Current SBA Loan Rates and Terms for 2019: All You Need to Know

SBA Loan Rates and Terms for 2019
SBA Loan Rates and Terms for 2019

The Small Business Administration (SBA) offers various loans that present several undeniable opportunities for small businesses. Among them is higher affordability compared to traditional banking options, a way to consolidate debt, or find the best loan fit for a small business, favorable repayment terms, and an easy online application. 

As of 2019, there are six main SBA loan programs that the agency offers to small businesses:

  1. SBA 7(a) Loans;
  2. SBA Microloans;
  3. SBA Disaster Loans;
  4. SBA Export Loans;
  5. SBA CAPLine Loans;
  6. CDC/504 Loans.

Although SBA loan rates are higher than the interest rates offered by traditional banks, they allow many businesses to apply for affordable small business financing, which would be a lot harder to get through more conservative sources. The SBA guarantee allows banks to take on certain risks they would probably never undertake others. The winning combination this potentially brings to the banks and small business can turn into a long-term gain for both. Had it not been for the SBA support, these loans would probably not be financed at all by the banks.

Basic Qualifications for SBA Loans

The basic requirements set by the SBA include a credit score of at least 680 and annual revenues of at least $100,000. Although there are exceptions (e.g. startups may be eligible for SBA loans), the general qualification requirements also include having at least two years of business operations. Qualification requirements for SBA loans usually vary by lender. Verify your specific case with your lender before applying for financing. 

Well-qualified borrowers can get prequalified for up to $350,000 of SBA financing online within 30 minutes. Your business may get funds in one to four weeks.

What Are the Rates for SBA Loans?

The following are the current maximum SBA loan interest rates:

  • SBA 7(a) loan rates: 7.5% to 9.75%
  • SBA Microloan rates: 8% to 13%
  • SBA Disaster loan rates: 4% to 8%
  • SBA Export loan rates: up to 11.75%
  • SBA CAPLine rates: up to 10%
  • CDC/504 loan rates: 3.76% to 3.98% 

Keep in mind that in addition to the SBA loan interest rates on an SBA CDC/504 loan, and on SBA 7(a) loans, there are also fees to watch out for. These fees are charged on the loan in addition to the interest rate and include the CDC servicing fee, the central servicing agent fee, and the SBA guarantee fee. The SBA 7(a) loan fees include additional so-called packaging fees that can cost as much as $4,000 or more, servicing fees of up to 2% of the loan amount, closing costs, and prepayment fees.

Three factors determine current SBA loan rates and terms:

  1. Base Rate (prime rate, London Interbank Offered Rate (LIBOR) (one month) + 3.0%, or SBA PEG Rate).
  2. Loan Term (less than seven years or greater than seven years).
  3. Loan Size (less than $25,000, $25,000 to $49,999, and more than $50,000).

The longer the term, the higher the interest. For instance, loans with terms longer than seven years will have a maximum interest rate that is 0.5% higher than similar size loans that have terms less than seven years.

SBA Loan Interest Rates in Review

Current SBA loan interest rates can have a fixed or variable interest rate. With a fixed-rate business loan, the rate remains constant throughout the term of the loan. A variable-rate small business loan means that the interest rate on the loan fluctuates at regular intervals, quarterly or monthly.

SBA 7(a) Loan Rates

With variable-rate SBA 7(a) loans, the rate is reset based on one of three publicly available market interest rate numbers, plus a fixed percentage. The interest rate must always be at or below the maximum interest rate set by the SBA. Usually, the banks offer only variable-rate loans to smaller size SBA loans, with interest rates at or close to the maximum allowable by the current SBA loan rates.

As market interest rates rise on the variable-rate SBA 7(a) Loan, so will the rate on the loan. For example, a 10-year loan for $50,000 with interest rates rising by 2% will show the following fluctuation: if the interest rate on the loan is 9%, with a monthly payment of $633 per month, with a 2% rise in interest rates upon the interest rate reset, the rate would be 11%, with a monthly payment of $689, this would mean the monthly increase for a newly issued loan.

