Your monthly payment on a business loan comes from three inputs: the amount, the interest rate and the term. Take a $150,000, 10-year 7(a) loan at the variable-rate cap, with prime at 7.00%: that's $2,239.66 a month.
7(a) loans are backed by the Small Business Administration (SBA), whose rules limit their rate and term. And the Truth in Lending rules that protect consumers don't cover credit taken mainly for business.
P is the loan, r the yearly rate divided by 12, and n the number of monthly payments. The second line is the yearly cost a lender compares with your cash flow.
The most a 7(a) lender can charge
A 7(a) loan comes from a lender, with SBA guaranteeing part of it. The largest one allowed is $5,000,000. On a variable-rate 7(a) loan, the rate can't exceed a base rate plus a set spread. The base is the prime rate on the month's first business day, or SBA's Optional Peg Rate.
The spread is 6.5 points up to $50,000, 6 to $250,000, 4.5 to $350,000 and 3 above that. The Federal Reserve's H.15 release put prime at 7.00% on September 24, 2026. If prime is 7.00% on a month's first business day, that month's caps over 10 years are:
| Loan and spread | Maximum rate | Monthly payment | Total interest |
|---|---|---|---|
| $40,000, prime + 6.5 | 13.5% | $609.10 | $33,092 |
| $150,000, prime + 6 | 13% | $2,239.66 | $118,759 |
| $300,000, prime + 4.5 | 11.5% | $4,217.86 | $206,144 |
| $1,000,000, prime + 3 | 10% | $13,215.07 | $585,809 |
At the cap, interest on the $40,000 loan adds up to 83% of the amount borrowed. On $1,000,000, it's 59%. These are ceilings, not quotes, and a variable rate can reset at most once a month.
For fixed-rate 7(a) loans, SBA publishes the maximum in the Federal Register instead. On a variable rate, rerun the calculator a point or two higher to price a rise in prime.
How long the loan can run
SBA's rule asks for the shortest appropriate term, given your ability to repay. The limit is 10 years unless the loan finances real estate, or equipment with a useful life over 10 years. Those can run to 25 years, extensions included.
Here's a $1,000,000 real estate loan at 10%, the cap for that size with prime at 7.00%:
| $1,000,000 at 10% | Monthly payment | Paid off in | Total interest |
|---|---|---|---|
| 10-year term | $13,215.07 | 10 yr | $585,809 |
| 20-year term | $9,650.22 | 20 yr | $1,316,052 |
| 25-year term | $9,087.01 | 25 yr | $1,726,102 |
| 25-year term, $2,000 extra a month | $11,087.01 | 14 yr | $860,805 |
Stretching from 10 to 25 years cuts the payment by $4,128.06 a month but nearly triples the interest. The last five years alone add $410,050 of interest to save $563.21 a month.
The last row keeps the 25-year contract but pays $2,000 extra every month. The loan clears in 14 years, and interest falls by $865,297. You still have the lower required payment to fall back on in a lean month.
When paying early triggers an SBA fee
On 7(a) loans of 15 years or more, a subsidy recoupment fee can apply. It's due when voluntary prepayments in one of the first three years exceed 25% of the highest balance.
The fee is 5% of that year's prepayments in year one, 3% in year two and 1% in year three. Pay off $300,000 of the $1,000,000 loan in its first year, and you'd owe $15,000.
The $2,000 extra a month comes to $24,000 in a year, 2.4% of the highest balance. That's far below the line.
504 loans and microloans work differently
A 504 loan funds a project such as buying land, a building or equipment. It sits alongside loans from another lender, which must add up to at least as much as the 504 loan.
You put in at least 10% of the project cost. It's 15% if the business is two years old or less, or the building is limited- or single-purpose. If both apply, it's 20%. On a $2,000,000 project, that's $200,000 to $400,000.
The 504 limit is $5,000,000 per borrower, or $5,500,000 per project for small manufacturers and some energy projects. SBA publishes the available terms in the Federal Register.
Microloans come from intermediaries that borrow from SBA and relend. You can owe one at most $50,000, repaid within seven years. Above $20,000, you must show you can't borrow elsewhere at comparable rates and have good prospects. The rate can't exceed the intermediary's own SBA rate plus 7.75 points, or 8.5 points on $10,000 or less.
No APR on the paperwork
On consumer loans, Regulation Z makes lenders disclose the finance charge and the annual percentage rate (APR). The rule doesn't apply to credit taken mainly for a business, commercial or agricultural purpose.
So price the loan yourself. Type the interest rate into the calculator, not an APR, to get the payment you'll really make. Then get every fee in writing and fold the upfront ones into one rate with the APR calculator.
What the lender weighs, and what you sign
Under SBA's rules, a loan must be sound enough to reasonably assure repayment. Lenders may weigh your credit history, the business's earnings or cash flow, and any equity or collateral.
Cash flow is where the payment bites. The $150,000 loan above costs $2,239.66 a month, or $26,875.92 a year. The DSCR calculator divides your net operating income by that yearly figure.
Expect to sign personally too. Under SBA rules, anyone owning at least 20% generally must guarantee the loan. That makes your own assets answerable for the debt if the business can't pay.
Your payment also leaves out insurance. On 7(a) loans and 504 projects over $500,000, SBA requires hazard insurance on all collateral.
Borrowing to buy a company? SBA rules let 7(a) money buy all or part of an existing business. The business valuation calculator checks whether the price fits its profit.
Sources
- eCFR, 13 CFR Part 120: SBA Business Loans (as of September 24, 2026)
- Federal Reserve, H.15 Selected Interest Rates (release of September 25, 2026)
- eCFR, 12 CFR 1026.3: Regulation Z exempt transactions (as of September 24, 2026)
- CFPB, Regulation Z, 12 CFR 1026.18: Content of disclosures (current version)