Current SBA Loan Rates for 2020

Updated September, 2020. All rates subject to change by the Small Business Administration.

Small businesses, the backbone of America, can now obtain the capital they need to expand, thanks to many loan programs under the SBA. These loan programs, including 7(a) Loans, CDC/504 Loans, and Disaster Loans, are famous for their low-interest rates. In this article, we will be talking about how SBA loan rates for 2020 – 2021 are determined, and where you can find and apply for SBA loans.

Want to learn more about how these SBA loans work? We’re going to explain that in a bit, but if you’re just in here to get the current rates, then here’s a handy list below.

The current September 2020 interest rates for SBA loans vary depending on the loan type:

 General SBA Loans

  • SBA 7(a) loans – 5.50% to 9.75% (for general business purposes)
  • SBA CDC/504 loans – 2.28% to 2.83% -(for financing properties and other fixed assets)

SBA Disaster Loans

  • SBA coronavirus disaster loans (capital for rebuilding due to the effects of COVID-19)
    • For-profit companies – 3.5% current rate
    • Non-profit companies – 2.75% current rate
  • Other SBA disaster loans
    • Borrowers with zero credit available elsewhere – 4.00%
    • Borrowers with access to other financing options – 8.00%

Still with us? Continue reading and we’ll talk about these different loans in detail.

SBA Loan Rates for SBA 7(a)

Do you need working capital, debt refinancing, and other forms of funding? Then, you should apply for the 7(a) loan program. The SBA partners with banks and other major financial institutions to provide low-interest loans to small businesses.

Under the 7a loan program, the SBA guarantees a portion of your loan. And depending on your qualifications, they also set limits on the loan’s interest rates, fees, and term lengths. Keep in mind that the SBA doesn’t directly loan you money from financial institutions. Instead, the latter decides to loan SBA money on their own accord.

Current SBA 7(a) Interest Rates

The SBA considers various factors, including term length, base rate, and loan amount, when determining maximum rates for SBA 7(a) loans. The current SBA 7(a) loan prime rate is 3.25%. Please refer to the table below for the current rates of most SBA 7(a) loans:

Loan Amount 7 Years and Below Above 7 Years
Up to $25,000 7.50% 8.00%
$25,000 to $50,000 6.50% 7.00%
$50,000 and above 5.50% 6.00%

Source: WSJ

Current Rates for Express Loans (Loans with an Accelerated Turnaround Time – SBA Express and SBA Export Express):

  • $50,000 or less – 9.75%
  • $50,001 or more – 7.75%

Eligibility & Terms of SBA 7(a) Loans

Did you know that the SBA considers most for-profit business owners eligible for a 7(a) business loan? Still, it’s their partner lender who makes the final decision. To qualify, you need to have (1) a business that is at least two years old, (2) a fair credit rating, and (3) a healthy cash flow and a healthy debt-to-income ratio. Those who do qualify get to enjoy many benefits, including the following:

  1. Borrowing Amount (Note: Financial institutions will decide the exact amount to lend based on various factors, such as the loan’s cash flow and purpose.)
    1. $5 million maximum borrowing amount for most loans
    2. $350,000 for SBA Express loans
  2. Guaranteed Amount
    1. 85% for loans worth $150,000 or less
    2. 75% for loans above $150,000
    3. 50% for SBA Express loans
  3. Maximum Term Length
    1. 10 years for most loans
    2. 25 years for real estate business loans
  4. Guarantee Fee: 0% to 3.5% (Note: Watch out for other fees your lender charges, such as referral and packaging fees.

SBA 7(a) Rates & Fees Calculation

While it is up to the lender to set your interest rate, the SBA’s role is to define the limitations of the interest rate to prevent the lender from overcharging. An SBA 7(a) loan’s maximum interest rate is the sum of the base rate and the small markup that the lender makes to cover profit and transaction costs. Lenders can choose to use the Wall Street Journal’s prime rate or their prime rate as your loan’s base rate. Regardless, the SBA will be there to establish a maximum.

