SBA loans consist of two primary types (SBA 7a loans and SBA 504 loans). The 504 loans are for commercial real estate, and use a community development company (CDC) as well as your primary lender to fund the loan. SBA 7a loans are the most popular loan type guaranteed by the Small Business Administration, and are typically either for working capital or to purchase or improve commercial real estate.
SBA Loan Rates
Current Maximum SBA 7a Loan Interest Rates: 6.75% – 9.25%
Current Maximum SBA 504 Loan Interest Rates: 4.08% – 4.43%
If you’re prepared to move forward with an SBA 7a loan, we recommend using SmartBiz. They can approve you for an SBA loan of up to $350K for working capital, or up to $5 million for commercial real estate. While most SBA lenders can take 90-120 days to fund, SmartBiz can get you funded in as fast as 30 days.
Current SBA 7a Loan Rates & Explanation
The Small Business Administration sets the maximum interest rate that any lender can charge when providing you with an SBA loan. These maximum SBA loan rates depend on the size of the loan you’re borrowing, which is why the rates are set with a range. All rates are based on nationwide market rates, which can change month to month.
Current U.S. Prime Rate as of December 2017: 4.50%
To calculate the maximum loan rates, the SBA takes the prime rate and adds 2.25% – 4.25% depending on the amount you’re borrowing. The table below shows the current SBA loan rates by loan amount.
Maximum SBA Loan Rates for SBA 7a Loan in December 2017
|Loan Amount||SBA 7a Loan of Less Than 7 Years||SBA 7a Loan of 7 Years or More|
|Less Than $25k||8.75%||9.25%|
|$25k - $50k||7.75%||8.25%|
|More Than $50k||6.75%||7.25%|
Note: If you’re getting an SBA Express Loan, then the interest rates could be higher than the amounts listed above.
Other Fees for SBA Loans
Interest rates are not the only cost you have to worry about if you’re getting an SBA loan. There are also origination fees and guarantee fees that the SBA charges.
The lender you choose will require an origination fee before they fund the loan. The origination fee will typically be somewhere between 1-4%, and is a one time fee either paid at closing or rolled into the entire loan amount.
The SBA requires your lender to pay a fee to help the SBA guarantee the loan. The fee covers the risk to the SBA that you may default on the loan. These fees are typically between 3-3.5% of the guaranteed portion of the loan, not the entire loan amount. The SBA generally only guarantees either 75% or 85% of the loan.
For more information about SBA loans and what you can expect, read our guide to SBA loans.
SBA Loan Costs vs Other Loans
While all of these fees may seem steep, unless you’re getting a loan that is fully collateralized by a real asset, like property, then an SBA loan will probably be the cheapest loan you can find. They offer rates and loan terms that are more favorable than other loans, and will typically give you the cheapest monthly payments.
Low monthly payments is a little bit different than total cost, however, If you really only need a loan for a short period of time to fill a cash flow gap then you should check out our recommended small business loans. These loans typically have higher rates, but because you’re paying on them for a short period of time (typically less than 1 year), the total cost can be lower than paying on an SBA loan for 10 years. Plus, you can get funded within a day or two instead of waiting for 30 days to get the money you need for your business.
How to Qualify for an SBA 7a Loan
If you think you’re ready to move forward with an SBA loan then you need to make sure you qualify. Here are the typical qualifications:
- Credit Score: 680+
- Years in Business: 2+ Years
- Down Payment: 10%+
- Collateral: Real collateral, like property, may be required but the SBA does approve loans without collateral for strong borrowers who sign a personal guarantee.
In addition to meeting these qualifications, you’ll also have to gather a lot of documentation before your application will even be reviewed. Here’s a list of documentation you should have ready prior to applying:
- Current Business Financials
- Projected Business Financials (1 Year)
- P&L Statement
- Business Leases
- Business Ownership/Origination Documents
- Business Overview & History
- All Business Licenses
- Business Tax Returns (2 Years)
- Personal Tax Returns (2 Years)
- Resumes of All Business Owners & Executives
For more information on applying for an SBA loan, check out our SBA loan checklist.
The Smart Hack
If you’re ready to get an SBA loan, then we recommend using SmartBiz as your loan provider of choice. They can fund you up to $350K for working capital or up to $5 million for a real estate loan. They get you through the SBA loan process faster than any other provider we’ve found. Where typically it takes 90-120 days, SmartBiz gets you funded in as fast as 30. Apply today to see how much you can qualify for!