A loan backed by the U.S. Small Business Administration (SBA) can be the least expensive way to get capital for many small businesses. They typically offer small businesses lower interest rates and longer terms than other financing options. Our SBA loan calculator will help you see just how affordable your SBA loan can be.
Our recommended SBA loan provider is SmartBiz. They can prequalify you in under 5 minutes with no impact on your credit score. Plus, they have the fastest turnaround time of any SBA loan provider we know, cutting the normal loan period of 90 – 120 days down to just 30 days.
How the SBA Loan Calculator Works
This SBA Loan Calculator is specifically designed for SBA 7(a) loans and SBA Express loans, the SBA’s most popular working capital loan programs. The SBA itself does not lend you the money but instead partially guarantees loans for a lender. This guarantee enables these lenders to make loans to small businesses at lower interest rates and with longer repayment terms.
Some lenders also require smaller down payments and lower collateral for SBA 7(a) loans.
Our calculator lets you input your loan term, the loan amount you’re seeking, and your annual business income. You can then view the interest rate, monthly payment for an SBA 7(a) loan, and your debt service coverage ratio (DSCR), which is a financial calculation used by lenders in determining whether to approve you for a loan.
The calculator allows you to choose up to 25 years on the term of your loan even though the SBA 7a loans for working capital are typically between 5-10 years. SBA loans with longer terms are typically reserved for large loan amounts ($350K+) and loans for commercial real estate.
Please do not use this calculator for calculating interest rate or payments on CDC / SBA 504 loans or other SBA loan products.
SBA Loan Costs & Monthly Payment Factors
The amount you’re going to pay every month is based on a number of factors, such as how much you borrow and how long you have to pay it back. Your total loan costs and monthly payments are therefore typically determined by the loan amount and term, interest rate, and any lender fees.
SBA loan costs and monthly loan payments are typically affected by the following:
1. Loan Amount & Term
In general, interest rates are lower for larger loan amounts and shorter repayment periods. However, based on the loan amount and term, our small business loan calculator displays the maximum interest rate. Note that your interest rate may be lower because our calculator uses the maximum rate allowed as a conservative estimate.
2. Interest Rates
The SBA sets the maximum interest rates that lenders can charge on 7(a) loans. The maximum interest rates are determined by the length of the loan term (number of years) and the size of the loan amount being borrowed.
Keep in mind that the interest rate is different from the annual percentage rate (APR) of the loan. Additional borrower costs such as the SBA guarantee fee, packaging fee, and closing costs will increase the APR. However, these fees are paid upfront before the loan is disbursed to you, so they don’t affect the size of the monthly SBA payments.
The largest fee is usually the SBA guarantee fee. Initially paid by the lender, the fee is almost always passed on to the borrower at closing and is typically rolled into the whole loan.
The amount you’re charged as a guarantee fee is based on the size and term of your loan. You’re generally charged a 3% fee on loans up to $750K, 3.5% on loans above $750K, and an additional 0.25% on any amounts above $1 million.
For a more in-depth explanation and full examples of how this works, read our article on SBA guarantee fees. In order to estimate the monthly SBA loan payment, our calculator assumes the loan will be fully paid off in equal monthly payments throughout the life of the loan.
Current SBA Loan Rates
The SBA loan rates vary over time (most SBA 7A(a) loans are pegged to the Fed’s Prime Rate). The SBA sets a maximum rate that lenders are allowed to charge borrowers, based on loan size and term. Below are current maximum SBA 7(a) rates.
Current Maximum SBA 7(a) Loan Rates as of January 2019
|Less than $25K|
|$25K - $50K|
The interest rate and monthly loan payments on an SBA loan may change over time based on market conditions. Interest rates on most SBA 7(a) loans are variable, which means they change with market interest rates. If market rates rise, the interest rate and payments on the loan will rise. This is usually a small increase over the course of several years.
The rates above contain the current prime rate (5.50%) plus a markup rate between 2.25% – 4.75%, depending on how much you’re borrowing and the length of the loan term. For more information on the current rates and how they’re calculated, visit our article on SBA loan rates.
