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Find the Lowest Rates on SBA Loans

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What Is an SBA Loan?

SBA loans are business loans guaranteed by the Small Business Administration. Via multiple SBA funding programs, this government agency provides SBA loan guarantees of up to 85% of the loan amount provided through an SBA-approved lender—typically banks.

The government guarantee lessens the risk for banks, allowing them to lend to small business owners who may not qualify for a traditional bank loan. The three main SBA loan programs let you borrow money for nearly any business purpose—including working capital, purchasing inventory or equipment, refinancing other debts, or buying real estate.

SBA loans offer low interest rates and long repayment terms, making them one of the most desirable types of business financing on the market. However, these government-guaranteed loans are generally slower to fund and require a lengthy application, so businesses will need to meet high requirements to qualify.

SBA 7(a) Loan Details

MAX. LOAN AMOUNT

Up to $5M

LOAN TERM

Up to 25 years

INTEREST RATES

Starting at 6%

SPEED

As fast as 2 weeks

The Top SBA Lenders

Cadence Bank

Best for: Low-rate, SBA 7(a) loans.

Cadence Bank is a preferred SBA lending partner, offering SBA 7(a) loans. Cadence Bank can offer SBA loans with some of the best rates and terms available. These loans can be used for a variety of purposes and are well-suited for newer businesses, as well as established, highly qualified businesses that are looking for long-term financing. 

First Home Bank

Best for: SBA 7(a) loans from an established 7(a) lending program.

A top-15 SBA lending partner, First Home Bank offers SBA 7(a) loans. With these SBA loans, you can access some of the best rates and terms of any business financing product on the market. SBA loans from First Home can be used for a variety of purposes and can accommodate a range of long-term financing needs. However, you’ll have to meet high requirements to qualify for an SBA loan from First Home Bank, and therefore, these loans are well-suited for established businesses with strong finances.

Temporary SBA Loan Program Updates

As part of the latest legislation for coronavirus relief, Congress relaunched the Paycheck Protection Program, expanding eligibility and allowing certain businesses to apply for second-draw loans. This bill also included temporary updates for standard SBA loan programs to provide additional assistance to small businesses during the pandemic.

Here’s what you need to know:

  • Fees: Lender and borrower fees are waived for both the 7(a) and 504 loan programs.
  • Microloan terms: Extends the maximum terms on microloans from six years to eight years.
  • Guarantee amounts: The SBA will guarantee up to 90% of the loan amount on 7(a) loans, including Community Advantage loans until Oct. 1, 2021. They will also guarantee up to 75% of the loan amount on Express loans for loans of $350,000 or less until Oct. 1, 2021. On that date, the guarantee amount will return to 50%.
  • Express loan amounts: SBA Express loan amounts will increase from $350,000 to $1 million. On Oct. 1, 2021, they will fall and stay at $500,000.
  • Covered payments: The SBA will make monthly payments of up to $9,000 for borrowers with eligible 7(a) or 504 loans. The number of covered payments ranges from two to six months and depends on when your loan was approved and disbursed, as well as the availability of funds.

SBA Loan Types

There are several different SBA loan programs out there, with the following three programs being the most popular:

  • 7(a) Loan Program
  • CDC/504 Loan Program
  • Microloan Program

The SBA loan program you’ll want to apply for depends on the size, age, and goals of your business.

Here’s a summary of all three options:

LOAN TYPE LOAN AMOUNT INTEREST RATES REPAYMENT TERM BEST FOR
7(a) Program
Up to $5 million
Prime rate + 2.25% – 4.75% (depending on loan amount and repayment terms)
10 – 25 years
General business financing needs
CDC/504 Program
Up to $5.5 million
5- to 10-year Treasury rate + 2.23% to 2.39% (depending on repayment terms)
10 – 25 years
Purchase of major fixed assets, like land, buildings, large equipment, and machinery
Microloan Program
Up to $50,000
8% – 13%
1 – 6 years
Starting or expanding a new business

SBA 7(a) Loan Program

The SBA 7(a) loan program is the most popular of all SBA loan programs because the capital can be put toward a wide range of business purposes. SBA 7(a) loans are available in amounts up to $5 million and depending on what you need your loan for, how fast you need it, among other criteria, there are different subsets of the 7(a) program that you can apply for, including:

  • Standard 7(a) Loan
  • SBA 7(a) Small Loan
  • SBA Express Loan
  • Export Express Loan
  • Export Working Capital
  • International Trade Loans
  • SBA CAPLines Line of Credit

Here are the details you need to know about the 7(a) program:

Interest Rates

SBA 7(a) loans come with interest rates in either fixed or variable (typically adjusted quarterly) varieties. Your bank lender determines which it will offer.

