There are three primary types of SBA loans: SBA 7A Loans, SBA Express Loans, and CDC/504 Loans. SBA 7A loans and SBA Express loans can be used for a wide variety of purposes, including growth capital and refinancing. CDC/504 loans, on the other hand, are specifically for the purchase of fixed assets like real estate and heavy machinery.
October 2018 Maximum interest rates on SBA 7A Loans range from 7.50% to 10.00%. Full Table
October 2018 Maximum interest rates for the CDC portion of CDC/504 Loans currently range from 5.04% to 5.25% including fees. Full Table
Before reading further, make sure you are qualified. Though there are exceptions, and startups are sometimes eligible, there are five general requirements for getting an SBA loan:
- In business at least 2 years
- Personal credit score is 680+ (check your score for free here)
- Seeking at least $30,000
- At least $100,000 in revenues for the past 12 months
- Business is profitable
Sound like you? Well qualified borrowers can get pre-qualified for up to $350K of SBA financing online in minutes. Our preferred SBA loan provider has a streamlined SBA loan process that funds businesses in as little as one week. See how much you pre-qualify for.
Click Here To Get Pre-Qualified
Current SBA (7A) Loan Interest Rates and Explanation
The Small Business Administration (SBA) sets the maximum interest rates that banks can charge on 7A loans. The current maximum interest rate ranges from 7.50% – 10.00%, depending on the size of the loan and the amount being borrowed.
The maximum interest rates on SBA 7A loans are also based on market interest rates. As market interest rates change, so will the maximum interest rates on these loans.
Maximum Interest Rates on SBA 7A Loans for October 2018
Loan Size: | Standard 7a (Repayment Term Less Than 7 Years) | Standard 7a (Repayment Term 7 Years or Greater) |
|---|---|---|
Less Than $25K | 9.50% (5.25% base rate + 4.25% markup) | 10.00% (5.25% base rate + 4.75% markup) |
$25k – 50K | 8.50% (5.25% base rate + 3.25% markup) | 9.00% (5.25% base rate + 3.75% markup) |
Over $50K | 7.50% (5.25% base rate + 2.25% markup) | 8.00% (5.25% base rate + 2.75% markup) |
If you’ve been in business for 2+ years, have a credit score of 680+, and have gross annual revenues of at least $100K, you may qualify for SBA financing with our preferred SBA loan provider. Get pre-qualified online for up to $350K in minutes.
Detailed SBA 7(a) Interest Rate Explanation* Please note SBA 7A Express loans carry a higher interest rate for similar size amounts and terms than the standard 7A loans above. We recommend avoiding SBA Express loans as firms like SmartBiz can provide approval for the standard 7A with similar turnaround times.
As the table above shows, 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, LIBOR (one month) + 3.0%, or SBA Peg Rate
- The term of the loan: Less than 7 years or greater than 7 years. For example, 3 and 5 year loans would all fall into the same category of under 7 years.
- The size of the loan: Under $25,000, $25,000 to $49,999, and over $50,000. For example, loans of $30,000 and $45,000 will fall under the same category.
As the table shows, loans longer than 7 years have a maximum interest rate which is half a percent higher than similar size loans that are for terms that are less than 7 years.
Loans for more than $50,000 have 1% lower maximum interest rates than loans between $25,000 and $49,999 when taken for similar terms. Similarly, loans for $25,000 to $49,999 have 1% lower maximum interest rates than loans for less than $25,000.
If you are interested in applying for an SBA Loan, we recommend checking out SmartBiz. They are the best company we have found at providing quick turnarounds on SBA loan approvals, and you can find out how much you qualify for in 5 minutes.
Fixed vs. Variable SBA Interest Rates
7A loans can have a fixed or variable interest rate. With a fixed rate loan, the loan interest rate remains constant throughout the life of the loan. With a variable rate loan, the loan’s interest rate can change (often referred to as a reset) at regular intervals, such as quarterly or monthly.
With variable rate SBA 7A 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 (for example those under $500,000), banks tend to offer only variable rate loans, with interest rates at or close to the maximum allowable by the SBA.
The 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.
Rates as of October 1, 2018:
- Prime Rate: 5.25% (source: WSJ)
- LIBOR (one month) + 3.0%: 5.23% (source: Bankrate)
- SBA PEG Rate: 2.88% (source: National Association of Government Guaranteed Lenders)
These rates can go up or down based on market conditions. Currently, they remain at decade-low levels. Over the last 10 years, the Prime Rate has been as high as 8.25%.
With a variable rate SBA 7A Loan, as market interest rates rise so will the rate on the loan. Let’s take the example of a 10-year loan for $50,000 with interest rates rising by 2%.
