The average small business loan interest rate varies by the type of lender, loan product and whether your interest rate is fixed or variable. Choosing the right loan for your business depends on several factors, including your intended purpose, business history, revenue, credit score and the type of lender.
Remember, the loan that appears to be the least expensive up front might not always be the case. Consider the loan from all angles, and keep an eye on its interest, fees, term and any prepayment penalty fees.
- Average small business loan interest rates by lender
- Average small business loan interest rates by loan product
- Other factors that affect your small business loan interest rate
- Types of fees
- What does it take to qualify?
Average small business loan interest rates by lender
The average rates for small business loans will vary by lender and loan type, and the lowest rate may not always be best for your unique business needs. The table below shows some of the most common types of business loans, as well as their averages, and maximum and minimum annual interest rates along with the average loan amount.
Note that the average loan amount tends to be much higher for variable-rate loans, while fixed rate loans offer less money, but tend to have the lower average annual interest rate. Fixed interest means it stays the same over time, while variable means the interest rate can change over the course of the loan. Those changes are based on the market, usually a financial benchmark set by the bank.
With a variable-interest rate loan, you risk the interest increasing drastically but you could also potentially see the benefits of the interest dropping quite low. A fixed interest rate may offer a higher maximum annual interest rate (AIR), but you would know exactly how much the loan will end up costing you in full from the moment you take it – assuming you make your payments on time.
Alternative business lenders
When compared to banks, online and alternative lenders have higher interest rates, as they typically have fewer eligibility requirements and faster underwriting processes. For example, some alternative lenders may only require six months in business and a stated annual revenue of $100,000 to qualify for a loan. These lenders may also return a credit decision within a few hours.
Due to the reduced eligibility criteria, online lenders are generally a better option for businesses or borrowers that may be considered unbankable – startups , low revenue businesses or applicants with lower credit scores. In the table below, we compare the APRs of online business loans from several alternative lenders.
Average small business loan interest rates by loan product
The type of loan you apply for, along with your time in business, credit score and revenue, will affect your interest rate. Some alternative products – such as merchant cash advances or invoice factoring – will have higher APRs than traditional options, such as bank or SBA loans. We recommend borrowers consider conventional financing options before turning to alternative ones.
In the table payday loans in MO below, we compare APRs for various types of loan products from data we gathered directly from lenders.
SBA 7(a) loan interest rate ranges
The Small Business Administration (SBA) guarantees SBA loans , which are offered by banks it partners with to help serve small businesses. These loans are among the most in-demand on the market because of the long terms and relatively low interest rates offered to borrowers. In particular, the SBA 7(a) loan is a versatile one, and helps cover a range of business financing needs, like purchasing equipment or working capital. These loans can be awarded for up to $5 million with terms as long as 25 years.