The affordability of Small Business Administration (SBA) loans attracts many small businesses that may not otherwise be able to obtain affordable financing. Whether you are considering SBA 7(a) loans, Express loans, Microloans, or CDC/504 loans, the SBA loan rates you will receive will likely be more affordable than many other financing options.
Current SBA Loan Rates
The current SBA loan rates as of October 1, 2021, are:
- SBA 7(a) loan rates: 5.5% to 8%
- SBA Express loan rates: 7.75% to 9.75%
- Certified Development Company (CDC) portion of CDC/504 loan rates: 2.37% to 2.91%
- SBA Microloan rates: 6% to 9%
- SBA Economic Injury Disaster Loan (EIDL) Rates: 2.75% to 3.75%.
Current SBA (7A) Loan Interest Rates and Explanation
The SBA sets the maximum interest rates that banks can charge on SBA 7(a) loans. The current maximum interest rate ranges from 5.5% to 8%, depending on the size of the loan and the amount being borrowed.
The maximum interest rates on SBA 7(a) loans are based on market interest rates. As market interest rates change, so will the maximum allowable interest rates on these loans.
Maximum SBA 7(a) Loan Rates for October 2021
Loan Size: | Repayment Term Less Than 7 Years | Repayment Term Greater than 7 Years |
|---|---|---|
Less Than $25,000 | 7.50% (prime rate + 4.25%) | 8.00% (prime rate + 4.75%) |
$25,000-$50,000 | 6.50% (prime rate + 3.25%) | 7.00% (prime rate + 3.75%) |
More than $50,000 | 5.50% (prime rate + 2.25%) | 6.00% (prime rate + 2.75%) |
Our free SBA loan calculator can help you estimate your monthly payment on an SBA 7(a) loan based on these interest rates and the amount you need to borrow.
How SBA 7(a) Loan Rates are Determined
The maximum interest rate on SBA 7(a) loans is based on three factors:
- A base rate (one of the following publicly available interest rate measures): Prime Rate, London Interbank Offered Rate (LIBOR) (one month) + 3.0%, or the SBA’s price/earnings to growth (PEG) ratio.
- The term of the loan: Loans of greater than seven years will be priced higher than those under seven years.
- The size of the loan: Less than $25,000, between $25,000 and $50,000, and more than $50,000. For instance, loans of $30,000 and $40,000 will fall in the same category.
Fixed vs Variable SBA Loan Interest Rates
SBA 7(a) loans can have a fixed or variable interest rate. With a fixed-rate loan, the interest rate remains constant throughout the life of the loan. With a variable rate loan, the interest rate can change, also referred to as a reset, at quarterly or monthly intervals.
The interest rate for variable-rate SBA 7(a) loans is reset based on one of three publicly available market interest rate numbers, plus a fixed percentage. The interest rate must always be at or below the maximum interest rate set by the SBA. For smaller size SBA loans—those less than $500,000—banks tend to offer only variable rate loans, with interest rates at or close to the maximum allowable by the SBA.
Base Rate and Interest Rate Resets
Banks can choose one of three market interest rate measures as their base rate. These are the prime rate, LIBOR + 3.0%, or the SBA PEG rate. While there are minor differences between these rates, they tend to track each other very closely. The prime rate is the one that’s most commonly used.
Rates as of October 1, 2021:
- Prime Rate: 3.25%
- LIBOR (one month) + 3.0%: 3.09%
- SBA PEG Rate: 1.63%
SBA Express Loan Rates
SBA Express loans are a subset of the SBA 7(a) loan program. Express loans offer a faster approval process than a standard SBA 7(a) loan. However, this convenience is offset by a higher interest rate. Maximum interest rates for SBA Express loans currently range from 7.75% to 9.75%. Express loans have a maximum of $350,000.
The maximum interest rates for SBA Express loans are:
- Loans up to $50,000 (Prime + 6.5%): 9.75%
- Loans over $50,000 (Prime + 4.5%): 7.75%
SBA Express loans carry a higher interest rate for similar size amounts and terms than the standard SBA 7(a) loan. An experienced SBA Express loan provider, such as SmartBiz, can provide funding in as little as 30 days.
Current SBA Loan Rates on Real CDC/504 Loans
The SBA sets the maximum interest rates that banks can charge on CDC/504 loans. The maximum interest rates on CDC/504 loans are tied to market interest rates and are also based on the amount being borrowed.
A CDC / 504 loan is composed of two loans:
- Bank loan: A loan from a financial institution (bank) for typically 50% of the price of the property, equipment, and building upgrades.
- CDC loan: A loan from a CDC (a nonprofit organization) for 40% of the price.
The remaining 10% is a down payment from the borrower. The SBA does not set the interest rate on the bank portion of the loan; however, the interest rate on these loans tends to be very low, capped at 10%. Since the loan is backed by real estate, there is lower risk to the bank in not getting back the money it lends. This lower risk is reflected in a lower interest rate.
Current CDC Loan Interest Rates
- 10-year term: 2.372%
- 20-year term: 2.765%
- 25-year term: 2.912%
Unlike the SBA 7(a) loan that may have a variable rate, the loan rates for the CDC portion of an SBA 504 loan are fixed for the life of the loan and will not change. The portion of the loan provided by the bank, credit union, or nonbank lender does not need to be fixed. It may have a variable rate or balloon payment.
Current SBA Loan Interest Rates on SBA Microloans
Loan amounts for SBA microloans cannot exceed $50,000, and repayment periods cannot extend beyond six years as the SBA sets those thresholds. Interest rates for microloans generally range from 6% to 9%. However, the exact rates and terms available for SBA microloans vary by lender.
SBA microloans are offered by intermediaries referred to as SBA microlenders. These SBA microlenders are often nonprofit organizations with expertise in small business lending and technical assistance. The SBA maintains a list of all current SBA microlenders, organized by state.
Economic Injury Disaster Loans (EIDL)
The CARES Act declared COVID-19 to be an eligible disaster for SBA EIDLs. These SBA disaster loans are available to businesses nationwide that have suffered economic loss as a result of the pandemic. This loan program is presently available through December 31, 2021.
EIDL Terms
- Loan amount: Up to $500,000 or 24 months of economic activity
- Repayment term: Up to 30 years
- Interest rate: 3.75% for for-profit businesses, 2.75% for nonprofit businesses
- Deferral of payment: 18 months
EIDL Qualifications
The qualification requirements for an EIDL include:
- Business type: Businesses, agricultural cooperatives, and nonprofits.
- Economic injury: Business has faced economic injury as a direct result of the disaster and is unable to pay ordinary operating expenses
- Business size: No more than 500 employees; sole proprietors or independent contractors are eligible
- Credit: These loans may be approved based solely on credit score
- Business revenue: There are no revenue requirements, and qualification does not require tax return or tax return transcript for approval
If your business meets these eligibility requirements, you can apply for an EIDL directly through the SBA’s Disaster Loan Portal.
Bottom Line
With the variety of loan programs offered by the SBA, there are many opportunities for small businesses to find a loan that meets their small business needs. Affordable SBA loan rates, coupled with favorable repayment terms, make them an attractive financing option for small businesses.
