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SBA loan rates in 2020
Find the latest rates for these popular small business loans
Business loans backed by the Small Business Administration (SBA) are known for offering some of the lowest rates out there. While your lender ultimately decides the rates your business is eligible for, the SBA caps how high those rates can get. However, your business will need to meet some stringent criteria in order to qualify.
Maximum SBA 7(a) loan rates: 7.75%–10.25%
Maximum CDC/504 loan rates: 2.523%–2.66%
SBA 7(a) loan rates for January 2020
The maximum rate for the popular 7(a) loan program depends on your loan amount and term. Generally, lower amounts and longer terms come with higher rates.
|Loan amount||Maximum rate for less than 7 years||Maximum rate for 7+ years|
|$0 to $25,000||9.75%||10.25%|
|$25,001 to $50,000||8.75%||9.25%|
SBA 7(a) loans come with both fixed and variable rates. Fixed rates stay the same over the life of your loan, while variable rates can fluctuate with the market. The interest rate caps apply to both types of rates, however.
Maximum rates apply to SBA 7(a) programs, which include:
- Standard 7(a) loans
- 7(a) Small Loans
- SBA International Trade Loans
SBA 7(a) Express loan rates
SBA 7(a) Express loans come with rates that differ from your typical 7(a) loan. Loan terms don’t affect the rate of an Express loan — only the loan amount.
Like with other 7(a) loans, larger loan amounts come with lower maximum rates.
|Loan amount||Maximum interest rate|
|$0 to $50,000||12%|
SBA 7(a) Express loan rates apply to loans that include:
- SBA Express loans
- SBA Veterans Advantage loans
- Export Express loans
CDC/504 loan rates for January 2020
CDC/504 loans can be more complicated than 7(a) loans. That’s because they’re made up of two loans: At least 50% of your financing can come from a bank or other SBA lender. Up to 40% can come from a nonprofit Certified Development Company (CDC) licensed by the Small Business Administration. The remaining 10% comes from your business, with no interest rate.
|Lender||Maximum interest rate|
|CDC 10-year loan||2.523%|
|CDC 20-year loan||2.66%|
The maximum rate a bank can charge through the CDC/504 Loan Program is 11.5%. However, some state laws override the maximum interest rate for a lower one.
The value of US Treasury bonds determine the rates on the CDC’s part of your loan.
SBA Microloan rates
If you’re getting a microloan through a nonprofit instead of your standard 7(a) lender, your interest rate depends on how much it costs your lender to fund your loan and how much you’re borrowing:
- Interest on microloans of up to $10,000 — cost of funds + 8.5%
- Interest on microloans of $10,000 or more — cost of funds + 7.75%
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How does the SBA calculate maximum rates?
Each Small Business Administration loan program has its own way of calculating maximum rate for loans in that program. Rates can also vary by SBA lender.
How the SBA calculates 7(a) rates
Maximum interest rates on SBA 7(a) loans are commonly based on the prime rate plus additional interest — even for fixed-rate loans.
The prime rate is a type of benchmark rate published in the Wall Street Journal. Benchmark rates depend on what lenders are charging their most creditworthy customers. The additional interest is a fixed rate that lenders can charge on top of the prime rate, which is currently 5%.
|Loan amount||Maximum rate for less than 7 years||Maximum rate for 7+ years|
|$0 to $25,000||Prime rate + 4.25%||Prime rate + 4.75%|
|$25,001 to $50,000||Prime rate + 3.25%||Prime rate + 3.75%|
|Over $50,000||Prime rate + 2.25%||Prime rate + 2.75%|
How the SBA calculates CDC/504 rates
The maximum bank rate for a CDC/504 loan is the same as that for a 7(a) loans, but how much a CDC can charge is challenging to calculate on your own.
To understand how it works, you first need to know what a debenture rate is. SBA 504 loans are funded by the sale of debentures, common long-term loans taken out by corporations or investors. Rates that come with debentures work a lot like interest rates, and they’re based on bonds issued by the US Department of Treasury and sold on Wall Street.
What does this mean to you? If you take out a 10-year CDC loan in January 2019, your interest is based on the five-year treasury yield on January 2, 2019 — or the first business day of the month.
To calculate the debenture rate, you add to the interest rate another fixed rate called a swap spread. Both are published online and vary depending on the bond market.
|Rate||How the SBA calculates the maximum rate|
|CDC 10-year loan||5-year treasury rate for the first of the month (2.476%) + swap spread (0.047%)|
|CDC 20-year loan||10-year treasury rate for the first of the month (2.640%) + swap spread (0.02%)|
|Bank loan||Prime rate + 6%|
Some lenders roll a portion of your CDC fees into your interest rate. This is called the effective rate. Effective rates are typically between 1.5% and 2% higher than the 10-year treasury yield.
What other costs should I consider?
Interest rates are among the top factors you look at when getting a loan, but it’s not all the potential costs to consider. SBA loans in particular can come with multiple fees charged by the government or your lender. Typically, you pay a fee to the SBA for backing your loan, though how that fee is calculated will depend on your program.
SBA 7(a) fees
The main fee associated with the 7(a) program is the SBA guaranty fee. An SBA guaranty fee offsets the risk the Small Business Administration takes on when backing your loan.
How much you pay depends on the portion of the loan that’s backed by the SBA — not your total loan amount. If the SBA guarantees 85% of a $100,000 loan, for instance, you’d pay a guaranty fee on $85,000.
|Guaranteed amount||Guaranty fee|
|$150,000 or less||2%|
|$150,001 to $700,000||3%|
|$700,001 to $5 million||3.5% up to $1 million, plus 3.75% on any amount over $1 million|
|All loans with a term of 12 months or less||0.25%|
SBA 7(a) loans also come with annual service fees that you pay on your outstanding balance each year. Today, that fee is 0.55% of the loan balance for all loan amounts.
CDC/504 borrowers don’t pay an SBA guaranty fee to get their funds, but they do pay an annual fee to the SBA on their loan balance. Borrowers also pay a fee to the Central Servicing Agent — like a loan servicer — every five years.
The CDC might charge a fee when releasing your funds as well as a monthly service fee. Banks typically charge only one fee when you get your funds, called a lender participation fee.
|Type of fee||Maximum cost||When you pay it|
|Lender participation fee||0.5% of the lender-funded amount||When you get your funds|
|CDC participation fee||1.5% of the CDC-funded amount||When you get your funds|
|CDC annual service fee||0.625%–2% of loan balance||Every year|
|Central Servicing Agent fee||0.1% of the outstanding balance per year||Every month|
SBA down payments
Your business may also be required to partly front the costs of the project you need the SBA loan for — called a down payment or an injection. With SBA 7(a) and 504 loans, businesses are required to put down around 10% of the loan amount.
How much you pay as a down payment depends on your personal credit score, loan amount and lender.
A loan backed by the Small Business Administration can help you land some of the most competitive rates on the market. But these popular loans also come with a higher rejection rate than any other type of business financing.
To learn more about how to finance your business, read our comprehensive guide to business loans.
Frequently asked questions
Rates are sourced from: www.sba.gov, www.treasury.gov and www.federalregister.gov
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