The maximum interest rate on the loan currently would be 9.00%, with a monthly payment of $633 per month. With a 2% rise in interest rates upon the interest rate reset, the rate would be 11.00%, with a monthly payment of $689 (this would be the monthly increase for a newly issued loan. If the loan was older, the increase in monthly payment would be lower).
Interest Rates Are Not The Only Costs To Borrowing Money: APR/APY
When taking a loan, there is often an origination fee. This fee supposedly covers the costs of the bank or financial institution of making the loan, including marketing costs. However, the origination fee is not directly based on costs and is arbitrarily set by the financial institution. An origination fee of 4% is not unusual. The fee is typically taken “off the top”. For example, a borrower taking a $50,000 SBA loan with a 4% origination fee would only receive $48,000.
SBA 7(a) loans also have a guarantee fee. Initially, the lender pays this fee to the SBA, but it’s almost always passed on to the borrower at closing. The fee typically ranges from 3% to 3.5% of the guaranteed portion of the loan. The exact percentage depends on the size of the loan and the length of the loan. For example, if a borrower takes a $250,000 10-year 7a loan, the SBA may guarantee 75% of that, or $187,500. 3 percent of that amount, or $5,625, is the guarantee fee that will be charged to the borrower. For more info, click here.
The true cost of borrowing money (interest rate + fees) is often called the APY (Annual Percentage Yield) or APR (Annual Percentage Rate). On a ten year SBA loan, the effect of fees can create an APR or APY that is around 1% higher than the loan’s interest rate. The shorter the loan the bigger the impact that fees will have on the APY/APR.
What size SBA loan could you qualify for? Apply with SmartBiz and get an estimate in minutes.
October 2018 SBA Loan Rates On Real CDC / 504 Loans
The Small Business Administration (SBA) sets the maximum interest that banks can charge on CDC/504 loans. The current maximum interest rate ranges from 5.04% to 5.25%, depending on the size of the loan and the amount being borrowed.
The maximum interest rates on CDC/504 loans are also based on market interest rates. As market interest rates change, so will the maximum interest rates on these loans.
While a 7A SBA Loan can be used to purchase real estate, a Real CDC/504 Loan will tend to provide borrowers with tremendous interest rate savings. A CDC / 504 loan is composed of two loans:
- A loan from a financial institution (bank) for typically 50% of the price of the property, equipment, and building upgrades.
- A loan from a Certified Development Company (a non-profit) for 40% of the price.
The remaining 10 % is a down payment from the borrower. The interest rates on the bank portion of the loan are not set by the SBA. However, the interest rates on these loans tend to be very low, currently in the mid-single digits. 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.
The maximum interest rate on the CDC portion of the loan is set by the SBA.
October 2018 Maximum Interest Rates CDC Loan (Using Treasury Rates for October 1, 2018)
Use our Free SBA Loan Calculator To Find Out Exact Interest Rates
Term of Loan | Treasury Rate | Fixed Rate | Ongoing Fees | Maximum Interest Rate |
|---|---|---|---|---|
10 Years | 5 Year Treasury (Currently 2.77%) | 0.38% | 1.7% (approximate) | 4.85% (2.77% 5 Year Treasury rate + 0.38% fixed rate + 1.7% ongoing fees) |
20 Years | 10 Year Treasury (Currently 2.90%) | 0.48% | 1.7% (approximate) | 5.08% (2.90% 10 year treasury rate + 0.48% fixed rate + 1.7% ongoing fees) |
- A ten year CDC/504 loan will have an interest rate which combines the current 5 year treasury rate, a fixed rate of 0.38%, and 1.7% in annual fees. As the table shows, the interest rates are based on the length of the loan:
- A twenty year CDC/504 loan will have an interest rate which combines the current 10 year treasury rate, a fixed rate of 0.48%, and 1.7% in annual fees.
Unlike a 7A loan, the loan rates for the CDC portions 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 non-bank lender does not need to be fixed (it may have a variable rate, a balloon payment, etc.).
If you are looking for a commercial real estate loan, have been in business 2+ years, and have a credit score of at least 680, an SBA 7(a) loan with Northeast Bank could be a good fit. Northeast Bank is a national SBA lender that offers rates as low as 5.5% for loans up to $5MM.
How Do SBA Rates Compare To Interest Rates On Normal Commercial Loans?
This is a trick question. In theory, if you can get approved for conventional commercial bank financing, the banking institution is not supposed to submit your application for an SBA loan. However, in general, banks are not interested in making loans of under $300,000 to small businesses. The portion of business loans which banks make that are under $1 million dollars has been shrinking for decades. The SBA guarantee against non-payment makes these loans less risky and potentially more profitable for banks. Without an SBA guarantee, these loans would probably not be financed at all.
If you are interested in applying for an SBA Loan we recommend checking out SmartBiz. They are the best lender we have found at providing quick turnarounds on SBA loan approvals, and you can find out how much you qualify for in 5 minutes.
