Prime rate just moved for the first time in three years. On September 17, 2026, it climbed to 7.00 percent after the Fed's first hike since 2023, and that single number resets the price tag on every SBA loan and every business line of credit in the country. If you're trying to decide between the two, the real question isn't which one is cheaper in theory. It's which structure matches how your business actually spends money.
SBA Loan vs. Line of Credit: What's Actually Different?
An SBA loan gives you one lump sum you pay back on a fixed schedule, usually over 10 to 25 years. A business line of credit gives you a revolving limit you draw from, repay, and draw from again, with interest charged only on what you've pulled. One is debt you take once. The other is a tool you reuse.
Most SBA 7(a) loans close between 60 and 90 days and carry heavy documentation requirements, because a lender is underwriting a 10-plus year commitment. A bank line of credit, once approved, can be tapped same-day going forward. That timing difference alone rules one or the other out for certain situations before cost even enters the conversation.
What Does Each One Actually Cost Right Now?
At today's 7.00 percent prime rate, SBA 7(a) loans over $350,000 cap at 10.00 percent variable, while loans of $50,000 or less can legally run up to 13.50 percent. Lines of credit move the same direction but usually sit a point or two above prime depending on the bank and your risk profile.
Across 162,355 SBA 7(a) loans approved between October 2023 and June 2026, the median rate at approval was 10.25 percent, with the middle half of all borrowers landing between 9.3 and 11.25 percent. That's a useful reality check against the scary-looking 13.50 percent ceiling you'll see quoted everywhere. Most qualified borrowers never get near the cap.
A line of credit reprices faster. When prime jumped to 7.00 percent in September 2026, a line priced at prime plus 2 percent went from 8.75 percent to 9.00 percent within a single billing cycle, no new paperwork, no phone call. That's the tradeoff with revolving credit: it's fast to access and fast to reprice when the Fed moves.
A $300,000 SBA loan at 10.00 percent over 10 years runs roughly $3,965 a month, all-in, whether you touch the money or not. A $300,000 line of credit at 9.00 percent only costs you interest on what you've actually drawn. Undrawn balance, zero interest. That single difference is why busy or seasonal businesses often prefer the line, even at a similar rate.
How Fast Can You Actually Get the Money?
Standard SBA 7(a) loans typically take 60 to 90 days to fund and generally require a 680-plus credit score and at least two years in business. A business line of credit, once the bank has approved your limit, can put cash in your account the same day you request a draw.
SBA Express is the SBA's faster lane, covering loans up to $500,000 with a lender decision in days instead of weeks, though it still isn't same-day money. If you need funds before next Tuesday, neither standard SBA nor most bank lines solve that. That's a real gap in the market, and it's worth knowing before you apply anywhere.
When an SBA Loan Is the Better Fit
An SBA loan makes sense when you're financing a single, large, one-time need with a long payback horizon, not recurring working capital. Think real estate, a buyout, a major fleet purchase, or a full kitchen remodel, something you'll still be paying off, and still benefiting from, five years from now.
- A construction company buying two excavators outright instead of leasing, spreading a $400,000 purchase over 10 years
- A restaurant group buying out a retiring partner's stake in the business
- A trucking company refinancing a mix of high-rate equipment loans into one lower, fixed payment
- Any owner-occupied commercial real estate purchase, where SBA 504 often beats a conventional mortgage
The average SBA 7(a) loan in fiscal year 2025 was roughly $477,800 across 78,078 loans and $37.3 billion in gross approvals, so these are not small-dollar decisions. One non-obvious wrinkle worth knowing: the mean loan size overstates what a typical borrower gets. The median 7(a) loan is much smaller than the mean, because a handful of multi-million-dollar deals pull the average up. If you're applying for $150,000 to $250,000, you're in the most common range the program actually funds, not an outlier.
When a Line of Credit Wins
A line of credit is the better call when your need is recurring, seasonal, or unpredictable in timing, not a single large purchase. You draw when cash is tight, repay when it isn't, and you're not paying interest on money sitting idle in your account.
- A landscaping or roofing business bridging payroll between the slow winter months and spring contracts
- A retailer stocking up ahead of a seasonal peak, then paying the line down as sales come in
- A trucking company covering fuel and maintenance spikes between customer payment cycles
- Any business that wants a safety net it hopes to never fully use
The catch: banks are far more conservative approving lines of credit than SBA loans for businesses with thin cash reserves or inconsistent monthly revenue, because there's no fixed repayment schedule forcing discipline. If your bank statements show wide swings month to month, expect a smaller limit or a harder conversation than you'd get applying for a term loan.
When Neither Product Is the Right Answer
Both SBA loans and bank lines of credit require solid personal credit, typically two or more years of consistent revenue, and documentation that takes real time to assemble. If you need funds in 48 hours, if a recent dip in sales shows up on your statements, or if your credit took a hit from a past bad year, you likely won't qualify for either product at a workable rate right now.
That's exactly the situation where some merchants look at a merchant cash advance instead, and it's worth being honest about that tradeoff too: an MCA trades speed and lighter underwriting for a materially higher cost of capital and a daily holdback on your revenue. It's the wrong tool for a business that could qualify for SBA or bank financing and just hasn't tried yet. It's a reasonable tool for a business that genuinely can't wait or can't qualify, used in small doses, not stacked on top of other advances.
SBA Loan vs. Line of Credit: Side by Side
| Feature | SBA 7(a) Loan | Business Line of Credit |
|---|---|---|
| Structure | Lump sum, fixed repayment schedule | Revolving, draw and repay repeatedly |
| Typical rate today | 9.3%–11.25% for most approved borrowers | Roughly prime + 1–4%, currently near 8%–11% |
| Time to fund | 60–90 days standard, days for Express | Days to weeks for approval, instant draws after |
| Best for | One large, long-term purchase | Recurring or seasonal cash needs |
| Interest charged on | Full amount, from day one | Only the drawn balance |
| Typical loan/limit size | $150,000–$477,800 average, up to $5M | Varies by bank, often tied to revenue |