To protect borrowers, the SBA puts a ceiling on 7(a) loan rates by limiting the “spread” a bank is allowed to apply on top of the loan’s base interest rate.

In other words, the SBA restricts how much a bank can make off your SBA loan.

If your loan amount is more than $50,000 and the term is less than seven years, your rate will be set by the prime rate and the maximum spread will be at most 2.25 percentage points (prime rate + 2.25%). For SBA loans of more than $50,000 and seven years or longer, your rate will still be determined by the prime rate, but that spread increases to 2.75 percentage points (prime rate + 2.75%).

Like all types of loans, the interest rate you end up paying depends on your credit score and the length of your repayment term. And finally, when you get your offer, be sure to calculate your APR. The APR will be different than your interest rate, incorporating any guarantee fees or origination fees you’re charged to get the true cost of the SBA loan.

See all current SBA loan rates here.

Repayment Term

What would an SBA 7(a) loan mean for your business’s cash flow? You can expect monthly payments for 25 years for real estate and up to 10 years for equipment and working capital.

Keep in mind: these are the longest terms you’ll find, giving you plenty of time to figure out how to make each payment and spreading those large, long-term loans over many years.

Fees

The SBA charges a guarantee fee for the service of guaranteeing the loan. The lender originally pays the guarantee fee, but it also can just pass that expense on to the borrower.

The guarantee fee on 7(a) loans ranges from 0.25% of the guaranteed portion of the loan to 3.5% of the guaranteed portion up to $1 million, plus 3.75% of the guaranteed portion over $1 million. Be aware that your guarantee fee might be included in the total cost of the loan.

Some partnered banks might also charge an origination fee or a loan packaging fee, depending on which banks you’re working with.

 

SBA CDC/504 Loan Program

An SBA 504 loan is a type of SBA loan that is used specifically for the purchase of fixed assets, to upgrade existing assets, or to purchase real estate.

Typically with a 504 loan, a bank extends half the total loan amount, SBA-approved certified development companies (CDC) extend 40% of the loan amount, and the borrower puts down a down payment to cover the rest.

These loans are available in amounts of up to $5.5 million.

Interest Rates

Of all the different types of SBA loans, CDC/504 loans have the most complicated interest rates. That’s because the 504 loan program involves two individual loans—one from a bank and one facilitated by a certified development company.

The rates on the CDC portion of the loan are subject to SBA rules — and you can expect to receive a rate equal to the 5- to 10-year Treasury rate + 2.23% to 2.39% (depending on repayment the terms of your loan).

The bank portion of the loan, on the other hand, is not subject to SBA-regulation, so you’ll receive a rate based on your business’s qualifications and you’ll be able to negotiate your rate with the bank you work with.

Repayment Term

Similar to other types of SBA business loans, CDC/504 loans come with either a 10-, 20-, or 25-year term.

Fees

SBA CDC/504 loan fees are usually about 3% of the loan amount—and can sometimes be financed with the loan.

Also, be aware that you’ll need to put around 10% of your purchase down to secure SBA 504 financing.

SBA Microloan Program

An SBA microloan is a loan of up to $50,000 from an intermediary nonprofit to the owner of a small business or startup. The money originates from the SBA, which initially lends the money at a discounted rate to the intermediary.

Businesses can use SBA microloans for a range of purposes, including working capital or buying equipment, machinery, or supplies.

Interest Rates

Microloans are administered by partnering financial institutions. The institution you work with is the one that sets the interest rate on the microloan, depending on your creditworthiness and the specifics of your small business. Rates, however, typically range between 8% to 13% for the microloan program.

Repayment Term

Loan repayment terms depend on the loan amount, use of funding, and other criteria, but the maximum repayment term allowed for an SBA microloan is six years.

Fees

There are no fees associated with microloans.

Who Qualifies for an SBA Loan?