Lenders can use any of the following:

  1. Prime Rate (lowest type of base rate)
  2. One Month London Inter-bank Offered Rate (LIBOR) + 3% Rate Adjustment
  3. SBA Optional Peg Rate (“a weighted average of rates the federal government pays for loans with maturities similar to the average SBA loan”)

Common Markups for 7(a) Loans

Lenders typically add a small mark-up to your 7(a) loan. Here are some of the usual computations:

Loan Amount 7 Years and Below Above 7 Years
Up To $25,000 Base rate + 4.25% Base rate + 4.75%
$25,000 to $50,000 Base rate + 3.25% Base rate + 3.75%
$50,000 and above Base rate + 2.25% Base rate + 2.75%

Source: SBA

Please note that because of the fast nature of express loan transactions (SBA Express and SBA Export Express), you’ll usually have higher interest rates.

For instance, loans that are $50,000 or lower will have an interest rate equal to the base rate + 6.5% markup, while loans above $50,000 will have an interest rate equivalent to the base rate + 4.5% markup.

Also, keep in mind that 7(a) loans are more likely to have a variable than a fixed interest rate, which means the interest rate of the loan you can take out may change when one of the components changes.

This means it might increase significantly with a higher base rate.

Want to learn your corresponding guarantee fee? See table below:

Loan Amount Guarantee Fee
$150,000 or below None
$150,001 – $700,000 3%
$700,001 and more 3.5%
More than $1,000,000 3.5% on the first $1,000,000

An additional 0.25% (to 3.75%) on the amount above $1,000,000

Source: SBA

You may want to check if your loan has a 15-year or longer term length. If so, you may have to pay a prepayment penalty if you plan to settle the loan within the first three years.

Keep tabs on extra fees that the SBA’s partner financial institutions may charge like referral fees or closing costs.

Apart from the interest rate, which you already have some idea of, you need to understand the cost, annual percentage rate (APR), and other information before taking out an SBA 7(a) loan.

To do so, check out our SBA loan calculator below:


Applying for SBA 7(a) Loans

If you’re searching for an SBA 7(a) loan, there are many options out there.Consider SmartBiz, one of the most popular lending facilitators around. This company has become the go-to SBA loan resource, particularly since they originated the most 7(a) loans three years ago. Streamlining and simplifying the world of SBA lending for over a decade now, SmartBiz is the first place you should go to if you’re looking for an SBA 7(a) loan under $350,000. This type of express loan is used to fund working capital and debt refinancing. With SmartBiz, you can quickly determine whether you qualify for a 7(a) loan.

Lendio is another financing platform that you can turn to if you couldn’t find a suitable loan program for your needs through SmartBiz. This platform matches small businesses with lenders that offer financing options for which they are eligible. Just answer questions about your company’s profile, financial situation, and the purpose of the loan, and then Lendio will run a search to find the lender that can help you. You can also check out our list of lenders below:

Lender Minimum Revenue Time in Business Minimum Credit Next Steps
$10,000/mo 2 years 720+ See if you qualify
$10,000/mo 2 years 720+ See if you qualify
$15,000/mo 2 years 720+ See if you qualify
$10,000/mo 2 years 720+ See if you qualify
$10,000/mo 2 years 720+ See if you qualify
$10,000/yr 2 years 650+ See if you qualify

Loan Rates for SBA CDC/504

If you’re a small business who’s in need of urgent financing for fixed assets such as real estate and machinery, consider applying for an SBA CDC/504 loan. This loan program is a project that involves three parties—(1) the borrower, (2) the financial partner, and (3) Community Development Corporations (CDCs).

The CDCs involvement, which funds 40% of the loan, makes the “CDC/504” loan possible. The remaining chunk is split between the financial partner (50%) and the borrower (10%).

This division of funding contribution may change depending on the age of the business applying for the loan. Generally, if your company is less than two years old, you are considered new. This means you will pay a higher percentage of the cost.

The CDC/504 loan appeals to small businesses because it usually has low, fixed interest rates and, of course, more significant loan amounts since it comes from more than one source.

Current Interest Rates for SBA CDC/504 Loans

Determining interest rates for CDC/504 loans can be complicated, but LendingBuilder estimates the effective rate for 10-year loans to be around 2.28% and about 2.83% for 20-year loans for September 2020.

Keep in mind, however, that these are just our estimates. Your rate may change depending on a variety of factors.

Regardless though, it will always be much lower than the interest rates for SBA 7(a) loans.

Eligibility & Terms for CDC/504

Not all businesses can qualify for a CDC/504 loan. Apart from showing proof of your ability to pay the loan, there are several other criteria that you must meet.