The interest rates the SBA sets is the maximum that banks can charge on SBA 7(a) loans. As a reminder, conventional small business loans rates range between 3% to 6%. The current maximum SBA interest rate ranges from 7.25% to 9.75%, depending on the size of the loan and the amount being borrowed. These interest rates are based on market interest rates. As market interest rates change, so do the maximum interest rates on these loans.

Below is a table showing maximum SBA 7A Loan Rates for September 2019:

Loan Size

Standard 7a (under 7 years to repay)

Standard 7a (over 7 years to repay)

Under $25,000

9.00% (5.00% base rate with 4.25% markup)

9.75% (5.00% base rate with 4.75% markup)

From $25,000 to $50,000

8.25% (5.00% base rate with 3.25% markup)

8.75% (5.00% base rate with 3.75% markup)

Over $50,000

7.25% (5.00% base rate with 2.25% markup)

7.75% (5.00% base rate with 2.75% markup)

 

SBA Microloan Rates

SBA Microloans provide financing to for-profit small businesses that have smaller working capital needs. These loans are not in any way guaranteed by the SBA and are offered by intermediaries - or SBA microlenders. The agency, however, has strict guidelines regarding loan amounts and Repayment Terms. Loan amounts for these types of loans cannot exceed $50,000 with repayment periods always kept under six years. Exact rates and terms will vary by microlender but can not exceed the SBA-set levels.

Loan Amounts

Up to $50,000 (commonly around $13,000)

Interest

8% - 13%

Application Fee

$25 to $50

Loan Processing Fee

$100 to $150

Closing Costs

2% to 5% of the loan amount

Packaging Fees

Determined by microlender

 

SBA Disaster Loan Rates

SBA Disaster loans provide financing to businesses and homeowners that have suffered as a result of a declared physical or economic disaster and can provide evidence of the negative impact. These are low-interest, long-term loans with rates starting at 4%. The highest possible rates for these loans is 8% and applies only to borrowers who are potentially able to procure funds from other sources. 

The SBA offers four main types of disaster assistance:

  1. Home and Property Disaster Loans (HPDLs) are available to homeowners and renters whose primary residence has suffered due to being located in an area of disaster.
  2. Business Physical Disaster Loans (BPDL) are available to entrepreneurs whose business suffered physical losses and damages to property not covered by insurance up to $2 million. 
  3. Economic Injury Disaster Loans (EIDL) are longer-term working capital loans for small businesses that require $2 million or less to meet normal operating expenses due to losses caused by a declared disaster. 
  4. Military Reservists Economic Injury Loans (MREIDL) are medium-term working capital loans that are provided to businesses that had an owner or essential employee called up for active military duty and have suffered losses due to that fact.

 

Loan Type

HPDL

BPDL

EIDL

MREIDL

Loan Amounts

$200,000

$2 million

$2 million

$2 million

Interest

4% to 8%

4% to 8%

4%, ineligible if credit is available elsewhere

4%, ineligible if credit is available elsewhere

Fees

No upfront fees or early prepayment penalties

No upfront fees or early prepayment penalties

No upfront fees or early prepayment penalties

No upfront fees or early prepayment penalties

Repayment & Deferral Period

Determined on a case-by-case basis

Monthly payments begin after 5 months of the promissory note date

Monthly payments begin after 5 months of the promissory note date

Monthly payments begin after 15 months of the promissory note date

 

SBA Export Loan Rates

SBA export loans provide funding to American small businesses that participate in export activity. Unlike other SBA programs, Export Loans guarantee up to 90% of the loan. Proceeds can be used to fund direct or indirect export activities and other international economic endeavors, like tourism and the sale of goods to domestic firms that ship overseas. 

