What Prime Rate Hikes Mean for Small Business Owners (Updated Daily) | SBA 7(a) Loans (2024)

FAQs

What is the current SBA 7a interest rate? ›

The prime rate directly influences the interest rate applied to your loan. Commercial banks typically only offer the prime rate to their most creditworthy customers, such as large corporations or financial institutions who have many financial resources.

If the prime rate rises, the interest rates on your loans and adjustable-rate credit cards will rise as well. Second, the prime rate affects liquidity in the financial markets. When the rate is low, liquidity increases.

For most 7(a) loan programs, SBA guarantees up to 85 percent of loans of $150,000 or less, and up to 75 percent of loans above $150,000. However, SBA provides a 50% guaranty on SBA Express loans.

The SBA generally doesn't offer 100 percent forgiveness on 7(a) and 504 loans, no matter how dire your finances are. However, for companies that have had to cease operations, the SBA will consider settlements that have been agreed to between a borrower and their loan issuer.

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.

SBA 7(a) interest rates

*The current prime rate, as of June 2024, is 8.5%. These interest rates apply to all loans within the 7(a) program, including SBA Express loans. Export working capital program loans are the only exception to this rule; lenders have the ability to set their own interest rates on EWCP loans.

SBA Loans and the WSJ Prime Rate

These loans are usually based on the WSJ prime rate and the lender's margin, meaning that when the prime rate increases, so does the interest rate on the loan.

With an increase in interest rates, businesses with company credit cards and existing loans can have higher interest payments, less disposable income and bigger overheads.

The change in the prime rate will affect the amount of interest you pay if your rate is variable. Financial institutions that offer low-interest or small business credit cards will have a rate of prime plus a certain percentage. Your interest rate will rise or fall depending on which way the prime rate goes.

What is today's prime rate? ›

What was the highest prime rate? The highest prime rate was 21.5%, reached on December 19, 1980.

It can be difficult to get an SBA 7(a) loan if you don't have strong annual revenue, a good credit score (690+) and at least two years in business. SBA 7(a) loan requirements vary from lender to lender, but you'll generally need to meet these criteria to qualify.

Thanks to the wide range of permitted loan uses, an SBA Express loan is financing that's easy to approve and is likely perfect for your startup's needs.

From 1 July 2023, the benchmark interest rate for Division 7A loans increased from 4.77 per cent p.a. to 8.27 per cent p.a.

These loans have an interest rate of 4 percent for businesses and 2.375 percent for private nonprofit organizations, a maximum term of 30 years, and are available to small businesses and most private nonprofits without the financial ability to offset the adverse impact without hardship,” Sánchez said.

The maximum 7(a) repayment term is 25 years for real estate purchases. For equipment purchases, inventory loans and working capital, the maximum repayment term is 10 years. How much down payment do you need for an SBA 7(a) loan?