ANNUAL REVENUE

Over $180K

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CREDIT SCORE

680

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TIME IN BUSINESS

Over 4 Years

Pros and Cons of SBA Loans

Is an SBA loan the right type of financing for your small business?

Here are some pros and cons to consider:

Pros

Although the interest rates on SBA loans will ultimately vary based on your business’s qualifications, the SBA sets guidelines on the maximum rates a lender can charge.

Therefore, aside from bank loans themselves, it’s hard to find more affordable financing than SBA loans.

With SBA loans, repayment terms typically range from 10 to 25 years—so you don’t have to worry about payments cutting into your business’s cash flow.

In addition, whereas many online loans are repaid on a daily or weekly schedule, SBA loans are repaid on a monthly schedule.

SBA 504/CDC loans aside, one of the biggest benefits of SBA 7(a) loans and SBA microloans is they can be used for virtually any business purpose.

This gives you flexibility with your funds, although you should always have a plan for your financing before applying for a loan.

Not all SBA loans have down payments, but those that often require them — SBA 7(a) and SBA CDC/504 loans — usually ask for 10% of the total amount you’re borrowing.

This is a fairly low down payment, considering traditional bank loans may ask anywhere from 20% to 30%.

Cons

Although SBA loans can be easier to access than bank loans, you’ll still need to meet fairly high-level criteria to qualify. For most SBA loans, you’ll need at least a few years in business, strong annual revenue, and excellent personal credit.

If you’re a newer business, however, SBA microloans may offer more flexible requirements.

SBA loans require a document-heavy application that includes several SBA-specific forms, among other paperwork. Because many SBA lenders are banks, they don’t always offer online applications and you may have to visit a branch location to apply in-person.

In addition, the underwriting and approval process is notoriously slow. It can take anywhere from 60 to 90 days.

If you’re interested in an SBA loan—but want to expedite the process—you might want to learn more about the SBA Express loan.

The SBA expects that all loans are secured in some way — which means your lender may require that you offer up collateral on your loan. These requirements will vary based on the type of loan and the lender.

That said, however, all SBA loans will require a personal guarantee from anyone who owns 20% or more of the business.

How to Apply for an SBA Loan

If you think an SBA loan is right for your business, you’ll want to decide what type of SBA loan you want to apply for, evaluate your qualifications, and find a lender to work with.

As we mentioned, the SBA loan process can be lengthy and complicated. You’ll need to provide documents like financial statements, information on your collateral, a description of your business, and a statement of how you’ll use the loan proceeds, among others. The complete list of loan documents you may need are as follows:

  • Driver’s license
  • Voided business check
  • Bank statements
  • Balance sheet
  • Profit & loss statements
  • Business tax returns
  • Personal tax returns
  • Business plan
  • Business debt schedule

The participating bank will look for applicants with good credit, a solid business plan, profitable businesses (most of the time, not always), and a demonstrated ability to repay the loan.

Your borrowing history is especially important to the bank you’re working with for an SBA loan.

For more information on how to apply for an SBA loan, check out our resources below.

SBA Loan FAQs

If your business has been impacted by the coronavirus pandemic, you have two dedicated options for relief through the SBA.

Paycheck Protection Program Loan (PPP): Congress has revived the PPP program for a new round of funding. The types of businesses and industries that are eligible for PPP loans have been expanded under the new relief package. Additionally, businesses that can demonstrate at least 25% reduction in gross receipts year over year and meet other requirements may be eligible for a second PPP loan. Learn more about the program and how to apply here.

SBA Economic Injury Disaster Loan: An EIDL, or economic injury disaster loan, is funded directly through the SBA. These loans offer low interest rates, long terms, and can be used to help offset the temporary loss of revenue to the COVID-19 outbreak. You can find an EIDL application on the SBA website here.

Many businesses can qualify for an SBA loan, but you need to have a good credit score—at least 680 or higher. SBA lenders will often, but not always, look for a high annual revenue, and at least two years of business history on the books.

SBA loans are more difficult to qualify for than loans from alternative lenders, however, they’re easier to qualify for than traditional loans from banks. The SBA lender will look for businesses with strong credit scores or a proven track record of business success.

Having said that, the SBA can be more amenable to lending to new businesses than a typical bank would be. Note that the application process can also take a considerable amount of time.

With an SBA loan, you can expect a low down payment of around 10%. However, the bank you work with might tack on an additional fee.