There are three export-related loan programs offered by the SBA:

  1. The SBA Export Working Capital Program (EWCP) encourages export activity by providing funding used to fulfill orders and receivables. These loans are made to support businesses with longer payment cycles and can be used to repay suppliers, finance the production of goods, and restock inventory.
  2. The SBA Export Express Loan Program is a simple and quick guarantee program for smaller loans related to export activities. Proceeds can be used for refinancing existing export loans or for any other actual export development activity.
  3. The SBA International Trade Loan (ITL) Program supports businesses that are expanding due to exports or that are suffering due to imports. These loans can be used to improve or expand existing facilities and equipment, and usually require equipment or real estate as collateral.

 

Loan Type

EWCP

Export Express

ITL

Loan Amounts

$5 million

$500,000

$5 million

Interest

There is no SBA maximum

9.00% - 11.00%

6.75% - 9.25%

SBA Guarantee

90% (up to $4.5 million)

90% for loans of $350,000 or less; 75% for loans over $350,000

90% (up to $4.5 million)

Collateral

Export-related inventory and receivables

Mandatory only for loans over $25,000 

Real estate, equipment, and other business assets

Personal Guarantee

Required for owners who own at least 20% of the business

 

SBA CAPLine Loan Rates

The SBA CAPLines loans are excellent for business owners that have recurring short-term financial need or need to prepare for unexpected expenses. There are four CAPLines programs based on seasonal or cyclical working capital needs. These four existing types include:

  1. SBA Seasonal Line of Credit is good for small businesses that need to fill seasonal or cyclical cash flow gaps with short-term financing.
  2. SBA Contract Line of Credit works best for manufacturers of goods or service providers working on a contract.
  3. SBA Builders Line of Credit is a program for contractors and builders working with real estate construction or renovation projects.
  4. SBA Working Capital (Asset-based) Line of Credit works to assist businesses that need to convert certain short-term assets into cash.

 

Loan Type

Seasonal 

Contract 

Builders 

Working Capital 

Loan Amounts

$5 million

$5 million

$5 million

$5 million

Interest

6.75% - 9.25%

6.75% - 9.25%

6.75% - 9.25%

6.75% - 9.25%

Repayment Terms

10 years

10 years

5 years

10 years

One-Time Guarantee Fee

2.00% to 3.75%

2.00% to 3.75%

2.00% to 3.75%

2.00% to 3.75%

Borrower Equity

15% or 25% for loans of $150,000 or more

15% or 25% for loans of $150,000 or more

15% or 25% for loans of $150,000 or more

15% or 25% for loans of $150,000 or more

 

CDC/504 Loan Rates

The 504 Loan or the Certified Development Company (CDC)/504 Loan Program offers financing the purchase of fixed assets, which usually means real estate, at below-market rates. The SBA sets the maximum interest that banks can charge on CDC/504 loans. The current maximum interest rate on SBA CDC/504 loans ranges from 3.76% to 3.98%, depending on the size of the loan and the amount being borrowed.

The maximum interest rates on these loans are also based on market interest rates. While an SBA 7(a) loan can be used to purchase real estate, a real CDC/504 loan will tend to provide borrowers with tremendous interest rate savings.

A CDC/504 loan is comprised of two loans. The CDC lends up to 40% of the loan, and a traditional lender (a bank or other financial institution) contributes another 50% of the project’s costs. The remaining 10% is contributed by the borrower in the form of a down payment from the borrower.

Loan Type

10-year CDC/504 loan

20-year CDC/504 loan

Loan Amounts

$5 million for job creation, up to $5.5 million for public policy or small manufacturing

$5 million for job creation, up to $5.5 million for public policy or small manufacturing

Treasury Rate

5-year Treasury (1.68% in 2019)

10-year Treasury (2.03% in 2019)

Interest

3.76%

3.98%

SBA Guarantee Fee

0.5%

0.5%

Funding Fee

0.25%

0.25%

Closing Costs

$2,500

$2,500

 

Unlike with other SBA-offered loans, the loan rate for the CDC portion of the 504 loan is not variable and will not change during the life of the loan.

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