In our data covering every 7(a) loan funded since FY2010, the median borrower in FY2025 paid 10.25%, on a median term of 120 months (10 years), as of the March 2026 refresh. A bank term loan to a well-qualified borrower currently runs roughly 6.4% to 11.0% APR, per Federal Reserve-sourced data reported by NerdWallet in July 2026, typically on a 3- to 7-year schedule. An online term loan runs far higher: NerdWallet puts the market range at 14% to 99% APR, and OnDeck, one of the larger online term-loan lenders, discloses its own average rate at 56.4% APR on the term loans it originated in the first half of 2025. Those three numbers, roughly 10%, roughly 8%, and roughly 56%, are the whole comparison in miniature.
An SBA loan is a term loan. The question is which term loan.
Most 7(a) loans, and every 504 loan, disburse once and repay on a fixed schedule, the definition of a term loan. So “SBA loan vs. term loan” is not a contest between two different products. It is a contest between an SBA-guaranteed term loan, priced under SBA’s rate caps and carrying an upfront guaranty fee, and a conventional bank or online term loan with no federal guarantee behind it. See our current SBA loan rates for how the guaranty fee and rate caps actually work.
The rate gap, by lender type
Current SBA 7(a) rate caps run from prime plus 6.5 points on loans of $50,000 or less (a 13.25% ceiling) down to prime plus 3.0 points above $350,000 (a 9.75% ceiling), with prime at 6.75% as of the site’s latest FRED pull. Actual paid rates run below those caps: in our FY2025 data, loans above $350,000 carried a median rate of 9.5%, while loans of $50,000 or less carried a median of 10.75%, reflecting both the wider spread cap and the higher fixed cost of underwriting a small loan. A bank term loan skips the guaranty fee entirely and, for the strongest borrowers, can undercut even SBA’s best-tier pricing. An online term loan skips SBA’s underwriting timeline and eligibility rules, and prices that convenience at a level that dwarfs both.
Term length is the other half of the trade
Rate is only one variable. Our data shows a median 7(a) term of 120 months and a median 504 term of 240 months (20 years), because SBA rules explicitly allow longer amortization than most conventional lenders will underwrite. Bank term loans commonly cap out around 5 to 7 years outside of real estate. Online term loans are shorter still, frequently 3 to 24 months, which is part of why their effective APR runs so high even when the “factor” or fee looks modest on paper: the same dollar cost gets annualized over a much shorter window. A longer SBA term lowers the monthly payment on the same loan amount, which is often the deciding factor for a cash-flow-tight business, not just the headline rate. Estimate your own payment with the SBA loan calculator.
Collateral and rate structure
In our data, 75.9% of 7(a) loans carried some form of collateral and 81.1% carried a variable rather than fixed rate, both tied to the loan’s rate index (commonly prime) rather than locked for the full term. A bank term loan follows a similar pattern: strong collateral generally buys a better rate, and many bank term loans float with an index too. An online term loan is different on both counts. Many are unsecured against outside collateral (the lender leans on daily or weekly repayment and a UCC lien on the business itself instead) and priced with a fixed factor or fee rather than a floating index, which is part of why the effective APR does not move with the market the way an SBA or bank rate does.
Why a bank might decline in the first place
The SBA guarantee exists precisely for the gap between “creditworthy enough to run a business” and “creditworthy enough for a bank to lend without a backstop.” The Federal Reserve’s Senior Loan Officer Opinion Survey put the net share of domestic banks tightening standards on small-firm commercial and industrial loans at 8.1% as of its most recent reading, a signal that bank term-loan access is not getting easier at the margin. That is the environment SBA’s guarantee is built for: a lender that would decline a term loan outright, or offer a shorter term and a larger down payment, can often approve the same borrower with the SBA’s guaranteed portion absorbing part of the risk.
Where a bank term loan wins
If you are an established, strong-credit borrower who does not need SBA’s longer terms or lower down payment, a conventional bank term loan can be faster to close, carries no guaranty fee, and sometimes prices below SBA. It also skips the SBA’s eligibility rules on business size, ownership, and use of funds entirely. See our full breakdown in SBA loan vs. conventional loan for the down payment, paperwork, and eligibility trade-offs beyond rate.
Where an online term loan fits, and its real cost
An online term loan is the right tool when you need funds in days, not weeks, and the amount is modest enough that the dollar cost of speed is tolerable. It is rarely the right tool for a large purchase, a long-term investment, or any borrower with the time to run an SBA process. OnDeck’s own disclosed 56.4% average, on loans it funded itself, is a useful anchor for what “fast and easy” actually costs when a lender does not have a federal guarantee lowering its risk. A shorter online term loan also means refinancing or renewing more often than a 10-year SBA term would require, adding repeated origination costs on top of the higher rate.
Getting matched to the right lender
Not every SBA lender prices or underwrites the same way, and the gap between a strong-tier and weak-tier SBA quote can be several points. A shortlist of lenders that actually fund businesses like yours, built on funded-loan track records rather than who pays for placement, is available through get matched.