The Small Business Administration (SBA) does not make small business loans, they provide partial loan guarantees to participating SBA bank and non-bank lenders. This partial loan guarantee is intended to reduce the risk to a point where a bank is willing to make a loan to a borrower that otherwise might not qualify.
It is free to apply to get pre-qualified for an SBA 7(a) loan, SBA CDC/504 loan, or SBA Express loan through SBA-Express.com™, and if qualified, you will receive a preliminary quote that outlines the rates, terms, fees, and costs associated with an SBA loan for your situation. We do not run a credit check for pre-qualifications, so there is no need to provide your social security number, and if you close on an SBA loan through SBA-Express.com™, we do not charge any fees or commission, we are compensated directly from the SBA lender.
SBA 7(a) loans, have a maximum loan amount of $5 million, and repayment terms of up to 25 years. Loans guaranteed by the SBA are assessed a guarantee fee. This fee is based on the loan’s maturity and the dollar amount guaranteed, not the total loan amount. The lender initially pays the guaranty fee and they have the option to pass that expense on to the borrower at closing. The funds to reimburse the lender can be included in the overall loan proceeds. On loans under $150,000 made after October 1, 2013, the fees will be set at zero percent. On any loan greater than $150,000 with a maturity of one year or shorter, the fee is 0.25 percent of the guaranteed portion of the loan. On loans with maturities of more than one year, the normal fee is 3 percent of the SBA-guaranteed portion on loans of $150,000 to $700,000, and 3.5 percent on loans of more than $700,000. There is also an additional fee of 0.25 percent on any guaranteed portion of more than $1 million.
SBA can guarantee as much as 85 percent on loans of up to $150,000 and 75 percent on loans of more than $150,000. SBA’s maximum exposure amount is $3,750,000. Thus, if a business receives an SBA-guaranteed loan for $5 million, the maximum guarantee to the lender will be $3,750,000 or 75%. SBA Express loans have a maximum guarantee set at 50 percent.
The actual interest rate for a 7(a) loan guaranteed by the SBA is negotiated between the applicant and lender and subject to the SBA maximums. Both fixed and variable interest rate structures are available. The maximum rate is composed of two parts, a base rate and an allowable spread. There are three acceptable base rates (A prime rate published in a daily national newspaper*, London Interbank One Month Prime plus 3 percent and an SBA Peg Rate).
Lenders are allowed to add an additional spread to the base rate to arrive at the final rate. For loans with maturities of shorter than seven years, the maximum spread will be no more than 2.25 percent. For loans with maturities of seven years or more, the maximum spread will be 2.75 percent. The spread on loans of less than $50,000 and loans processed through Express procedures have higher maximums.
For SBA Express loans, the maximum loan amount is $350,000, and the maximum guarantee is 50%. Lenders and borrowers can negotiate the interest rate. Rates can be fixed or variable and are tied to the prime rate (as published in The Wall Street Journal), LIBOR, or the optional peg rate (published quarterly in the Federal Register) but they may not exceed SBA’s maximum rates. Lenders may charge up to 6.5 % over the base rate for loans of $50,000 or less, and up to 4.5 % over the base rate for loans over $50,000.
For SBA CDC/504 loans, rates are pegged to an increment above the current market rate for 5-year and 10-year U.S. Treasury issues, with terms of 10 or 20 years, and SBA fees totaling approximately 3 percent the debenture and may be financed with the loan.
Since the new economic recovery package is in place, getting an SBA loan is easier, faster and more cost effective than ever, and banks as well as non bank SBA lenders across the country are looking to make new small business loans.
When you apply for an SBA Loan through SBA-Express.com™, you get access to the nations top SBA Lenders who are eager to respond quickly to qualified SBA loan requests. In fact, most of our participating SBA lenders are prepared to Pre-Qualify* borrowers who meet their requirements in as fast as 48 Hours!
And best of all, applying for an SBA Loan through SBA-Express.com™ is absolutely FREE! Simply complete and submit the express application form found to the top of this page, and your SBA Loan request will be expedited and reviewed by a participating SBA-Express.com™ Lender with top priority.
If you have any questions, please click here to contact us, or call us toll free at 800-697-9792.