Frederick Bryan
Is it possible to start a new business, buy property, equipment and build a manufacturing plant from scratch without putting any money down on an SBA loan for 750k ?
Hi Frederick!
Pretty much all SBA loans require a minimum of 10% down for you to get approved. It will be difficult to get any business loan for $750k without either putting a percent down or securing it with a substantial amount of collateral, like using real estate you own. Good luck!
ahmed
i have a towing business can i get an SBA lone for a property i want to buy for my business thank you
Hi Ahmed,
Great question. You may be able to qualify for an SBA loan to buy your property. You’ll need to pay certain fees if you decide to go that route, and you’ll still need to come up with the down payment. However, a broker can probably give you a better idea of whether your business will qualify after reviewing the specifics of your business.
Good luck!
Dock
V Crow
What would the rate be for the purchase of a 30 year old consulting business for 2,145,000 pay back in 10 years? Having met all of the SBA stipulations, of course..
Hello! The rate will depend fall into the ranges we’ve provided, which can change from month to month. You can check out our SBA loan calculator to have a better understanding of what your payments might look like. Good luck!
Best,
Jeff
Michael
Hey guys my name is Michael, I’m 34 and I manage a hardware store . I’ve been doing this for the last 5 years and have worked there for a total of 10 years . I am looking for as much help as I can get to acquire the business. Where do I start ? Lots of people tell me because I am a minority, there are plenty of options? Lets start with the loan. Let’s say the purchase price will be 1.5 million … I know I need skin in the game but can only offer 20k cash , have 50k in 401k, and have about 150k in home equity . What’s do I do? Are there grants ? The business is successful, profitable,turn key. Owner ready to retire . Wants to get this started . I appreciate any input . Thanks in advance!!
Hi Michael!
Great question. I’ve moved your question over to our forum so we could give you a more in-depth answer. Check it out here.
Best,
Jeff
ram Bangalore
Hi
I am a Dentist and Planning to set up my own Practice.I am planning to buy a real estate property around 350,000 and I may need 500,000 to finish the interiors,equipment etc. What is the best way to get the loan? Should I get separate SBA loans for real estate and to run the dental practice ? To buy the real estate what is the main difference between conventional loan vs SBA ? Thanks in advance
Hi Ram!
As a Dentist you may want to check out our article on Dental Practice Loans, as the content is tailor made for your situation. To answer your question, you have several options! That’s always a good thing and a bad thing, because it can be difficult to figure out which one is right. Commercial real estate loans are generally filled with good options, all providing reasonable interest rates during repayment. This is due to the fact that the loan is secured by the real estate you’re purchasing or remodeling. There’s less risk for the lender. We recommend an SBA 504 Loan if you can wait long enough to get funded. An SBA loan can take 45 – 90 days or more to fund, but a 504 loan typically has the lowest rates of all commercial real estate funding options.
If you need less than $5 million you could also aim for an SBA 7a loan for commercial real estate. You can combine the costs of the real estate, the remodel, and any working capital you may need to operate your business moving forward. This might be the best option for your unique situation, but you really can’t go wrong in choosing either SBA loan or a conventional bank loan, which is similar to the 7a loan in both costs and fund uses. You can read our article on commercial real estate loans to learn more.
Best,
Jeff
ram Bangalore
Thank you so much
Don
I’m a contractor nothing more.
But, what I have witnessed is that many businesses men keep separate companies for the property and business. A local tire chain would lease the property and buildings from a separate LLC created for each owned by one or more of the senior partners.
When the owner of the tire company died and the company run under his name disappeared. The family and other partners still had the properties which they had been making money on from leasing to the company. Some would be sold the rest leased to others.
Also my family doctor from when I was a kid owned then medical building he was in, which provided a good revenue stream for his family.
I believe you need to keep buy your property etc… under one LLC or corporation etc… keeping your Dentist business and property businesses separate. If you sell your Dentist business or it fails. You still have the property to lease to the new owners or which ever other business moves in.
I agree with Don. While I recommend working with an attorney and asking him or her these types of questions, I believe that it is a good practice to keep your businesses separate, if you can. Managing real estate is a lot different than managing a dentist office. Keeping them in separate LLCs allows you to keep the rental income potentially when you sell your practice down the road. It could be a nice retirement for you. However, some businesses will not qualify for a loan without the revenue of the business (and the business guaranteeing it). If that’s the case, then you’ll have to keep them together until you can pay off the loan on the real estate. At that point you could look into separating them. If you try to separate when you buy the real estate then the loan will based 100% on your personal credit situation, unless you already have other properties in the LLC you’re buying it with.
To learn more about legal entities you can check out our guide to the best business structure.
Best,
Jeff