What Are the Current SBA Loan Rates?

What Are the Current SBA Loan Rates?

What Are the Current SBA Loan Rates?

Small Business Administration (SBA) loans are among the most popular and reliable ways for small business owners to secure funding. As with any financial product, however, loan rates change. What are the rates for business owners looking to get financing? It depends on the specific SBA loan.

Current SBA Loan Interest Rates 2022

  • SBA 7(a) fixed rates: up to 8.5% to 11.5%
  • SBA 7(a) variable rates: up to 5.75% to 8.25%
  • SBA Express loan rates: up to 8% or 10% 
  • SBA Microloan current rates: up to 8 to 9.75%
  • SBA 504 current rates: 4.92% to 5.11%
  • Other Disaster loan rates: up to 4% to 8%
  • MREIDL rates: Same as published EIDL rate
  • SBA CARES Paycheck Protection Program (PPP) loan rate: 1%
  • COVID-19 Economic Injury Disaster loan (EIDL) rate: 3.75% (2.75% for non-profits)

Here are more details about interest rates and terms of various SBA loan programs. 

SBA 7(a) Loan Rates

SBA 7(a) loans are probably the best known of SBA loans, offering up to $5 million in funding for qualified businesses. 

SBA 7(a) loans may have fixed or variable interest rates. For variable rates loans, there are generally three acceptable base rates:

  • The Prime Rate;
  • One-month LIBOR plus 3 percentage points
  • SBA Optional Peg Rate

Each of these base rates is very close, differing by less than a portion of a percentage point. The optional peg rate is a weighted average of rates the federal government pays for loans with maturities similar to the average SBA loan. The Peg Rate is 2 percent for the April–June quarter of FY 2022. LIBOR is being phased out, and lenders have the option of using another base rate if they use it on similarly priced commercial loans.

SBA 7(a) Variable Loan Rates

Variable rate loans based on the current prime rate of 3.5% have the following maximum rates:

Loan AmountLoan Term of <7 yearsLoan Term of >7 years
$0 – $25,0007.75% (Prime + 4.25%)8.25% (Prime + 4.75%)
$25,001 – $50,0006.75% (Prime + 3.25%)7.25% (Prime + 3.75%)
More than $50,0005.75% (Prime + 2.25%)6.25% (Prime + 2.75%)

Note that these examples are based on the Wall Street Journal Prime rate. Lenders, however, are free to use the prime rate, the SBA peg rate. (LIBOR may be used but is being phased out). Each of these is very close, differing by less than a portion of a percentage point. If you have a variable rate loan, you could see your costs fluctuate over time. 

Fixed Rate 7(a) Loans

Lenders may also offer fixed-rate 7(a) loan rates at “reasonable” fixed rates. Current maximum fixed rates based on the prime rate:

Loan AmountRatePrime rate in effect on the first business day, plus:
$0 – $25,00011.5%6.0% (600 basis points) plus 2.0% (200 basis points)
$25,001 – $50,00010.5%6.0% (600 basis points) plus 1.0% (100 basis points)
$50,001 – $250,0009.5%6.0% (600 basis points)
$250,001 or more8.5%5.0% (500 basis points)

Read the terms of your loan carefully to know just what your monthly payments will be to the lender for the life of a loan. (SBA loan rates are just a portion of the total cost.)

With 7(a) loans, most loans carry a 10-year term, however, borrowers may have up to 25 years (or useful life) when these loans are used to pay for equipment or real estate. These loans are often used for working capital, inventory, and in some cases to refinance debt. 

SBA Express Loan Rates

SBA Express loans fall under the SBA 7(a) umbrella. They are faster and easier to apply for. 

Like other 7(a) loans, rates may be fixed or variable. Fixed rate loans carry the same maximum rate as other 7(a) loans. For variable rate loans, lenders may use the optional base rates mentioned above, and may charge up to

  • 4.5% over the Prime rate on loans over $50,000 up to $500,000 (and $500,000 for Export Express) making the current rate for these loans up to 8%.
  • 6.5% over the Prime rate for loans of $50,000 or less, regardless of the maturity of the loan, making the current rate for these loans up to 10%.

