In today's presentation we are going to review how interest rates are calculated for the SBA loans. So let's get started!

1. Guide to
SBA Loan
Interest Rates

2. loans
Are commercial loans
structured according to SBA
requirements.
The SBA is not involved in issuing the loans, it does set the
guidelines for these loans, including limits on interest rates.

3. 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.

4. These maximums are
based on:
term, and size
of the loan.

5. 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.

6. 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.
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.

7. By Loan Type

8. 7a Loans
The general rule is that the
more money you borrow,
and the quicker you pay it
back, the lower your interest
rate will be.

9. 7a Loans
The 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.

10. 7a Loans
The 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.

11. 7a Loans
As of January 2014, these rates are:
•
•
•
Prime Rate:
3.25%
!
LIBOR
One Month Prime + 3%:
SBA Peg Rate:
3.16%
3.13%

12. 7a Loans
As of January 2014, these rates are:
•
•
•
Prime Rate:
3.25%
!
LIBOR
One Month Prime + 3%:
SBA Peg Rate:
3.16%
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.

13. 7a Maximum Interest Rates
(Using Prime Base Rate)
!
Less Than $25K!
Standard 7a! 3.25% (base rate)
$25k – 50K
Over $50K
3.25% + 3.25%
3.25% + 2.25%
=6.5%
=5.5%
Repayment less
than 7 year
+ 4.25% (markup)
Standard 7a!
3.25% + 4.75%
3.25% + 3.75%
3.25% + 2.75%
=8.0%
=7.0%
=6.0%
3.25% + 6.50%
3.25% + 6.50%
3.25% + 4.50%
=9.75%
=9.75%
=7.75%
Repayment 7
years or greater
7a Express
=7.5%

14. Fees On 7A Loans

15. 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.

16. fee amounts
Description 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 $700,000
3.00% 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

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

18. CDC/504 Loans
January 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%

19. Business Disaster Loans
If you cannot obtain a loan
elsewhere, the interest rate for
a disaster business loan is
capped at 4%.

20. Business Disaster Loans
If 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.

21. Average Interest Rates
Overall, 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.

22. Keep in mind
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.

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