Debt Service Coverage Ratio
The debt service coverage ratio (DSCR) is a financial ratio used by SBA lenders to determine if you can afford a loan. It’s calculated by dividing your business’ annual net operating income by your annual loan payments. Generally, SBA lenders prefer borrowers with a DSCR over 1.25.
For example, suppose your annual business income is $100k and you want to take out a 10-year, $500k SBA loan. Your loan payments for one year will be approximately $72,797 (the loan calculator shows a monthly SBA loan payment of $6,066. Simply multiply this by 12 to estimate the annual payment). Dividing $100,000 by this number gives you a DSCR of 1.37. This is considered good and will help you get approved for SBA financing.
By ensuring your DSCR is above 1.25, lenders can be confident that minor changes to your business’s revenues or expenses won’t result in a default on your SBA loan. If, when working with the SBA loan calculator, you notice your DSCR number is under 1.25, you’re probably requesting more money than an SBA lender would be willing to loan you. Consider reducing your financing request or double-checking the figure you’re using for annual business income (including owner’s salary).
SBA 7a Loan Qualifications
An SBA loan is difficult to qualify for, carrying similar qualification requirements to a traditional bank loan. To get an SBA loan, you will generally have to meet these 5 requirements:
- Have a personal credit score of at least 680 (check yours for free here)
- Be in business for at least 2 years
- Have annual revenues over $120K, trending up
- Be profitable
- Be seeking $30K or more
Most SBA loans are issued to existing businesses, but those who want to fund a startup or buy a new business may also be able to qualify for an SBA loan. In most cases, startups will need to be much stronger borrowers and have collateral sufficient to cover the loan.
When buying a business, the business you’re purchasing will typically need to be profitable and have good revenue trends because it’s difficult to get SBA funding for a turnaround or startup business.
If you meet the qualifications above you can prequalify for an SBA loan from SmartBiz within a few minutes by filling out an online application. SmartBiz is the fastest SBA loan provider we’ve reviewed, with the ability to get you funded in as quick as 30 days.
SBA Loan Application Documentation
Before you apply for an SBA loan, you’ll want to make sure you’ve prepared the necessary documentation so you can help speed up the process. SBA loan applications are document intensive, and you’ll likely be asked for more documentation throughout the process. Here’s what you can expect most lenders to request:
- Last 3 Years of Tax Returns (business and personal)
- Year-to-Date Profit and Loss (P&L) Statement
- Year-to-Date Profit Balance Sheet
- Business Plan and 3 Years of Financial Projections
- Business Certificate/License
- Owner Résumé
- Business Lease
- Personal Asset and Liabilities List
Applying for an SBA loan can take a long time (45 – 120+ days), and it takes a significant amount of documentation. While the information above will get you started, if you’re ready to apply you’ll need more information to successfully navigate the application process. You can read our in-depth guide for more information about how to apply for an SBA loan.
SBA Loan Amortization Schedule
When a loan is “fully amortized” it means that loan payments are the same each month and consist of both principal and interest. For example, if you amortize a loan for $100k over 10 years then you would pay 120 equal monthly installments of $1,060.66. This means that over time, the proportion of monthly interest you pay declines and the amount of principal you repay increases.
An amortization schedule is a table that shows a breakdown of this monthly payment including how much interest and principal you paid each month and what your remaining balance is. The amortization schedule shows these numbers for every month over the full life of the loan.
It’s important to know what your SBA loan amortization schedule looks like so you’ll know during any given month how much you have left to pay off. It’s also a good idea to check an amortization schedule before you sign up for a loan to fully understand your payment obligations. You don’t want to end up paying on a loan for longer than you expect, and you don’t want to find out half way that your payments are increasing.
The Bottom Line: SBA Loan Calculator
In most cases, SBA loans are the most affordable loan for small business owners. The SBA business loan calculator will help you estimate the monthly payment and DSCR for an SBA 7(a) loan for either working capital or commercial real estate.
If, after using the SBA loan calculator you want to apply for an SBA loan, we recommend applying with SmartBiz. They can prequalify you in minutes with only a soft credit pull. Plus, their application process is streamlined and they have cut funding times from 3-4 months to 4-5 weeks.