There are other pricing options available to lenders as long as they do not exceed the SBA maximum allowable interest rate. 

Normally these loans offer loans of up to $350,000, however the CARES Act temporarily raised that limit to $1 million through the end of 2020, then permanently raised the SBA Express loan limit to $500,000.

SBA Microloans

Are you considering the smaller, but potentially more easily-accessible SBA microloans? When repaying the SBA loan, you need to know that the rates can vary from lender to lender. Still, the SBA puts limits in place for lenders when charging interest to borrowers.

The maximum interest rates for SBA Microloans are calculated based on the Intermediary’s Cost of Funds. Interest rates are established using the 5 Year Treasury Bill Rate in effect at the time funds are loaned to the Intermediary. The Interest rate charged to small business microborrowers will be based on the intermediary’s cost of funds and other credit and collateral considerations.  It gets a little complicated from there, but the current maximum interest rate is:

  • 7.75% over the intermediary’s cost of funds for loans of more than $10,000
  • 8.50% over the intermediary’s cost of funds for loans of $10,000 or less

Note that the base rate is then discounted based on average loan size but can never be less than 0%. Based on a 5-year Treasury Bill rate of 2.65% (which fluctuates), the microloan rate generally wouldn’t be more than 8% for smaller loans or 9.75% for larger ones. 

Microloan payments are required on at least a monthly basis and balloon payments aren’t allowed. Deferred payments may be allowed in certain cases.

The terms on these business loans will never be longer than six-year terms. Not all microloans will require collateral, making them an attractive option for small businesses who need smaller funding sources.

Microloans are truly small business loans in that the loan amount is capped at  smaller loans of up to $50,000. They may be used for the purchase of “furniture, fixtures, supplies, materials, equipment, and/or for working capital.” Borrowers may not use funds to buy real estate or for the home of a business owner, unless that home is used specifically for business. Lenders may choose to allow microloans to be used to refinance debt at their discretion – when they think it will improve cash flow for the business. 

SBA 504 Loan Rates

SBA 504 Loans (also known as 504 CDC loans) offer financing through two lenders. One part of the loan comes from a financial institution and the other (up to 40%) comes from a Certified Development Company (CDC) – which then sells the CDC portion of the debt (also known as a debenture) to a private investor. The other 10-20% comes from the borrower in the form of a down payment. 

For the CDC portion of the loan, the current rates are: 

  • 4.92% for a 10 year loan, 
  • 5.05% for a 20 year loan 
  • 5.11% for a 25-year loan   

SBA 504 loans may also be used for refinancing debt in certain cases. For refinance 504 loans, the current rates are:

  • 4.93% for a 10 year loan, 
  • 5.07% for a 20 year loan 
  • 5.13% for a 25-year loan   

You will find more information on monthly 504 effective interest rates here.

There is no cap on the project size for these loans, but the maximum SBA debenture is usually $5 million. Funds are often used for large projects such as commercial real estate purchases (where at least 51% must be owner occupied, and more in some cases), expansion of facilities or large equipment purchases. The maximum repayment term is either 10, 20 or 25 years.

SBA Disaster Loan Rates

SBA Disaster Loans are available to businesses in a federally declared disaster area (for example, areas impacted by hurricanes, earthquakes, fires or other disasters). Businesses may apply for loans of up to $2 million for physical damages due to the disaster. Businesses suffering economic injury due to the disaster loan may apply for an Economic Injury Disaster loan of up to $2 million, and loan proceeds may be used for working capital to help the business pay bills it would have paid had the disaster not occurred. 

The interest rate will be set when the disaster is declared and will cover all loans processed under that disaster declaration. In recent disasters (2019 and 2020) the interest rate has been up to 4% (2.75% for private nonprofits) for businesses without credit available elsewhere. The maximum rate for businesses with credit available elsewhere is currently 8%.

