How the rate is built
Rate equals a base rate, such as prime, plus a spread negotiated with the lender, subject to SBA maximums that vary by loan size and term.
The base rate follows broader interest rates. When the Federal Reserve raises or lowers its policy rate, prime generally moves with it, which feeds into variable-rate loans. Our piece on how the Federal Reserve affects your business loan explains the link.
The spread depends on your credit, cash flow and collateral. Strong files may get lower spreads. SBA caps limit how high it can go, with higher allowed margins on smaller loans. I will not quote current numbers because they change. Get them in writing.
Fixed versus variable
Fixed rates stay constant, so payments are predictable. Variable rates change with the base rate, so payments can rise or fall.
Variable-rate loans often start lower. If rates rise, so does your payment. Fixed rates cost more at the start in some markets but protect your budget.
Illustrative example: on a $100,000 balance, a one percentage point change in rate moves annual interest by about $1,000. Run your budget at a rate two points higher than today. If you can still comfortably pay, a variable rate may be acceptable.
What else changes the cost
Fees matter as much as rate: the guarantee fee, packaging and closing costs, servicing fees and any prepayment penalty add to total cost.
Two loans with the same rate can differ in total cost by thousands of dollars. Ask for a written breakdown: rate, term, monthly payment, all fees, and total repayment. Read the SBA guarantee fee for the largest standard fee.
A longer term lowers the monthly payment but raises total interest. Match term to the asset: shorter for working capital, longer for real estate.
Comparing SBA with other products
SBA loans usually have the lowest rates but take the longest. Faster products cost more per dollar, so compare total cost and what the money earns.
| Metric | SBA loan | Fast funding |
|---|---|---|
| Quoted as | Annual rate | Often a fixed fee or factor |
| Speed | Weeks or longer | Days or same day |
| Convert to compare | Total repayment | Total repayment and payback period |
Always convert quotes to total repayment and monthly-equivalent payment. That is the way to compare a factor-based quote with a rate-based one.
Reducing your rate
Improve credit, show strong cash flow, offer collateral, request a smaller amount and get quotes from more than one lender.
- Raise your credit score by paying balances down before applying.
- Show steady or growing revenue with clean bank statements.
- Add collateral or an equity contribution where reasonable.
- Compare at least two or three lender quotes.
- Ask whether the lender will reduce the spread for autopay or a deposit relationship.
For the credit side, see SBA loan credit score requirements.
When paying more for speed makes sense
Pay more for speed only when the project earns more per month than the extra cost over the time you would otherwise wait.
If waiting eight weeks for an SBA closing delays $5,000 a month of profit, the delay costs about $10,000. A faster product that costs $7,000 more still comes out ahead in that example. If the profit is smaller, wait.
ROI Funder places SBA loans and faster options and shows true cost, payback period and monthly-equivalent payment before you sign. We consider 500+ FICO, 6+ months in business and $20,000+ monthly revenue. Apply with a soft credit pull.
Frequently asked questions
What is the current SBA loan interest rate?
It depends on the base rate, program, loan size and lender. Ask lenders for a written quote and check SBA.gov for the caps.
Are SBA rates fixed or variable?
Both exist. Variable rates move with the base rate; fixed rates stay the same.
Is the interest rate the full cost?
No. Add the guarantee fee, closing costs, servicing fees and any prepayment penalty.
Why are SBA rates lower than other options?
The government guarantee reduces lender risk, which allows lower rates and longer terms, at the cost of a slower process.