SBA Loans: Current Interest Rates For July 2023

The Small Business Administration (SBA) provides a number of loan programs designed to help small businesses grow. In this post, we explain the rates for three of the SBA’s most popular loan programs: 7(a) Loans, CDC/504 Loans, and Disaster Loans.

Here are the current interest rates for SBA loans in July 2023:

• Current Rates For SBA 7(a) Loans: 10.50%-13.00%
• Current Rates For SBA CDC/504 Loans: Approximately 5.99%-6.26%
• Current Rates For EIDL Loans For COVID Relief: 3.75% for for-profit businesses and 2.75% for nonprofit businesses.
• Current Rates For PPP Loans: 0% if forgiven; 1% if not forgiven.
• Maximum Rates For Other SBA Disaster Loans: 4.00% with no credit available elsewhere or 8.00% with credit available elsewhere.

Keep reading to learn about the SBA’s loan programs, how current rates are calculated, and where to find the best SBA loans.

SBA 7(a) Loan Rates

The SBA 7(a) loan program is the Small Business Administration’s most popular program. The SBA works with partners, such as banks and other financial institutions, to offer low-cost loans for most business purposes, including working capital, refinancing, and equipment.

While the SBA does not directly loan money under the 7(a) loan program, it guarantees a portion of the loan and sets limits on the interest rates, fees, and term lengths the financial institutions can offer.

Current SBA 7(a) Interest Rates

The maximum rate for SBA 7(a) loans varies based on your term length, the borrowing amount, and the base rate (see below for an explanation of the base rate). Below are the current rates for most SBA 7(a) business loans (as of July 2023):

SBA Express and SBA Export Express loans (loans with an accelerated turnaround time) have slightly different rates. Currently, the maximum rate for Express loans of $50,000 or less is 14.5%; the rate for loans above $50,000 is 12.5%.

SBA 7(a) Loan Eligibility

If you run a for-profit business, you are likely eligible for a 7(a) business loan in the eyes of the SBA. However, the partner lenders are ultimately responsible for borrower eligibility. In general, to qualify for a 7(a) loan, you will need to meet these requirements:

• Own a business that is at least two years old
• Have fair credit
• Have a strong cash flow and debt-to-income ratio

SBA 7(a) Loan Terms

If eligible, borrowers benefit from long-term, low-interest loans that can be used for most general business purposes.

• Most 7(a) loans have a maximum borrowing amount of $5 million
• SBA Express loans have a maximum borrowing amount of $350,000.
• The amount you are eligible for will depend on the use of proceeds, your cash flow, and other factors.
• The maximum term length is ten years for most loans, including inventory, working capital, and equipment.
• The maximum term length is 25 years for real estate.
• The SBA will guarantee a portion of your loan:
  • For loans of $150,000 or less, the SBA will guarantee 85% of the loan.
  • If your loan is above $150,000, the SBA will guarantee 75% of the loan.
  • Express loans carry a maximum guarantee of 50%.
• The SBA charges a guarantee fee of 0% to 3.75% and a possible prepayment penalty.
• SBA partners might also charge fees, such as closing costs, referral fees, packaging fees, or others.

How SBA 7(a) Interest Rates Are Determined

The lender sets your interest rate, but the SBA ensures that there is a maximum interest rate they can charge. A base rate plus a small markup determines the rate. Usually, the base rate is the Wall Street Journal prime rate, but lenders could use any of these base rates:

• Prime Rate: The lowest rate banks set for lending. The Wall Street Journal publishes the most commonly used prime rate.
• One Month LIBOR + 3% Rate Adjustment: The London Inter-bank Offered Rate, a rate used for inter-bank lending in London.
• SBA Optional Peg Rate: A metric that the SBA defines as “a weighted average of rates the federal government pays for loans with maturities similar to the average SBA loan.”

The base rate is added to a small markup to determine the maximum interest rate. Here are the markups for most 7(a) loans:

For SBA Express and SBA Export Express loans, the markups are base rate + 6.5% for loans of $50,000 or below and base rate + 4.5% for loans above $50,000.

General 7(a) loans rates can be fixed, but usually, they have a variable interest rate. If you have a variable rate, your interest rate will rise or fall when the base rate changes.