By law, the interest rate depends on whether the business has “Credit Available Elsewhere.” The SBA will determine whether the applicant does or does not have does not have sufficient funds or other resources, or the ability to borrow from non-government sources, to provide for its own disaster recovery. Those that do have other resources are deemed to have credit available elsewhere. (EIDL applicants determined to have Credit Available Elsewhere are ineligible for EIDL disaster assistance.) 

The maximum term for an SBA Disaster loan is 30 years. Businesses with credit available elsewhere have a maximum repayment term of 7 years. The SBA will set the payment amount and length of repayment based upon the borrower’s ability to repay. 

MREIDL Loan Rates

For loans under the Military Reservist Economic Injury Disaster Loan program, the published interest rate which will be assigned to MREIDL loans changes quarterly. However, once the appropriate interest rate is assigned to a MREIDL loan at the time of approval, it remains fixed. The interest rate to be applied to any MREIDL loan is SBA’s published EIDL interest rate at the time the MREIDL application is approved.

SBA PPP Loan Rates

Paycheck Protection Program loans were made available to small business owners impacted by the pandemic. Most of these loans were forgiven, but any balances that are not forgiven carry a fixed rate of 1%. The repayment period is 2 years for loans approved by the SBA before June 5, 2020 or 5 years for loans approved after. (Lenders and borrowers may agree to a 5 year term for loans approved before June 5, 2020.) 

SBA COVID EIDL loan rates

Economic Injury Disaster Loans related to the COVID-19 disaster carry a fixed rate of 3.75% (2.75% for nonprofits) for 30 years.

FAQs

What are Typical SBA Loan Terms?

As you can see from the discussion of SBA loan interest rates here, terms will vary depending on the type of SBA loan and, in some cases, the lender’s rates. However, it’s fair to say that typically these loans offer favorable rates and terms— sometimes even better than what you can get from a bank loan.

As far as business financing options go, these loans are quite attractive but they will require strong borrower qualifications and typically take at least 1-3 months to get approved and funded. Learn more about SBA loan terms here. 

Are SBA Loans Interest Free for 12 Months?

No. SBA loans always charge interest. However, PPP loans were eligible for forgiveness, including interest, so PPP loans that were forgiven were essentially turned into interest-free grants. In addition, as part of the CARES Act, the SBA Debt Relief program authorized the SBA to make payments for up to six months for certain loans, and to defer payments and interest on others, though interest continued to accrue.

Do SBA Loans Have High Interest Rates?

No. SBA loans are offered at competitive interest rates. It may be possible for well-qualified borrowers to find lower-rate commercial loans but generally these are considered highly competitive loans. 

Are SBA Loans Fixed Rates?

Some SBA loan programs carry fixed rates. For example, COVID-19 EIDL loans carry a fixed rate of 3.75% (2.75% for nonprofits). Other loans, such as 7(a) loans may be offered at a reasonable fixed rate, or a variable rate (with SBA approval).

What are Typical SBA Loan Terms?

As you can see from the discussion of SBA loan interest rates here, terms will vary depending on the type of SBA loan and, in some cases, the lender’s rates. However, it’s fair to say that typically these loans offer favorable rates and terms— sometimes even better than what you can get from a bank loan.

As far as business financing options go, these loans are quite attractive but they will require strong borrower qualifications and typically take at least 1-3 months to get approved and funded. Learn more about SBA loan terms here.

How are SBA Loan Rates Set?

SBA loan rates are set in a variety of ways, depending on the type of loan. The SBA publishes information about rate changes in the federal register and on their website, though it can sometimes be difficult to find specific up-to-date information. See each loan type above for more information on how rates are set.

The Small Business Administration publishes an interest rate called the optional “peg” rate (13 CFR 120.214) on a quarterly basis. This rate is a weighted average cost of money to the government for maturities similar to the average SBA direct loan. This rate may be used as a base rate for guaranteed fluctuating interest rate SBA loans.

