If you’re thinking of applying for an SBA loan to fund your business, our SBA loan calculator could help you estimate how much you can expect to repay on a monthly basis.
One benefit of SBA loans is that they have longer repayment terms and lower business interest rates compared to other small business loans. This often results in smaller monthly payments, giving business owners time to invest the funds in the business and turn a profit on that investment before paying it all back.
There are three main factors to an SBA loan payment: loan amount, interest rate and loan term. Using an SBA loan calculator to figure out how much money you can afford to borrow is the first step to determining the monthly payments. SBA loans, specifically the popular SBA 7(a) loans, typically have a maximum amount of $5 million, providing business owners with the ability to secure a large amount of funding for their business.
Interest rates for SBA 7(a) loans can be either fixed or variable. Usually, the borrower and the lender can negotiate interest rates, but the SBA sets a maximum spread to protect borrowers — a spread is essentially a percentage that a bank can make off a loan.
For variable 7(a) loans that have a term of less than seven years, the spread on SBA interest rates is between 2.25% and 4.25%; add that to the current Prime rate for your total interest rate. A term that is seven years or more will be subject to slightly higher SBA loan interest rates, but the spread can be no more than 4.75%. With fixed rate loans, the SBA uses a formula to determine the maximum fixed interest rate.
When you’ve established an amount and figured out an interest rate, you can fill in the appropriate fields on the SBA loan calculator. The results should reveal the monthly payment you may receive. SBA loan terms normally have a span of seven, 10 or 25 years, depending on the specifics of the loan. While longer term loans allow for businesses to borrow more, they may be costlier over the long term.