.0154%, for a total of 0.4559%.
- There are other fees that may be charged to the borrower include processing fee, underwriting fee, attorney’s fees and appraiser’s fees; title, hazard and flood insurance fees; environmental impact fees; and points.
While this is a more complicated loan program and may take some work to qualify, 504 loans offer attractive fixed debt loans for financing large purchases.
SBA Microloan Fees
SBA Microloans are generally made by non-profit community-based organizations. Microloan proceeds may be used only for working capital and acquisition of materials, supplies, furniture, fixtures, and equipment.
SBA Microloans are considered the most accessible to small businesses, since even startups may qualify. The organizations that make these loans strive to serve disadvantaged small business owners, such as women, minorities, veterans and/or low-income entrepreneurs.
Rates may be negotiated between the borrower and the intermediary making the loan, though the SBA has a formula that dictates the maximum interest rate that can be charged. In FY 2021, the average Microloan was for $16,557 and carried a 6.55% interest rate. (Since then interest rates have been rising. See maximum SBA microloan rates here.)
Borrowers may be charged reasonable packaging fees of no more than 3% of the loan amount for loans with terms of one year or more, or 2% for loans with terms of less than one year. They may also be charged actual paid and documented closing costs.
These loans are designed to be as short as necessary, and the maximum loan term is six years.
Since they don’t usually require collateral, however, they are an attractive option for businesses with few assets. Microloans are a valid working capital option and a less-expensive option for large purchases than a credit card or some personal loans.
EIDL Loan Payments
The Economic Injury Disaster Loan (EIDL) program is also an SBA loan program that falls under the SBA Disaster Loan program. These loans are designed to help small businesses that have suffered substantial economic injury in a federally declared disaster area. For businesses impacted by coronavirus, that included qualified small businesses in all 50 states and US territories. Certain agricultural businesses, ESOPs, nonprofits, tribal organizations were also eligible, as were self-employed individuals and independent contractors. (Currently you cannot apply for a new COVID-19 EIDL loan.)
An SBA EIDL loan due to the COVID-19 crisis carries a 30 year repayment term with an interest rate of 3.75% (or 2.75% for non-profits.) There is currently no loan forgiveness for these loans— they must be paid back. But borrowers may also request an Economic Injury Disaster Loan grant (or “advance”) of up to $10,000 (administered as $1000 per employee.) There is no personal guarantee for loans under $200,000 and no collateral is required for loans of less than $25,000.
If you received one of these loans, the SBA provided you with the loan payment amount when you received the financing offer. An amortization schedule is also available, and simple to calculate since these loans carry a 30-year repayment schedule.
PPP Loan Payments
Paycheck Protection Program (PPP) loans were a type of SBA 7(a) loan created under The CARES Act to help small business owners survive the coronavirus economic crisis, primarily by helping them keep employees on payroll. As of May 31, 2021 the PPP program closed to new applications.
Most PPP loans were forgiven. However any remaining balance not forgiven carries an interest rate of 1%. The repayment term is either two years for loans originated before June 5, 2020, or five years for loans originated on or after that date. There is no prepayment penalty if you pay it off faster.
How SBA Loan Interest Rates Work
Of all the factors that determine your exact monthly loan payment, nothing has more influence than SBA loan rates. The interest rate can mean an SBA payment difference of a few dollars, or a few hundred dollars, depending on the size of your loan. Some loans feature set interest rates. For others, the SBA may cap the interest rate, but lenders may charge less. For those programs where interest rates may vary, a variety of factors may influence the rate for which borrowers qualify.
Among them are:
- Credit scores
- Ability to repay
- Time in business
- Net annual revenues
Even if these factors don’t affect the interest rate, they may influence whether you qualify. When it comes to small business loans in general— including business credit cards— one of the most effective ways to lower loan payments is to get your business and personal credit scores into the excellent range. Business owners with excellent credit often qualify for lower rates, which in turn means lower payments and less money paid over the life of the loan.
How to Qualify for an SBA Loan
To qualify for an SBA loan, your business must be a small business as defined by the SBA. It must be a for-profit business based in the US. (There was an exception for PPP and EIDL loans due to coronavirus; they were also open to qualifying nonprofits.) You must have acceptable credit and demonstrate an ability to repay the loan. The credit history of all owners with 20% or greater ownership will be checked. Business credit may be checked, and some loans require the lender to obtain a FICO SBSS score.
Learn more about SBA loan qualifications here.
Small Business Loan Alternatives to SBA Loans
While SBA loans are appealing, many business owners won’t qualify or don’t have weeks to wait for a decision. Here are other small business financing options from online providers you may want to consider instead.
Line of Credit
Business Cash Advance
You can use Nav’s other business loan calculators to determine how much each of the above options will cost you over time. Nav also has other financial health tools to help you find the financing you need now and that you’re most likely to qualify for, whether it’s small business loans, business credit cards, or other financing options. Nav uses data about your business, like your business credit scores, annual revenue, time in business, and even cash flow, to take the guesswork out of finding business funding. Sign up today to start seeing your options.