SBA LoanGuide to

Interest Rates

Are commercial loans structured according to SBA requirements.

loans

The SBA is not involved in issuing the loans, it does set the guidelines for these loans, including limits on interest rates.

When it comes to interest rates, the SBA does not set one rate for all loans, but instead sets certain maximums that your lender must respect. These maximums are based on:

term, and size of the loan.

These maximums are based on:

term, and size of the loan.

The lowest interest rates are given to larger loans with short repayment terms, while the highest rates are given to smaller loans with longer repayment terms.

Generally,

The lowest interest rates are given to larger loans with short repayment terms, while the highest rates are given to smaller loans with longer repayment terms.

Generally,

Because SBA loans are designed to provide credit to businesses that may not qualify for a conventional bank loan, SBA loans may sometimes have higher interest rates than non-SBA loans.

By Loan Type

7a LoansThe general rule is that the more money you borrow, and the quicker you pay it back, the lower your interest rate will be.

7a LoansThe general rule is that the more money you borrow, and the quicker you pay it back, the lower your interest rate will be.

The actual interest rate you will end up paying will be negotiated between you and your lender, but both fixed and variable interest rate structures are available.

7a LoansThe maximum rate is composed of a base rate + a spread.Your lender can use one of three acceptable base rates: the Prime rate published in a daily national newspaper, London Interbank One Month Prime (LIBOR) + 3%, or an SBA Peg Rate.

7a LoansAs of January 2014, these rates are:

• Prime Rate: 3.25% !

• LIBOR One Month Prime + 3%: 3.16%

• SBA Peg Rate: 3.13%

7a LoansAs of January 2014, these rates are:

• Prime Rate: 3.25% !

• LIBOR One Month Prime + 3%: 3.16%

• SBA Peg Rate: 3.13%In addition to the base rate, lenders are allowed to add an additional spread to calculate your final interest rate. This is where the size and repayment term of your loan factors into your interest rate.

7a Maximum Interest Rates(Using Prime Base Rate)

!Less Than $25K! $25k – 50K Over $50K

Standard 7a!Repayment less

than 7 year

3.25% (base rate) + 4.25% (markup)

=7.5%3.25% + 3.25%

=6.5%3.25% + 2.25%

=5.5%

Standard 7a!Repayment 7

years or greater

3.25% + 4.75% =8.0%

3.25% + 3.75% =7.0%

3.25% + 2.75% =6.0%

7a Express3.25% + 6.50%

=9.75%3.25% + 6.50%

=9.75%3.25% + 4.50%

=7.75%

Fees On 7A Loans

While banks initially pay this fee to the SBA, they can pass this fee onto the borrower during the closing of the loan.

Fees On 7A Loans

fee amountsDescription of 7A Loan SBA Guarantee Fee

All 7A Loans Under $150,000 No Fee

7A Loans 1 Year & Shorter 0.25% of the Guaranteed Portion of the Loan

7A Loans Greater Than 1 Year with a loan amount more than $150,000 less

than $700,0003.00% of the Guaranteed Portion

of the Loan

7A Loans Greater Than 1 Year with a loan amount more than $700,000 an

less Than 1 Million

3.50% of the Guaranteed Portion of the Loan

CDC/504 LoansInterest rates on 504 loans are pegged to an increment above the current market rate for 5-year and 10-year U.S. Treasury issues.

CDC/504 LoansJanuary 2014 Rates:

• 20-year 504 rate: 10 Year Treasury market rate (2.98%) + Spread (0.48%) = Total interest rate 3.46%

• 10-year 504 rates: 5 Year Treasury market rate (1.76%) + Spread (0.38%) = Total interest rate 2.14%

Business Disaster LoansIf you cannot obtain a loan

elsewhere, the interest rate for a disaster business loan is

capped at 4%.

Business Disaster LoansIf you cannot obtain a loan

elsewhere, the interest rate for a disaster business loan is

capped at 4%.

If your business has credit available elsewhere, the max interest rate is 8%.

The SBA will determine whether you have credit available elsewhere.

Average Interest RatesOverall, between July 1, 2011 and June 30, 2012, the average interest rate for variable and fixed rate SBA loans was 5.3% and 5.8%, respectively.

that this was for all SBA loans, and that this rate will vary depending on the type, size, and term of the loan that you receive.Overall, while interest rates remain fairly low, recent data shows a slight upward trend (less than 1%) in interest rates for both 7a and 504 loans.

Keep in mind

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