Small Business Administration (SBA) loans are a popular financing option for businesses of all sizes. They offer access to much-needed capital, flexible terms, and attractive interest rates. However, one question that many business owners often ask is whether SBA loans come with an interest rate. In this comprehensive guide, we’ll explain everything you need to know about interest rates on SBA loans.
What are SBA loans?
Before we dive into interest rates, it’s essential to understand what SBA loans are.
These loans are a type of financing option that the Small Business Administration (SBA) guarantees. In other words, when a business applies for an SBA loan through a lender, the SBA will guarantee a certain portion of the loan. This makes it easier for the lender to offer favorable terms and conditions to the borrower.
Do SBA loans have an interest rate?
Yes, SBA loans come with an interest rate, just like any other loan.
However, what sets them apart is that they offer some of the most attractive interest rates in the market. The interest rates on SBA loans are typically lower than those on conventional loans.
This is because the SBA guarantees a portion of the loan, reducing the level of risk for the lender.
What determines the interest rate on SBA loans?
The interest rate on SBA loans can vary depending on several factors.
One of the primary factors that determine the interest rate is the SBA program you choose. For example, SBA 7(a) loans with a maturity of less than 7 years have an interest rate equal to Prime rate + 4.25% (as of October, 2023).
On the other hand, the interest rate for 7(a) loans with a maturity of more than 7 years is Prime rate + 4.75% (as of October, 2023)..
Other factors that can impact the interest rate include the loan amount, the repayment term, and the lender.
Wrapping It Up
SBA loans are an excellent financing option for small businesses. They offer access to much-needed capital, favorable terms, and lower interest rates.
If you’re planning to apply for an SBA loan, it’s essential to understand the various factors that determine the interest rate.
By doing so, you can take steps to improve your credit score and position yourself for better rates. So, if you’re looking for financing for your small business, consider exploring the SBA loan options available to you.
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