⏰ Estimated reading time: 9 minutes
Important points
The average interest rates for business loans are as follows: 6.42% to 12.41% At the bank. Online loans can have higher interest rates.
Bank and SBA loans tend to have the lowest interest rates, but they have strict requirements to qualify.
Factors that can affect the interest rate on a business loan include the type of loan, the lender, the qualifications of the business, and the collateral provided.
We start with a quick survey to better understand your business's unique needs.
Once we have found your personalized match, our team will be happy to discuss the further process.
What are the current business loan interest rates?
Loan type
Approximate annual interest rate
bank small business loan
6.42% to 12.41%
online term loan
6%～99%
SBA loan
10.75
to %
14.25
%* Fixed: 12.75% to 15.75%
business credit line
10%～99%
equipment financing
4%～45%
Invoice factoring or financing
10%～79%
Seller cash advance
40%～350%
*Rate is calculated based on the current prime rate of 7.75%. Updated in November 2024.
What is the interest rate on a business loan?
The interest rate on a business loan is basically the amount that the lender charges for the funding. Interest is usually expressed as a percentage of the amount borrowed. The higher the interest rate, the more money is added to the original loan amount.
Business lenders typically quote interest as an annual percentage rate (APR). APR tells you how much you pay to borrow money in one year, including both interest and fees (such as origination fees, underwriting fees, and closing costs). Therefore, the best way to compare business loan rates is to use the annual percentage rate.
However, not all lenders use APR when estimating the cost of a product. Some lenders may use:
Monthly or weekly interest rate. Interest is charged weekly or monthly as a percentage of the unpaid principal amount. This does not include loan fees.
Factoring fee. Factoring fees, also known as discount rates, are charged as a percentage of the unpaid invoice. These fees used in invoice factoring typically range from 1% to 5% of your monthly invoice amount.
You should always try to calculate these types of interest rates into APR to better understand how much your loan will cost. APR also makes it easier to compare products from different financial institutions to ensure you're getting the best deal for your business.
Business loan interest rate example
For example, let's say you have excellent credit and are approved for a $50,000 business loan with a term of five years and an annual interest rate of 15%. On this loan, you'll pay $1,190 per month for a total of $21,370 in interest.
A more otaku perspective
What does the Fed rate cut mean for business loan rates?
“In September, the Fed announced its first rate cut since March 2020. The Fed cut rates again at its November meeting. When the Fed lowers interest rates, business lending rates tend to fall as well. ”
As a result, you may be able to obtain a loan with lower borrowing costs.
For example, the maximum allowable fixed interest rate on a $500,000 SBA 7(a) loan in August was 13.5%. That means you'll pay a total of $413,645.73 in interest over 10 years.
Due to the Fed rate cut, the maximum interest rate on this loan is 12.75%. While 0.75% may seem like a small difference, it actually saves you $26,606.93 in interest costs. ”
Are small business loans fixed or variable interest rates?
Small business loans may have fixed or variable interest rates. Fixed rate loans make it easier to plan your repayments because the interest rate and monthly payments will remain the same over the life of the loan.
Adjustable rate loans may have lower initial interest rates than fixed rate loans, but their interest rates can rise or fall because they are tied to an underlying index that moves with the market. This means your payments can fluctuate, which can make budgeting difficult.
What are the fees for business loans?
Business loan fees are often unavoidable and can increase the amount you borrow. Small business lenders charge upfront fees of varying amounts, depending on factors such as the size of the loan, length of repayment period, credit score, and type of business loan.
Common fees included in small business loans include:
Underwriting fee. Fees collected by underwriters for reviewing and verifying documents you provide, such as financial statements, personal bank statements, credit reports, and tax returns.
closing costs. Fees associated with repaying a loan, such as loan packaging fees, commercial real estate valuations, and business valuations.
Factors affecting business loan interest rates
10.75
to %
14.25
%
.Other factors that can affect the interest rate on a business loan include market conditions, the amount borrowed, and the length of the repayment term.
How to get the highest interest rate on a business loan
To get the most competitive interest rates on business loans, you need to show lenders the strength of your business and prove that you're a low-risk borrower. Borrowers with good credit, good financial standing, and multiple years of business history typically qualify for the lowest interest rates.
Here are some tips to help you get the best interest rate on your business loan.
FAQ
Business loan interest rates are usually 6%～99% According to the latest data from the Federal Reserve in April, the average interest rate on bank loans to businesses is 6.42% to 12.41%. Ultimately, the interest rate you receive will depend on factors such as the type of loan, lender, and business qualifications.
Appropriate interest rates for business loans range from 6% to 17%. However, some online loans may come with higher interest rates, especially for startups or borrowers with poor credit.
Ultimately, however, the interest rate you receive on a business or personal loan will depend on the type of loan, lender, and qualifications.
