Small Business Loan Rate Options


23 August 2020

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A good small business loan rate is found in the many options available to entrepreneurs. If a business is owned by minorities or women, that improves the options available. Rates on business loans vary, but usually not much compared to home or private loans. Because business loans are heavily reviewed prior to approval and very well insured, rates remain close to the prime rate.

The Small Business Administration has several loan products available to help small businesses. Starting with the SBA microloan, which are loans made through SBA intermediaries with loan amounts of less than $ 35,000. The small business loan rate is around 8% and is tied to the Treasury loan rate plus 7.5% or 8.5% (depending on whether the loan is more than or less than $ 10,000). The SBA's primary credit instrument is a loan guarantee product called the SBA 7 (a) loan with a maximum guaranteed amount of $ 1.5 million. Loans are made through an approved bank, the SBA guarantees the loan, and the rate is tied to the prime rate. 7 (a) loans over $ 50,000 have a maximum prime rate plus 2.75% (2.25% if the term is less than seven years).

There are community development organizations that make loans to small businesses. They exist to create and grow small businesses, as small businesses bring income to a community and create jobs. Their credit standards are not as rigid as those of formal banking institutions and they are very open to minority and women-owned businesses. Typically, the interest rate on your small business loans is around 4.25% -8.75%. Their maximum loan amounts are relatively low, between $ 50,000 and $ 100,000, but they will have loan agreements with banks to help them with larger loans. These community organizations are distributed throughout the United States and serve both urban and rural areas.

Examples of community organizations with low interest rates include Acción in Albuquerque, New Mexico. Acción offers rates of 2% to 7% depending on risk and has a maximum loan of $ 150,000. In Tulsa, Oklahoma, the Tulsa Economic Development Corporation (TEDC) uses SBA products and likes to promote SBA 504 where they can offer a fixed 4.7% for a period of ten years. SBA 504 is used for mortgage financing for the acquisition and / or renovation of capital assets (land, buildings, equipment) and has a maximum loan of $ 4 million. In Harrisburg, Pennsylvania, the Harrisburg Regional Chamber has the Capital Region Economic Development Corporation (CREDC). The CREDC has a small business loan below the market rate of 4.25% and a maximum amount of $ 200,000.

These are just a few quick examples of community organizations across the country providing small business loans. As seen, they can sometimes beat conventional business loans and even the SBA's small business loan rate.


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