Current SBA Loan Rates and Programs in 2021

Worried about how to make investments in your startup when you have limited funds at hand? Do loans sound terrifying? Some business loans are a real headache, which you try to avoid. You even desperately try to look for options like getting a venture capitalist.

However, there are some loans like the Small Business Administration (SBA), which is designed for small businesses. Do you know that SBA loans come with the lowest interest rates you have ever known? Here are some aspects of SBA loan programs that small businesses must be aware of.

What are SBA Loans?

The SBA is a small business loan program that is partially guaranteed by the Small Business Administration. The program is designed to eliminate some of the risks that lenders and financial institutions are exposed to while issuing a loan.

Yes, you heard it right! It’s not the SBA who issues the loan directly. Rather, the SBA works as an approving body that works with a group of financial institutions and supports them in lending loans to small businesses.

These financial institutions are able to take the risk of lending only because they have SBA’s back, as it partially guarantees the loans issued by these lenders to startups and small businesses. Although SBA loans are known for offering the lowest interest rates in the market, these are subject to change as per the Federal Reserve’s rules and actions.

It means that the SBA will back up for a certain portion of the loan provided by these lenders. Therefore, if a small business is unable to repay the loan, the SBA will cover a part of the loan amount as guaranteed to these banks and other financial institutions. It is this partial guarantee that makes these lenders extend loans to small businesses in the first place.

For small businesses and startups, this government-backed loan program is like an angel sent by God! Because of the unbelievably low-interest rates, the SBA loans are more flexible and convenient for merchants with a lower annual turnover.

To qualify for SBA loans, a candidate needs to fulfill the following criteria –

  • At least 2 years of business history
  • A minimum of $100,000 in annual revenue
  • The business owner must have a 640+ personal credit score.

What are the Current SBA 7(a) Loan Interest Rates?

As of January 2021, the current SBA 7(a) loan interest rates, which are calculated on the basis of a 3.25% current prime rate, are as follows –

SBA Loan Amount If paid within 7 years If paid in over 7 years
$25,000 or less 7.50% 8.0%
$25,001 to $50,000 6.50% 7.0%
Over $50,000 5.50% 6.0%


The 7(a) loan is the most flexible and convenient loan program by SBA, and it offers flexible loan amounts for a number of uses. You can use the SBA loans for managing your daily business operations, repaying high-interest loans, purchasing new products and software, and upgrading to new technologies.

Other SBA loan programs like the 504 loans are a good choice for business owners who are looking forward to making land and other important purchases.

How are the SBA Loan Rates Set?

The reason why SBA sets low interstate rates is to help small businesses with low sales volumes grow. The interest rates set for the SBA 7(a) loan are actually the daily prime rate, and it varies depending on the Federal Reserve’s actions as well as the lender spread.

The lender spread refers to the difference between the interest rate charged by the lender and the interest rate that the lender pays to the depositor. The lender spread is negotiated between the lender and the borrower based on various factors. The two parties can either agree on a variable or a fixed interest rate.

However, based on the amount and the maturity time of the loan, the SBA finally decides the maximum spread that lenders can charge to a particular business borrower. Further, instead of the daily prime rate, the lender may also calculate the interest rates with the help of the 1-month London Interbank Offered Rate (LIBOR) plus 3%.

It must be noted that the SBA loan interest rates are only one part of your total expenses. It is your APR or Annual Percentage Rate that reflects your actual borrowing amount, and it includes your rate of interest along with all the other fees associated with the SBA loan program.

What are CDC/504 Loans?

The SBA’s CDC/504 loan programs are designed to help businesses buy land or buildings and make other major purchases, such as equipment, machinery, and technological devices. Besides, if you are looking for long-term and fixed-rate financing, the SBA 504 loan programs are a good option for you.

The 504 loans are again partially backed up by the certified nonprofit organizations that focus on the community’s economic development and other development companies. However, these loans would require collateral, which is usually the assets being funded. Further, the principal borrowers of your company will also require personal guarantees to be eligible for the SBA 504 loan program.

Terms of Different SBA Loan Programs

  1. SBA 7(a) Loans

  • 7(a) loans max out at $5 million, and they don’t require a minimum loan amount.
  • You will need to qualify for the SBA loan programs. To be eligible, you will need to –
  1. Gather all the vital legal and financial documents (Business license, personal financial statements, business tax returns, SBA’s borrower information form, etc.).
  2. Have good personal and business credit scores (the higher, the better)
  3. Have a strong business plan as to how you will spend the loan amount.
  4. Fulfill the lender’s requirements and minimum qualifications.
  • If your loan amount is less than $150,000, the SBA guarantees 85% of the sum. If it is more than $150,000, then the percentage guaranteed will be 75%. However, the SBA’s guaranteed amount is limited to $3.75 million.
  1. CDC/504 Loans

  • These loans are available in either 10- or 20-year terms.
  • The minimum loan amount required is $50,000, while the maximum limit is $5.5 million.
  • Although the fee percentages are fixed, they are restructured after every 5 years depending on the principal. This often results in a lower payment on the part of the borrower.

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