SBA 7(a) Fees

In addition to the interest rate, the SBA might charge a one-time guarantee fee or a portion of your loan. The fee is based on the loan amount:

• Loans Of $150,000 Or Less: No guarantee fee
• Loans Of $150,001 To $700,000: A 3% guarantee fee
• Loans Of $700,001 & Above: A 3.5% guarantee fee
• Loans Above $1,000,000: A 3.5% guarantee on the first $1,000,000 and an additional 0.25% (to 3.75%) on the portion above $1,000,000

The SBA also charges a small prepayment penalty if you repay in the first three years of a loan with a term of 15 years or longer.

The partners you are working with are allowed to charge some additional fees. You might be charged closing costs, referral fees, or others.

SBA 7(a) Loan Calculator

The interest rate will tell you a lot, but to fully understand the cost of an SBA loan, you’ll need to have more information, including the APR and the total cost of borrowing. If you have an SBA 7(a) loan offer, use our SBA loan calculator to get estimates on everything you need to know to make an informed decision.

Where To Find SBA 7(a) Loans

If you’re looking for an SBA 7(a) loan under $350,000 for working capital, debt refinancing, or real estate, start your search with SmartBiz. This lending facilitator, which is responsible for originating the most 7(a) loans of $350,000 or less in 2017, uses technology to see instantly whether you’re eligible for a loan and to speed up the lending process.

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If SmartBiz isn’t for you, Lendio offers a loan matchmaking service for SBA loans and other types of business financing. After filling out a short questionnaire with information about yourself and your business, Lendio will match you up with lenders that you’re eligible for.

SBA CDC/504 Loan Rates

The SBA CDC/504 program is for loans that are used to finance fixed assets such as land, real estate, and machinery. To offer these loans, the SBA works with Community Development Companies (CDCs) and other financial partners.

The project is typically funded 40% by the CDC, 50% by a financial partner (usually a bank), and 10% by your business. If your business is new (under two years old) or you’re funding a special property, you might have to pay a larger percentage of the cost.

While borrowers can use a general 7(a) loan to finance fixed assets, CDC/504 borrowers benefit from low, fixed interest rates and larger possible borrowing amounts.

Current SBA CDC/504 Interest Rates

Overall, CDC/504 loans carry lower interest rates than the SBA’s 7(a) loans. Below are the current estimates (as of July 2023):

• Effective Rate For 10-Year Loans: About 6.26%
• Effective Rate For 20-Year Loans: About 5.99%

Due to the complicated nature of determining rates for CDC/504 loans, the above rates are estimated to the best of our ability. On receiving a loan, your rate might be different than the rates seen above.

CDC/504 Loan Eligibility

If you meet these requirements, you have a good chance of qualifying for a CDC/504 loan:

• Must be a for-profit business
• Must do business in the US
• Must not have funds available elsewhere
• Must have demonstrated the ability to repay the loan
• Must have relevant management expertise and a business plan
• Must have “a tangible net worth less than $15 million, and an average net income less than $5 million after taxes for the preceding two years”

CDC/504 Loan Terms

Businesses that qualify for a CDC/504 loan will be able to borrow with these terms:

• The maximum the SBA will lend is $5 million, but it can go up to $5.5 million for some projects.
• The amount you qualify for is dependent on the needs of the project, your business’s finances, and whether your project meets certain community development goals, such as job creation.
• The maximum term length for equipment and machinery is 10 years.
• The maximum term length for real estate is 20 years.
• Borrowers are subject to one-time and ongoing fees, including monthly servicing fees and guarantee fees. However, most fees are included in the effective interest rate.
• The project being financed is typically used as collateral.
• The SBA guarantees 100% of the CDC’s portion of the loan.
• The SBA charges a prepayment penalty for the first half of the loan (the first five years of a 10-year loan and the first 10 years of a 20-year loan). The penalty is a small percentage of the remaining balance, which decreases the longer your loan is outstanding.

How SBA CDC/504 Loan Rates Are Determined

CDC/504 loan rates are based on the 5- and 10-year treasury rates plus a spread to the bond investor. Additionally, there are rate markups to cover fees for the SBA and its various partners, which include ongoing borrower fees, CDC servicing fees, and CSA fees:

• SBA Borrower Fees: 0.914%
• CDC Fees: Minimum 0.625%
• CSA Fees: 0.1%

In total, these fees usually add up to about 1.64%. There are some upfront fees included in your loan, but these fees are not rolled into your interest rate. The spread to the bond investor changes month-to-month, but we have averaged out last year’s spread to estimate the spread for 2022.

