SBA Loan Rates & How They Work

If you’re considering SBA loans as a source of secure and affordable funding for your small business, we’ll explain the associated rates and fees so you know what to expect from these government-backed loans with low interest rate and long repayment terms.

 

SBA 7(a) Loan Interest Rates

The current 2018 Prime Rate, determined by market conditions and set quarterly by the Federal Reserve Board, is 4.75%. On top of this base, lenders can charge additional rates, up to the maximum interest caps set by the SBA.

Loans offered through the SmartBiz Loans marketplace have a variable interest rate, made up of the Prime Rate plus 1.50 % to 3.75% depending on the size of the loan.

  • Working Capital and Debt Refinance loans between $30,000 and $50,000 have a variable interest rate, made up of the Prime Rate + 3.75%
  • Working Capital and Debt Refinance loans between $50,000 and $350,000 have a variable interest rate, made up of the Prime Rate + 2.75%
  • Commercial Real Estate loans between $500,000 and $5,000,000 have a variable interest rate, made up of the Prime Rate + 1.50%

SBA 7(a) Loan Fees

Some of the fees that are associated with 7(a) loans are charged directly by the SBA for backing the loan, while others are charged by lenders or agents to cover the costs of processing and delivering the funds. The SBA regulates the maximum additional fees that can be charged.

When applying for a 7(a) loan through SmartBiz, whether that be for working capital, debt refinance, or commercial real estate, you appoint SmartBiz Loans to serve as your referral and packaging agent. We help you assemble and complete all the appropriate documents to apply for funding. SmartBiz Loans refers your application to one of our preferred SBA lending partners who is most likely to approve your unique business and get you to a “yes” faster and easier.

Fees for SBA 7(a) Working Capital and Debt Refinance Loans

  • For SBA working capital loans up to $150,000, the SBA fee is 2% of the guaranteed portion of the loan OR 1.7% of the loan balance.
  • For loans of $150,001 to $700,000, the fee is 3% of the guaranteed portion OR 2.25% of loan balance.
  • For loans of $700,001 to $5,000,000, the fee is 3.5% of the guaranteed portion up to $1,000,000 plus 3.75% of the guaranteed portion over $1,000,000.

Fees for SBA 7(a) Commercial Real Estate Loans

SBA 7(a) commercial real estate loans up to $5 million have a guaranty fee paid to the SBA between 3% and 3.75% depending on the loan amount.

  • For loans of $500,000 to $700,000 the fees are 3% of the guaranteed portion OR 2.25% of loan balance.
  • For loans of $700,001 to $5,000,000: 3.5% of the guaranteed portion up to $1,000,000 plus 3.75% of the guaranteed portion over $1,000,000.

To find out the APR and monthly payments associated with your desired loan amount, check out our Working Capital and Commercial Real Estate loan calculators!

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Other types of SBA loans not offered through the SmartBiz marketplace include CDC/504 loans and SBA microloans. These are typically used for more specific purposes, so they can have unique requirements and components.

SBA 504 Loan Interest Rates

SBA CDC/504 loans are an alternative to 7(a) loans, most commonly used for purchasing commercial real estate and fixed assets like large equipment. They’re made up of several elements: a loan from a bank for about 50% of the total amount, a loan from a non-profit Certified Development Company (CDC) for 40%, and a 10% down payment from the borrower.

Unlike 7(a) loans, the CDC portion of 504 loans have a fixed interest rate, meaning that it won’t change over time. Keep in mind, though, that the 50% paid for by the financial institution does not have to be fixed.

SBA 504 Loan Fees

CDC/504 loans have a variable number of fees that are associated with the various parties involved. The baseline includes a bank origination fee, a CDC flat fee of $2500, and SBA charges on both the bank and CDC loans. In addition, there may also be several other closing costs for servicing, processing, underwriting, and more depending on the specific application. There is a prepayment penalty that decreases over the loan term.
Learn more about SBA CDC/504 loans on the SBA’s website.

SBA Microloan Interest Rates

For smaller loan amounts, the Small Business Administration can contribute and guarantee up to $50,000 for small businesses through its nonprofit intermediaries. These loans are primarily for women, low-income, veteran, and minority entrepreneurs. Interest rates typically range from 8% to 13%.
Find out more about SBA Microloans here.

Have questions about how SmartBiz can help you achieve your business goals through an SBA 7(a) loan? Learn about SBA 7(a) loans the services we offer on our website.

 

 What you need to know: The information provided through SmartBiz® University and the articles contained therein are for educational purposes only. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.