SBA Loan Interest Rate

The SBA (Small Business Administration) offers guarantees on loans for small businesses or entrepreneurs who have cash flow but do not have the necessary principal to obtain a loan for expansion or for a startup. The SBA has many different types of guarantees that they will give to private lenders, each with its own interest rate, but there are SBA loan interest rate maximums for each of these types of loans.

In the case of SBA loan 7(a), the interest rate depends on the amount of money borrowed and the length of maturity for the loan.

For loans less than $25,000: the interest rate must not exceed the prime plus 4.25% for loans with a maturation of less than 7 years, and 4.75% for a maturation of more than 7 years.

For loans between $25,000 and $50,000, the interest rate must not exceed the prime plus 3.25% percent for loans with a maturation of less than 7 years, and, 3.75% for a maturation of more than 7 years.

For loans above $50,000: the interest rate must not exceed the prime plus 2.25% for loans with a maturation less than 7 years, and 2.75% for a maturation more than 7 years.

In other words, the interest rate on this most common of SBA guaranteed loans is tied to the prime rate (which in turn is tied to the federal interest rate), plus or minus a certain percentage as determined by the borrower and the lender but not exceeding certain SBA maximums.

For the 504 loan program-also known as a CDC loan-which offers a guarantee from the SBA equal to 40% of the total loan, the interest rate is fixed to 5 and 10 year Treasury issues.

For the microloan or 7(m) loan, the SBA loan interest rate is variable depending on a number of factors, including the size of the loan, the needs of the borrower, the planned use of the funds, and the costs or needs to the intermediary lender. These microloans have a maximum value of $35,000 and a maximum length of maturity of 6 years.

SBA loan interest rates vary with the type of loan and with the length of maturity. In many cases, the interest rates will be comparable to that of an ordinary commercial lender's rates, but when you consider that several potential fees are waved with an SBA guaranteed loan, and that-without sufficient capital-it may be the only way to get a loan for your small business, and SBA loan has lower rates than it may at first appear.