  1. Your tangible net worth must be less than $15 million.
  2. Your average net income must be less than $5 million after taxes for the last two years.
  3. Your project must create jobs.
  4. Your company must be classified as a “for-profit business” and operating in the US.
  5. You must have a well-defined business plan.
  6. You must show the necessary management expertise to accomplish the business plan.

Once your for-profit business qualifies for a CDC/504 loan, an SBA agent will discuss the terms. Most CDC/504 loans come with the following terms:

  • The SBA can lend you up to $5 million, depending on your qualification and the type and size of your project.
  • You can qualify for a $5.5 million loan if the SBA finds that your project meets specific community development goals.
  • Equipment and machinery loans have a 10-year term length.
  • Real estate loans have a 20-year term length.
  • Watch out for one-time and ongoing fees, such as monthly servicing fees and guarantee fees—make sure to include them in your loan cost estimate. Ask the SBA agent handling your application whether the effective interest rate consists of these fees.
  • In a CDC/504 loan contract, you agree to use your project as collateral. Rest assured though that the SBA guarantees the immediate transfer of the funds you need, especially the CDC’s promised portion of the loan.
  • There’s a prepayment penalty that the SBA charges for the first half of the loan to protect the CDC and the partner financial institution against the possible financial loss of interest income expected from the original loan terms. This penalty gets lower over time, the longer that your loan remains outstanding.

Calculating for SBA CDC/504 Loan Rates

Before you apply for a CDC/504 loan, make sure you understand how its interest rates are determined. This way, you can check for financial errors. Interest rates for this type of SBA loan are a combination of three elements—treasury rates (5 to 10 years), bond investor yield spread (changes month to month, so make sure to use the latest value), and markups.

What Does The SBA CDC/504 Loan Rate Markup Include?

The markup computation depends on the fees charged by the SBA and the partner financial institutions involved. The SBA charges 0.914% borrower fees, while the CDC charges 0.625% minimum fees. There’s usually a 0.1% handling commission. These rates may change depending on the SBA’s assessment of your application, and the overall cost may include upfront fees not rolled into the total interest rate.

Estimated Effective Rates for 10- and 20-Year Loans

To calculate for the effective rates of both loan types, we used the average of last year’s spread to the bond investor (0.38% for 10-year loans and 0.51% for 20-year loans) and added it to the total ongoing fees (1.64%) and the 5-year treasury rate for the initial month (0.26% for 10-year loans and 0.68% for 20-year loans). So, for 10-year loans, the estimated effective rate is 2.28%, and for 20-year loans, 2.83%.

How to Search for SBA CDC/504 Loans

Like SBA 7(a) loans, you can find the right SBA CDC/504 loan for your project through a lending facilitator. You can also use SBA’s Lender Match Platform to ensure that you’ll find reputable lenders. The search process is just as simple as well, involving no more than answering a short questionnaire. Once the SBA receives the questionnaire, they will inform all partner lenders about your inquiry. It usually takes two days before eligible lenders start contacting you.

SBA Loan Rates for Disasters

Is your small business affected by the current coronavirus pandemic? Natural calamities and hazards are the biggest threats to businesses, especially small startups, with insufficient safety nets.

The SBA understands this, which is why they offer Disaster Loans to companies severely affected by disasters. You can then use the loan for operational expenses and costs that aren’t covered by FEMA.

In other words, these loans give you the working capital they need to avoid complete closure during or after a disaster.

Disaster loans cover two types of damage following a disaster—physical damage (destruction of equipment and facility) and economic damage (significant loss of income posing threats of closure).

You can apply for a disaster loan for physical damage to cover costs of repair or reconstruction of physical assets vital to your operation, and a disaster loan for economic damage due to high working costs until normal operations resume.

Current Rates for SBA Disaster Loans Intended for Businesses Affected by COVID-19 Outbreak

2020 was not kind to thousands of small businesses across the country. Right now, you are probably still struggling with the economic impact of the COVID-19 pandemic. Until it’s completely safe to resume full operations, the situation will remain the same, especially for small businesses with almost depleted working capitals.

If you are part of the many small businesses that need additional working capital to survive this pandemic, you can apply for Economic Injury Disaster Loans (EIDL) for COVID-19. It is essentially a disaster loan with some slightly different properties to tackle unique issues the pandemic presents.

