INTEREST RATE REVIEW

Interest Rates

SBA loan interest rates are typically based on the prime rate currently at 7.5% plus the bank spread. The SBA puts caps on the spread based on if the loan is variable or fixed, the program, and the loan amount. Depending on the type of loan and amount currently rates can range from the mid 9% range to the mid 10% range.

Fixed and Variable Rate Options
Both fixed and variable rates are available with both conventional and SBA loans. Usually, most all conventional loans are fixed and most all SBA 7(a) loans are variable. However, a conventional lender will typically provide a better rate when set at variable instead of fixed and an SBA lender will typically charge the maximum rate allowed if set at fixed instead of variable.

Base Rate and Spread
General guideline to ball park interest rate expectations:

  • Most conventional lenders will base their rate spread for most loans between 3% and 5% over the 10 Year Treasury rate. 

  • Most SBA lenders will base their rate spread for most loans between 2% and 3% over the Wall Street Prime (WSP) rate.

There are conventional lenders that will use WSP rate instead of the 10 Year Treasury. SBA puts a cap on the rate spread a lender can charge. For SBA 7(a) loans the maximum spread is 3% over the WSP rate regardless if the rate is fixed or variable.

As a general rule, lenders with narrow qualifying criteria will have slightly better rates than lenders with wider qualifying criteria.

Wall Street Prime Rate 
The Wall Street Prime rate is the base rate used by most SBA lenders and some conventional lenders.

10 Year Treasury Rate 
The 10 Year Treasury rate is the base rate used by most conventional lenders.

LOAN RATE MAXIMUMS: SBA 7(a) Variable

The interest rates for 7(a) loans vary based on the loan amount, as per the following breakdown:

  • $50,000 or less: The maximum spread is 6.5% resulting in a current max rate of 15.00%.

  • $50,001 to $250,000: The maximum spread is 6% resulting in a current max rate of 14.50%.

  • $250,001 to $350,000: The maximum spread is 4.5% resulting in a current max rate of 13.00%.

  • Over $350,000: The maximum spread is 3% resulting in a current max rate of 11.5%.

Please note that these rates are current as of October 2023, calculated with the current prime rate of 8.50%. It's also important to keep in mind that these interest rates are maximum rates. The actual rates may vary and average less

LOAN RATE MAXIMUMS:
SBA 7(a) Small and SBA Express Loans

For 7(a) Small and SBA Express loans, the maximum interest rates allowed are determined by the loan amount and whether the interest rate is fixed or variable. The interest rates are as follows:

  • Loans $50,000 or less: These loans cannot exceed the Prime or SBA Optional Peg Rate + 6.5%. Whether the rate is fixed or variable, it is subject to this maximum limit.

  • Loans $50,001 up to and including $250,000: For these loans, the highest permissible interest rate is the Prime or SBA Optional Peg Rate + 6.0%.

  • Loans $250,001 up to and including $350,000: The maximum allowable interest rate for these loans is the Prime or SBA Optional Peg Rate + 4.5%.

  • Loans $350,001 up to and including $500,000: The interest rate for these loans cannot exceed the Prime or SBA Optional Peg Rate + 3.0%.

These interest rates are designed to facilitate borrowing for small businesses while ensuring that the cost of borrowing remains within reasonable limits. Please remember that these are the maximum interest rates, and the actual rates may vary depending on multiple factors such as the borrower's creditworthiness, loan term, and overall risk profile of the loan..

Keeping rates in perspective

  • Record high 21.5% WSP rate 37 years ago in December 1980

  • 20 years ago, December 1997 the rate was 8.5%

  • Ten years ago, December 2007 the rate was 7.25%

  • 5 years ago, December 2012 the rate was 3.25%

  • 2 year ago, December 2015 the rate was 3.50%

  • 1 year ago, December 2016 the rate was 3.75%

  • Today, December 2017 the rate is now 4.5%

Before the 2001 recession the WSP rate was 9% in January, 2001 and dropped to 4.75% by December.

Before the 2008 recession the WSP rate went from 8.25% in June of 2006 to 3.25% in December 2008 and stayed at 3.25% for 7 straight years.

In 2015 the WSP rate went to 3.5%, in 2016 to 3.75%, and 2017 will end at 4.5%

LOAN RATE MAXIMUMS:
7(a) CAPLines

The interest rates for the 7(a) CAPLines are determined by the loan amount and whether the interest rate is fixed or variable. The maximum allowable interest rates are as follows:

  • Loans $50,000 or less: For these loans, the maximum interest rate cannot exceed the published maximum allowable fixed rate or, if variable, the Prime or SBA Optional Peg Rate + 6.5%.

  • Loans $50,001 up to and including $250,000: These loans cannot exceed the published maximum allowable fixed rate or, if variable, the Prime or SBA Optional Peg Rate + 6.0%.

  • Loans $250,001 up to and including $350,000: For these loans, the highest permissible interest rate is the published maximum allowable fixed rate or, if variable, the Prime or SBA Optional Peg Rate + 4.5%.

  • Loans $350,001 and greater: The interest rate for these loans cannot exceed the published maximum allowable fixed rate or, if variable, the Prime or SBA Optional Peg Rate + 3.0%.

Remember, these are maximum rates, actual rates may be lower depending on various factors including the borrower's creditworthiness, loan term, and overall risk profile of the loan.