The affordability of Small Business Administration (SBA) loan rates attracts many businesses that may not otherwise be able to obtain affordable financing. Whether you are considering an SBA 7(a) loan, Express loan, microloan, or Community Development Company (CDC)/504 loan, the SBA loan rates you receive will likely be more affordable than most other financing options.
On December 27, 2020, the federal government authorized an additional $284.5 billion in funding for the Paycheck Protection Program (PPP). Under this new allocation, PPP loans are available to first-time borrowers as well as businesses that have already received one PPP loan. Similar to prior funding rounds, this allocation will likely be depleted quickly. We recommend submitting an application through Lendio, a broker that has handled—and received funding for—thousands of PPP loans since the program’s inception.
Current SBA Loan Rates
Current SBA Loan Interest Rates as of May 1, 2020:
- SBA Paycheck Protection Program Loan rates: 1%
- SBA Economic Injury Disaster Loan rates: 2.75% to 3.75%
- SBA 7(a) Loan rates: 5.5% to 8%
- SBA Express Loan rates: 7.75% to 9.75%
- CDC Portion of CDC/504 Loan rates: 2.394% to 2.84%
- SBA Microloan rates: 5% to 10%
SBA Loans for COVID-19 Relief
The SBA is offering two different loan products to assist small businesses impacted by the current crisis: Economic Injury Disaster Loans (EIDLs) and Paycheck Protection Program (PPP) loans. These are two separate and distinct loan programs.
Paycheck Protection Program Loans
Authorized by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), these SBA loans can be used to cover payroll-related business expenses, mortgage or rent, and utility payments for up to two months.
Paycheck Protection Program Loan Terms
- Loan amount: Up to $2 million
- Repayment term: Up to 2 years
- Interest rate: 1%
- Deferral of payment: 6 months
Paycheck Protection Program Loan Qualifications
To qualify for funding, businesses must:
- Be small businesses, nonprofits, veterans organizations or tribal businesses
- Employ fewer than 500 employees
- Fit the size standards set by the SBA
- Be operating as of Feb. 15, 2020
- Pay payroll taxes
- Submit a Form 1099-MISC if they have paid contractors
Economic Injury Disaster Loans
The CARES Act declared COVID-19 to be an eligible disaster for SBA EIDLs. These disaster loans are available to agricultural businesses nationwide that have suffered economic loss as a result of the pandemic.
- Loan amount: Up to $2 million
- Repayment term: Up to 30 years
- Interest rate: 3.75% for for-profit businesses, 2.75% for nonprofit businesses
- Deferral of payment: 4 months
The qualification requirements for an EIDL include:
- Business type: Limited to agricultural businesses
- 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.
EIDL Emergency Advances or Grants
As part of the CARES Act, you may request an emergency advance of up to $10,000 to be paid to you within three days of application submission for an EIDL. This advance can cover expenses for ongoing operations. If an advance is disbursed, and the application is denied, the advance becomes a grant and does not need to be repaid.
Typical SBA Loan Qualifications
Qualification requirements for SBA loans vary by lender, with only basic requirements set by the SBA. However, the typical requirements include having a credit score of at least 680 and annual revenues of at least $100,000. Although there are exceptions, and new businesses are sometimes eligible for SBA startup loans, the general qualification requirements also include having at least two years of business operations.
The typical qualification requirements you can expect with most SBA loans are:
- Time in business: At least two years
- Credit score: At least 680
- Loan amount: Seeking at least $30,000
- Annual revenue: At least $100,000 in revenues for the past 12 months
- Profitability: Your business must be profitable
Exact qualification requirements for SBA loans vary between lenders. This means that it may be worthwhile to inquire with a lender before going through the SBA loan application process with any particular lender. If you are unsure as to whether or not your business would qualify for an SBA loan, you can answer the questions below to find out.
Do You Qualify for an SBA Loan?
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Current SBA 7(a) 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 7.25% to 9.75%, 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 interest rates on these loans.
Maximum SBA 7(a) Loan Rates for May 2020
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%)
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%)
Last updated on 05/11/2020.
Our SBA loan calculator can help you estimate what your monthly payments would be on an SBA 7(a) based on these SBA loan 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 SBA price/earnings to growth (PEG) ratio.
- The term of the loan: Fewer than seven years or greater than seven years. For example, three- and five-year loans would all fall into the same category of fewer than seven years.
- The size of the loan: Less than $25,000, $25,000 to $49,999, and more than $50,000. For example, loans of $30,000 and $45,000 will fall in the same category.
SBA Express Loan Rates
SBA Express loans are a subset of the SBA 7(a) loan program. It offers 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%.
The maximum interest rates for SBA Express loans are:
- Loans up to $50,000 (prime + 6.5%)
- Loans over $50,000 (prime + 4.5%)
SBA Express loans carry a higher interest rate for similar size amounts and terms than the standard SBA 7(a) loan. We recommend avoiding SBA Express loans as firms like SmartBiz can provide approval for the standard SBA 7(a) loan program with similar turnaround times.
Fixed vs Variable SBA Loan Interest Rates
SBA 7(a) loans can have a fixed or variable interest rate. With a fixed-rate business loan, the loan interest rate remains constant throughout the life of the loan. With a variable-rate loan, the interest rate on the loan can change―often referred to as a reset―at regular intervals, such as quarterly or monthly.
With variable-rate SBA 7(a) loans, the rate 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 small differences between these rates, they tend to track each other very closely. The prime rate is the one that’s most commonly used.
Current SBA Loan Rates on Real CDC/504 Loans
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 rates on the bank portion of the loan. However, the interest rates on these loans tend to be very low, currently capping out at roughly 10%. Because the bank loan is senior to the CDC loan, and the loan is backed by real estate, there is a low risk that the bank will not be able to get back the money it loans. The low-risk is reflected in the low-interest rates.
Current Maximum Interest Rates CDC Loan
Term of Loan
Maximum Interest Rate
5-year Treasury (currently 0.31%)
2.44% (0.31% 5-year Treasury rate + 0.38% fixed rate + 1.7% ongoing fees)
10-year Treasury (currently 0.66%)
2.82% (0.66% 10-year Treasury rate + 0.48% fixed rate + 1.7% ongoing fees)
Last updated on 05/11/2020.
*Using Treasury rates for May 1, 2020.
Unlike an 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 go up or down. 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, a balloon payment, and so on.
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 these thresholds. Interest rates for microloans vary by lender.
The current SBA loan interest rates for microloans generally range from 5% to 10%.
SBA microloans are offered by intermediaries referred to as SBA microlenders. These SBA microlenders are typically area nonprofit organizations with experience in small business lending and technical assistance. The SBA maintains a list of all current SBA microlenders, making it easy for you to find a lender in your state.
SBA vs Conventional Small Business Loan Rates
In general, SBA loan rates will be higher than the interest rates offered by traditional banks. On average, conventional small business loans rates range between 3% to 6%. While conventional business loan rates are lower than SBA rates, one of the eligibility requirements for an SBA loan is that you are unable to obtain credit elsewhere.
Many banks are not interested in making loans of less than $300,000 to small businesses. The portion of business loans that banks make that are less than $1 million has been shrinking for decades. The SBA guarantee against nonpayment makes these loans less risky and potentially more profitable for banks. Without an SBA guarantee, these loans would probably not be financed at all.
With the variety of loan programs offered by the SBA, there are many opportunities for small businesses to consolidate debt or 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.
Small business owners seeking an SBA loan may want to consider applying through SmartBiz. SmartBiz offers a streamlined SBA loan process for loans up to $350,000. If approved, you can receive funding in as soon as 30 days.