What is the average interest rate for a business loan?
What is the current SBA loan rate? SBA loan rates vary depending on several factors, including the type of SBA loan, the size, and the maturity date. The current prime rate (as of August 2, 2024) is 8.5%. That means SBA 7(a) loan fixed rates can range between 13.5% and 16.5% depending on your loan terms.
| Business loan | Interest rate |
|---|---|
| Business lines of credit | Average 7.58% to 9.35% APR* |
| SBA loans | Fixed rate: 13.50% to 16.50% APR Variable rate: 11.50% to 15.00% APR |
| Merchant cash advance | 1.04 to 1.32 factor rate |
| Bad credit business loans | 20% to 99%+ APR 1.03 to 1.52 factor rate |
| SBA loan size | Maximum interest rate |
|---|---|
| $50,001 to $250,000 | 14.5%. |
| $250,001 to $350,000 | 13%. |
| $350,001 or more | 11.5%. |
| *Rates calculated with the current prime rate of 8.5%. Updated August 2024. | |
What is the current SBA loan rate? SBA loan rates vary depending on several factors, including the type of SBA loan, the size, and the maturity date. The current prime rate (as of August 2, 2024) is 8.5%. That means SBA 7(a) loan fixed rates can range between 13.5% and 16.5% depending on your loan terms.
What is an interest rate? Interest represents the cost you incur for borrowing money, and conversely, it's what banks reward you for depositing money with them. Interest rates are typically expressed as a percentage of the total amount of money you borrow or save over a year.
The average commercial and industrial loan made by commercial banks is $663,000, according to the most recent data from the Federal Reserve. However, business loans can range anywhere from $1,000 to $5 million or more, depending on the lender, type of business loan and your finances.
| Loan Amount | Maximum Rate | Maximum Rate Allowed (w/ Current 8.5% Prime Rate) |
|---|---|---|
| $0 to $25,000 | Prime + 8% | 16.5% |
| $25,001 to $50,000 | Prime + 7% | 15.5% |
| $50,001 to $250,000 | Prime + 6% | 14.5% |
| Above $250,000 | Prime + 5% | 13.5% |
Interest rates for 7(a) loans are negotiated between the borrower and the lender, but are subject to SBA maximums, which are pegged to the prime rate or an optional peg rate. Interest rates may be fixed or variable.
What Disqualifies You From Getting an SBA Loan? The three primary disqualifiers for an SBA loan include a poor credit history, insufficient collateral or equity investment, and lack of a solid business plan. These factors can signal to lenders a high risk of default, making loan approval less likely.
While there's no official required SBA loan minimum credit score from the Small Business Administration, lenders will often set minimum credit score requirements for both personal and business. An SBSS of 140 to 160+ or a personal score of 620 to 640+ are commonly needed to qualify.
Why are SBA loan rates so high?
Because SBA loans' interest rates are tied to the WSJ Prime, both for fixed- and variable-interest loans, the higher the WSJ Prime, the higher the interest rates for SBA 7(a), 504, and Express loans. See the table below for current rates for SBA-backed small business loans.
In general, eligibility is based on what a business does to receive its income, the character of its ownership, and where the business operates. Normally, businesses must meet SBA size standards, be able to repay, and have a sound business purpose. Even those with bad credit may qualify for startup funding.
SBA prepayment penalty for the SBA 7(a) loan program
For SBA 7(a) loan has a term of 15 years or more, you may have an SBA prepayment penalty. Prepayment penalties apply when you voluntarily prepay 25% or more of the outstanding balance within the first three years after the date of your first disbursem*nt.
Ultimately, the interest rate you receive will depend on the loan type, lender and your business's qualifications, among other factors. What is a good rate on a business loan? A good rate on a business loan can range from 6% to 17%.
| Business loan type | Average interest rates |
|---|---|
| Traditional bank loans | 8% to 8.9% |
| Lines of credit | 7.7% to 9.1% |
| Term loans | Fixed: 3.52% to 10.99% Variable: 5.63% to 11.45% |
| Merchant cash advances | 1.0 to 1.5 factor rate |
| Product | Interest Rate | APR |
|---|---|---|
| 30-Year Fixed Rate | 6.44% | 6.49% |
| 20-Year Fixed Rate | 6.31% | 6.36% |
| 15-Year Fixed Rate | 5.91% | 5.98% |
| 10-Year Fixed Rate | 5.93% | 6.02% |
Short-term loans usually require repayment within 12 to 18 months. Intermediate-term loans range from one to three years. Long-term loans' repayment periods range from three years to 25 years. Among private term loan providers, small businesses may benefit the most from SBG Funding and its flexible loan payment terms.
| Lender | Average small business loan amount |
|---|---|
| Bank loans (small regional bank) | $146,000* |
| SBA 7(a) loans | $479,685 |
| Online loans | $5,000 to $500,000 |
| Short-term loans | $5,000 to $750,000 |
While you can get up to $5 million for a standard SBA 7(a) loan, most borrowers in 2022 took out just under a million dollars at $999,210. The average for all SBA 7(a) loans, including the Small Loan and Express programs, was $538,903.
| Loan Type | Interest Rate | Repayment Term |
|---|---|---|
| SBA 7(a) | 9.50% - 11.25% | 7 - 25 years |
| SBA 504 | 8.50% ± 1% | 10/20/25 years |
| SBA Express | 13.00% - 15.00% | 7 - 25 years |
| Based on current Prime Rate, 8.5%. Last updated Aug 20, 2024. Get a Quote → | ||
Do you need a down payment for a business loan?
A down payment for an SBA 7(a) or 504 loan ranges from 10 percent to 20 percent. For loans from banks, credit unions and alternative lenders, you may see down payment requirements that range from 10 percent to 30 percent — and some lenders that don't require any down payment.
| Payoff period | APR | Total interest over life of loan |
|---|---|---|
| 12 months | 15% | $2,077 |
| 24 months | 15% | $4,092 |
| 36 months | 15% | $6,199 |
| 48 months | 15% | $8,397 |
What is the easiest SBA loan to get approved for? Loans under the 7(a) program have a higher acceptance rate. And since most 7(a) loans are for $50,000 or less, it may be easier to get approved for a small amount with an Express loan.
Do SBA loans require a down payment? Yes, the minimum SBA loan down payment requirement is 10% for 7(a) and 504 loans, although this amount can vary based on a business's cash flow and collateral. For example, weak cash flow or low-value collateral can increase the down payment requirement to 30% of the loan amount.
Be small under SBA Size Requirements. Not be a type of ineligible business. Not be able to obtain the desired credit on reasonable terms from non-Federal, non-State, and non-local government sources. Be creditworthy and demonstrate a reasonable ability to repay the loan.
