Business acquisition loan rates, payments and closing costs
Short answer
On SBA 7(a) acquisition loans, the lender sets the rate but SBA caps it. For variable-rate loans over $350,000 the maximum is Prime (or SBA's optional peg rate) plus 3%; smaller loans have higher caps, and SBA publishes fixed-rate maximums. Conventional acquisition loans aren't capped and are priced on the lender's view of risk. Ask lenders for a dated quote rather than relying on an advertised rate.
Rates on acquisition loans get a lot of attention, partly because they're the easiest number to compare. They matter, but on SBA loans the cap keeps most quotes close together. What matters more is whether your deal still covers its payments if rates rise.
SBA's maximum rates
SBA doesn't set your rate. It sets the most a lender can charge. Variable rates are built from a base rate plus a spread; the base is either the Prime rate or SBA's optional peg rate. As of SOP 50 10 8.1:
| Loan amount | Maximum variable rate |
|---|---|
| $50,000 or less | Base + 6.5% |
| $50,001 to $250,000 | Base + 6.0% |
| $250,001 to $350,000 | Base + 4.5% |
| $350,001 and up (Standard 7(a)); $350,001 to $500,000 (SBA Express) | Base + 3.0% |
SBA publishes maximum fixed rates on its website, separate from this chart. The rate for a variable loan is set using the base rate in effect on the first business day of the month SBA receives the complete application. We don't quote a "current" rate here because it would be out of date within weeks; your lender's quote should name the base rate, the spread and the date.
Fixed or variable?
Variable
More common on SBA acquisition loans. Usually starts lower than a fixed rate. Payments rise if the base rate rises, which can squeeze coverage in the early years when the loan balance is highest.
Fixed
Payment certainty for the term, which makes the 1.25x coverage easier to plan around. Often priced higher at the start, and fewer lenders offer it on acquisitions.
What moves your rate within the cap
- Coverage. A deal at 1.6x is less risky than one at 1.26x.
- Equity. More of your own money in the deal than the 10% minimum.
- Collateral. Real estate or equipment that makes the loan closer to fully secured.
- Your experience running a similar business.
- Relationship. Deposits and treasury services with the lender.
- Loan size. Bigger loans have a lower cap and often sharper pricing.
Stress-test the rate, not just the quote
Illustration, not a real deal
Say you're borrowing $1,500,000 over 10 years for a business with $300,000 of EBITDA and no other debt. At an assumed 9%, the annual payment is about $228,000, so coverage is 1.32x. At 11% it's about $248,000 and coverage falls to 1.21x, below the 1.25x a lender needs at approval. The lender tests coverage at approval, but you live with it for 10 years. If a two-point rise breaks your cash flow, the deal is too tight. Run your numbers in the payment calculator.
The fee is part of the cost
SBA loans carry an upfront guaranty fee on the guaranteed portion (maximum 3.5% of the first $1,000,000 guaranteed plus 3.75% of the rest for loans over $700,000, unless SBA has announced a temporary change). Compare the rate and fees together when you're weighing an SBA loan against a conventional acquisition loan. See SBA acquisition loan terms for the full picture.
Payment calculator
An SBA 7(a) acquisition loan is a fully amortizing loan, so the payment is the standard formula: loan × r ÷ (1 − (1 + r)−n), with r the monthly rate and n the number of months (up to 120 for the business portion). Enter your numbers below to get the monthly payment, the annual debt service and the coverage ratio a lender will test against the 1.25x minimum.
Use this to sanity-check a deal before you talk to a lender. It runs entirely in your browser; nothing you type is sent anywhere.
Monthly payment on the SBA loan:
Total annual debt service:
Debt service coverage:
Largest loan at 1.25x on these terms: -
How the numbers are worked out
The monthly payment is a standard level payment: principal and interest together, the same each month, paying the loan off over the term. Annual debt service is twelve of those plus any other debt payments you entered. Coverage is EBITDA divided by annual debt service. The "largest loan" line runs the formula backwards: it takes EBITDA ÷ 1.25, subtracts the other debt payments, and asks how big a loan that payment supports.
