The Federal Reserve raised interest rates this week, including SBA loans. Here is some information to consider with the change:
1. The SBA interest rate increase is small… The 25 basis points increase is lower than previous increases in the past two years. The increase now brings the Wall Street Journal Prime Rate to 8.50%.
2. June showed the Consumer Pricing Index (CPI) has slowed to 3.0%—a good sign, as CPI measures the overall change in consumer prices based on a representative basket of goods and services over time. The CPI is at its lowest rate since March 2021.
What does it mean when SBA interest rates increase? In simple terms, it implies that interest rates charged on loans offered by the Small Business Administration have been increased. This can have several implications for small businesses and borrowers seeking financial assistance from the SBA.
A higher SBA interest rate could mean that borrowing becomes more expensive for small businesses, as they will need to pay more in interest on the loans they take out. This may lead to higher monthly loan payments and potentially impact the affordability of loans for some businesses.
Additionally, increased SBA interest rates may affect the overall demand for SBA loans. With higher interest rates, some businesses might be deterred from taking out loans, leading to decreased loan applications and approvals.
On the positive side, higher rates might also encourage banks and lending institutions to offer more competitive rates on their own loans, as SBA loans become less attractive due to the higher cost.
Ultimately, any change in SBA interest rates can have significant implications for the small business community, influencing borrowing decisions and the overall accessibility of capital for entrepreneurs and business owners.
And, don’t forget…
SBA Program Fees are waived for loans up to $500,000, keeping money in the pockets of small business owners and reducing closing costs.
SBA loans are still a viable option with 10-year repayment terms and are much more forgiving on overall payments than commercial loans.
Sam Phelps — Director of Development