Benefits of COVID-19 EIDLs

  1. General-purpose loan to cover accounts payable, bills, and fixed debts
  2. Low interest rates
    1. 3.5% (for profit)
    2. 2.75% (non-profit)
  3. Loan amount
    1. Up to $2 million with collateral
    2. Below $25,000 without collateral
  4. Fixed rates – no possible interest rate increase down the road
  5. Term length – up to 30 years (unlike SBA 7(a) and SBA CDC/504 loans, which usually come in 10 or 20 years term)
  6. Possible $10,000 advance (if you need the funds)

Current Rates of SBA Loans for Other Disasters

Disaster loans naturally have lower interest rates than other types of SBA loans, especially for non-profit organizations.

As previously explained, these SBA loans have fixed rates, which means their value won’t change throughout the loan’s life regardless of the economic situation. However, these rates may vary depending on your ability to qualify for financing elsewhere.

The maximum interest rate can go up to 8% if you have other possible fund sources, and 4% if you don’t.

This arrangement is quite reasonable since the SBA also factors in “urgency” and “opportunity” when determining loan amount and eligibility. You may get an even lower interest rate if you are borrowing money for a non-profit organization.

To give you an idea how this works, check out these interest rates for businesses in Mississippi and Tennessee that were affected by Tropical Storm Olga:

Type of Loan With No Access to Credit Elsewhere With Access to Credit Elsewhere
Business Loans 3.875% 7.75%
Non-Profit Organization Loans 2.75% 2.75%
Economic Injury Loans — Businesses & Agricultural Co-ops 3.875% N/A
Economic Injury Loans — Non-Profits 2.75% N/A

Source: SBA

The SBA also considers the borrower’s business location and the type of disaster that affected them. Request for a fact sheet related to the said disaster, which you can use to estimate the loan’s possible interest rate.

Eligibility & Terms

Both for-profit businesses and non-profit organizations are allowed to apply for a disaster loan. To qualify, however, there are some basic eligibility requirements you have to meet.

First, you must prove that (1) your business is within a declared disaster area, and that (2) it has experienced physical or economic damage from the disaster.

Even if you are in a rather dire situation, the SBA must also (3) check if you can repay the loan. Lastly, they will have to (4) look into your credit score. Whatever interest rate you qualify for, you can use the loan to cover repair and recovery costs that aren’t covered by your insurance or by FEMA.

Before applying for a disaster loan, you should know the standard terms to expect. First, the loan can have a 30-year maximum term length and a $2 million maximum borrowing amount, as previously explained. However, if you have access to funds elsewhere, the maximum term length will be reduced to 7 years, and your interest rate may also go up to 8%.

The final amount SBA will offer you may ultimately vary, depending on your ability to repay the loan. If it turns out to be more than $25,000, SBA will ask for collateral.

Calculating for SBA Disaster Loan Rates

You should know by now that the SBA considers different factors when determining disaster loan rates. They do this to ensure that the terms are fair for all the parties involved, including the lending partners and the SBA itself.

Of the factors the SBA considers, the (1) disaster’s type and location are the most significant.

The SBA must first establish that your business is within the disaster zone. Then they will determine how much damage the disaster caused your business. From there, they can have an initial loan rate estimate, which can change when other factors come into play.

Next, (2) the type of business or organization you are also influences your disaster loan rate.

For-profit companies typically get higher loan rates, while non-profit organizations and small agricultural co-ops get relatively small loan rates, which (3) may increase depending on their ability to access other fund sources.

The SBA assigns higher interest rates to businesses and organizations, while homeowners have low interest rates.

Finding an SBA Disaster Loan

Before heading to an SBA office to apply for a loan, it’s best to check their Disaster Loan Assistance page to see if your business is within the declared disaster area. This way, you can determine if you are eligible for a disaster loan.

When you’re at least 80% sure that you qualify, you can use lending facilitators to allow the SBA to find a lender that can provide the financing you need.

Ineligible for a Disaster Loan? Here are the Loan Rates for SBA 7(a)

Do you need working capital, debt refinancing, and other forms of funding? Then, you should apply for the 7(a) loan program. The SBA partners with banks and other major financial institutions to provide low-interest loans to small businesses.

Under the 7a loan program, the SBA guarantees a portion of your loan. And depending on your qualifications, they also set limits on the loan’s interest rates, fees, and term lengths. Keep in mind that the SBA doesn’t directly loan you money from financial institutions. Instead, the latter decides to loan SBA money on their own accord.