A quick example
Illustration, not a real deal
The default numbers above describe a $1,500,000 loan at 10% over 10 years for a business with $350,000 of EBITDA. The monthly payment is about $19,820, so annual debt service is about $237,900 and coverage is about 1.47x. On those terms the business could support a loan of roughly $1.77 million at 1.25x, before the valuation and the 10% equity rule are applied.
What the calculator doesn't do
- It doesn't apply the valuation cap. On an SBA deal, total purchase debt can't exceed the independent valuation, whatever the cash flow supports.
- It doesn't check equity. You still need 10% of total project cost. See SBA down payment rules.
- It doesn't adjust EBITDA. Lenders accept only adjustments they can justify in the credit memo, and on $3 million-plus deals they must use the earnings from the Quality of Earnings report. See SBA DSCR requirements.
- It ignores fees and interest-only periods. If a paying seller note is interest-only, SBA requires the lender to test it as if it amortized over no more than 10 years. Enter that amortizing payment in "other annual debt payments".
For a fuller picture that includes equity and the valuation, use the acquisition affordability calculator.
Closing costs and fees
The main closing costs on an SBA acquisition loan are the SBA upfront guaranty fee (up to 3.5% of the guaranteed portion up to $1 million plus 3.75% above, on loans over $700,000), lender packaging and closing fees, the business valuation, a QoE on $3 million-plus deals, any real estate appraisal and environmental review, legal fees and insurance. The guaranty fee and borrower due diligence costs can be financed, and what you pay for valuations and QoE counts toward your equity. Broker fees don't.
Closing costs belong in your sources and uses from day one. They change the loan amount and your required equity.
| Cost | Financeable? | Counts toward equity if you pay? |
|---|---|---|
| SBA upfront guaranty fee | Yes | Not typically (it's a loan cost) |
| Business valuation | Yes | Yes, verified with paid invoices |
| Quality of Earnings | Yes | Yes |
| Real estate appraisal, environmental | Usually | As verified prepaid project costs |
| Lender packaging/closing fees | Often | Ask the lender |
| Legal and accounting for the purchase | Often as project costs | As verified prepaid costs |
| Broker/agent fees you pay | Case by case | No (SOP excludes agent fees) |
| Life and hazard insurance premiums | Lender's call | Lender's call |
Guaranty fee worked example
Illustration, not a real deal
Say your loan is $1,800,000 at a 75% guaranty, so $1,350,000 is guaranteed. Maximum upfront fee: 3.5% × $1,000,000 = $35,000, plus 3.75% × $350,000 = $13,125, total $48,125, unless SBA has announced a different fee for the fiscal year. Financed, it adds $48,125 to total project cost and $4,813 to your 10% equity.
Don't forget
- Lease assignment fees and landlord legal costs.
- Franchise transfer fees, if buying a franchise.
- UCC searches and filing fees.
- Working capital, which isn't a closing cost but is a use of funds.
Report costs: valuation cost drivers and QoE providers.
Common questions
What is the interest rate on an SBA loan to buy a business?
It depends on the loan size, whether it's fixed or variable, and the lender's pricing within SBA's maximums. For a variable loan over $350,000, it can't exceed the base rate plus 3%. Get quotes, since base rates move.
Are SBA rates lower than conventional acquisition loans?
Not always. SBA rates are capped but often priced near the cap, and there's an upfront guaranty fee. SBA's bigger advantage for buyers is the 10-year term and lower equity.
Can I negotiate the rate on an SBA loan?
Yes, within the cap. A strong file (high coverage, more equity, good collateral, deposits with the lender) can earn a lower spread.
Does the rate change on a variable SBA loan?
Yes, it adjusts with the base rate on the schedule set in the note. Make sure the deal still covers its debt at a higher rate.
What term should I use for an SBA acquisition loan?
Ten years (120 months) for the business portion is the maximum under SOP 50 10 8.1. If you're also buying the building, use a separate calculation for the real estate at up to 25 years, or ask your lender for the blended term.
Related guides
Sources
This guide explains rules and practice in plain English. It isn't legal, tax or credit advice, and SBA and IRS rules change. Check the current SOP, regulations and your lender's requirements before you rely on anything here. Examples with made-up businesses are illustrations, not real deals.