Overall, here is how we have come up with our estimated effective rates:

• 10-Year Loans: The 5-year treasury rate (for the first of the month — 4.19% for July 2023) + averaged spread for last year’s 10-year loans (0.43%) + ongoing fees (1.64%)
• 20-Year Loans: The 10-year treasury rate (for the first of the month — 3.86% for July 2023) + averaged spread for last year’s 20-year loans (0.49%) + ongoing fees (1.64%)

Where To Find SBA CDC/504 Loans

The best place to look for a 504 loan is via the SBA’s Lender Match platform. After filling out the questionnaire, the SBA advertises that eligible lenders will get in touch with you within two days.

SBA Disaster Loan Rates

SBA Disaster Loans are designed to help businesses stay afloat and rebuild following a disaster. To qualify for a disaster loan, you will need to be a business or consumer in a declared disaster area.

If your business has been affected by a disaster, you might qualify for a long-term, low-cost loan for physical or economic damages. Loans for physical damage can be used to repair or replace property damaged by the disaster. Loans for economic damages can be used to “help small businesses survive until normal operations resume after a disaster” by giving you the working capital necessary to keep your business going.

EIDL Rates For COVID-Affected Businesses

Businesses that received an Economic Injury Disaster Loan (EIDL) as a result of the COVID-19 pandemic could use funds to pay fixed debts, payroll, accounts payable, and other bills that can’t be paid due to the disaster. Rates for SBA EIDL loans are different than rates for other SBA Disaster Loans.

Rates for EIDLs for COVID-19 are as follows:

• For-Profit Businesses: 3.75%
• Nonprofit Businesses: 2.75%

Like other SBA disaster loans, COVID-19 EIDLs have fixed rates that will remain constant throughout the life of the loan. Payments are deferred for the first 12 months. Terms last up to 30 years.

Loan Rates For The Paycheck Protection Program (PPP)

The Paycheck Protection Program (PPP) was available to small businesses affected negatively by COVID-19. Eligible borrowers included independent contractors, the self-employed, sole proprietorships, nonprofit organization, and 501(c)(19) veterans organizations.

While technically a loan, borrowers can receive PPP loan forgiveness as long as the funds were used for eligible expenses. Otherwise, the loan has an interest rate of 1% and a term length of two years (if the loan was issued before June 5, 2020) or five years (if the loan was issued after June 5, 2020).

SBA Loan Rates For Other Disasters

Disaster loan interest rates depend on whether or not you have the ability to access funds elsewhere, which the SBA calls “credit available elsewhere”:

• If you have credit available elsewhere, the maximum interest rate will be 8%.
• If you don’t have credit available elsewhere, the maximum interest rate will be 4%.

Disaster loan interest rates are fixed, meaning they will stay the same for the life of the loan. Although the above numbers reflect maximum rates, disaster loans often carry lower interest rates, especially for non-profit organizations.

For example, here are the interest rates for businesses in Mississippi and Tennessee that were affected by Tropical Storm Olga:

SBA Disaster Loan Eligibility

Disaster loans are used to cover costs that aren’t covered by insurance or FEMA. Both for-profit and private non-profit businesses are eligible. Here are the basic eligibility requirements:

• Must be in a declared disaster area
• Must have experienced physical or economic damage to your business
• Must have demonstrated the ability to repay the loan
• Must have acceptable credit

SBA Disaster Loan Terms

Eligible applicants can borrow loans with these terms:

• Most loans have a maximum borrowing amount of $2 million
• The amount you are offered depends on need and repayment ability.
• If no credit is available elsewhere, the loan has a maximum term length of 30 years
• If credit is available elsewhere, the maximum term length is seven years.
• Collateral is required for loans over $25,000.

How SBA Disaster Loan Rates Are Determined

These factors determine disaster loan rates:

• Credit available elsewhere: If you have the ability to access funds from other non-federal sources, the SBA will assign you higher interest rates.
• Type of business or organization: Disaster loans are granted to businesses, private non-profit organizations, small agricultural co-ops, and homeowners. Your interest rate will be dependent on the category you fit into. In general, businesses have the highest interest rates, whereas homeowners have the lowest.
• Type and location of disaster: Interest rates differ based on the disaster and area. To see the rates available in your area, take a look at the fact sheet via the SBA’s disaster loan portal.

Where To Find Disaster Loans

You can check whether your business is in a declared disaster area and get your application started via the SBA’s Disaster Loan Assistance page.

FAQs About SBA Loan Rates

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