Financial institutions that make SBA loans typically may charge up to a maximum allowable rate, which means you may get quoted different rates by different lenders depending on your creditworthiness and other factors. On the other hand, a loan made through the SBA such as EIDL or Business Physical Disaster loans will carry a rate set by the SBA.

Are SBA Loans Interest Only?

SBA loans generally require fixed monthly payments that will amortize the loan. Interest-only payments often result in balloon payments later in the loan term, and that’s risky for both the borrower and the lender (in this case the SBA, or ultimately taxpayers). The SBA does not allow for balloon payments.

That said, there are some loan programs and circumstances that may allow for interest-only payments. For example, Export Working Capital Program loans may allow for interest-only payments.

Fixed vs Variable Interest Rates for SBA Loans

Some SBA loans will only offer fixed rates (for example, disaster loans) while others may offer either fixed or variable interest rates (for example, 7(a) loans). Some loans may carry a combination of fixed or variable interest rates. For example, with Export Working Capital loans the Lender may use a fixed rate on either the guaranteed or unguaranteed portion and a variable rate on the other portion of the loan. (The guarantee refers to the SBA guarantees which help protect the lender in the case of default.)

How Can I Qualify for an SBA Loan?

With the exception of SBA Disaster loans, small business owners apply for these small business loans through a financial institution approved to make SBA loans. Some lenders are “preferred lenders,” which means they have final authority to approve SBA loans rather than submitting them to the SBA for approval. All lenders must make sure loans meet the minimum SBA loan requirements. These include: 

  • Your business must qualify as a small business, typically based on SBA size standards. 
  • You must not be able to get similar financing elsewhere. 
  • You must demonstrate you can repay the loan. 
  • You must have invested some of your own money into the business, even if it’s a startup.
  • You must have acceptable personal and/or business credit scores. (PPP loans generally don’t require good credit.) 7(a) loans of $350,000 or less will be prescreened for a FICO SBSS score of 155 or higher (many financial institutions require a score of 160-165 or above.) 
  • In many cases, borrowers are required to contribute a down payment of 10%

Because credit can be a major factor in getting approved for an SBA loan, it pays to know your personal and business credit scores. Check them before you apply so there are no surprises when it’s time to meet with lenders. Lenders must use this information to determine your ability to repay, and they can turn you down without it.

You’ll find more information on SBA loan qualifications here

How to Apply for an SBA Loan

Certain types of SBA loans require that you apply directly to the SBA; specifically Disaster Loans and Economic Injury Disaster Loans (EIDL) require you to complete the loan application at SBA.gov.

All other SBA loans go through lenders approved by the SBA to make these loans. While these lenders must follow SBA guidelines when approving SBA guaranteed loans, they may add their own eligibility criteria as long as they aren’t discriminatory. That means it can sometimes pay to shop around to find a lender that will work with you. Some SBA lenders may work with startups, for example, while others may not.

If you need a loan fast, or if you don’t meet the criteria (such as good credit scores), you may want to consider other options. Those may include lines of credit or term loans, business credit cards, equipment financing or even crowdfunding.

 

This article was originally written on September 1, 2021 and updated on May 6, 2022.

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2 responses to “What Are the Current SBA Loan Rates?

  1. We are in the process of trying to get an EIDL loan , got denied because of no 2019 sales.
    We start an LLC in August 2019, opened bank account, started making purchases, lawer fees , signed my lease and been paying rent since November 2019. So to my understanding we were in “business” just no sales to base an eidl loan off… i found some talk that we need to file a schedule C for 2019 , submit P&L and projections for 2020 As we start our recon , are the above steps enough and/ or anything else we could do to increase our chances?…we really like the no payments for 12 months ,so we can use the loan for working capital 6 months while we pay off our startup loans. What options do we have ? Thank you..