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Average Business Loan Rate: Your Guide to Interest Costs

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3 min read. December 10, 2021 – by Phil Fernandes

The average business loan interest rate ranges between 2.5% to 7% at traditional lenders like banks, according to data from the Federal Reserve

However, the amount you’ll be charged for a business loan could vary widely depending on a number of factors – such as the type of lender you work with and your own criteria. 

Understanding how business loan rates and fees work can put you in a stronger position to secure affordable financing. 

Average business loan rates for 2022

What is the average interest rate on a business loan?

Business loan interest rates are essentially the cost of borrowing money. Interest rates are expressed as an annual rate, while APRs measure the total cost of borrowing – including additional charges such as origination fees. 

Not every business will be able to qualify for low-interest business loans. The business loan interest rate you’ll be charged will depend on a few different factors. 

The type of lender: Banks and credit unions tend to offer the lowest rates on small business loans, however, they also feature rigid requirements. Online lenders and fintechs provide more flexible financing options and are more accommodating on eligibility. However, these lenders can be a bit pricer. 

The loan type: Different types of business loans can come with different rates. For example, Small Business Administration (SBA) loans are government-backed and tend to have some of the lowest rates on the market – as low as 5.5%. On the other hand, faster financing options such as merchant cash advances tend to be on the higher end of business loan rates. 

Your business’s finances: Lenders will look into your business’s finances to determine how risky you are as a borrower. This includes your credit score, revenue, cash flow, and even your business history. The riskier you appear, the higher the business loan rate you’ll receive. 

Collateral: Oftentimes, lenders will be willing to offer you a lower interest rate if you provide collateral. Business loans that are secured with collateral are seen as less risky to lenders since they can seize these assets if you can’t make payments. 

Repayment terms: Generally speaking, loans with longer repayment terms tend to feature lower monthly payments than business loans with shorter terms. However, business loans with longer terms typically cost more over the total lifetime of a loan. 

Do small business loans have a fixed or variable interest rate?

Small business loans can have either fixed or variable interest rates. With fixed-rate loans, interest rates and monthly payments remain the same throughout the duration of the loan. This helps businesses understand their future expenses and allows them to plan ahead. 

Fixed-rate loans locked in at low-interest rates offer a distinct advantage to borrowers, especially if market rates increase over time. However, if you secured a fixed-rate loan at a higher interest rate, you may be able to refinance if market rates drop or your finances improve. 

Most term loans typically feature fixed interest rates. These types of loans offer a lump sum of capital that can be used for major purchases, such as real estate, equipment, or debt refinancing. 

With variable-rate loans, your interest rate and monthly payments may fluctuate depending on market conditions. Most variable-rate loans start with lower interest rates that rise over time. This makes it difficult for business owners to budget and plan their expenses ahead of time, since their monthly payments may vary. 

Business lines of credit, a type of financing that works similarly to credit cards, tend to feature fluctuating rates. Business lines of credit are ideal for ongoing expenses or when you don’t know how much capital you’ll need. 

Business lines of credit also tend to be flexible and can be used to finance expansions, operating costs, emergency expenses, and more. Variable rates may add a layer of uncertainty, however, lines of credit don’t need to be repaid until the funds actually get used – making them a great reservoir of cash. 

How much are business loan fees?

Business loan fees are additional costs of borrowing apart from interest rates. Almost every lender charges some type of business loan fee. The amount you’ll pay varies depending on the size of your loan, the type of business loan, the repayment term, and your credit score.

It’s important to work with lenders that are transparent about the business loan fees, since this will give you a better understanding of your total borrowing costs. The most common types of business loan fees include:

Origination fees: Typically charged upfront to cover the cost of processing a small business loan.

Underwriting fees: These fees are associated with the costs of underwriting, or the lender’s process for determining a borrower’s risk level. During the underwriting process, the documents you provide will be reviewed and verified – including bank statements, credit reports, and more.  

Closing costs: These fees are associated with the costs of funding the transaction. Closing costs typically cover appraisals, legal fees, and more. They are most common in real estate transactions or business acquisitions. 

SBA loan guarantee fee: SBA loans typically feature guarantee fees between 0% to 3.75% of the loan size. 

How to find the best business loan rates

The business loan rate you qualify for will ultimately boil down to your qualifications. Nevertheless, different lenders will offer you different rates. If you’re going to secure the best business loan rates, you’ll need to compare multiple offers from multiple lenders. National makes this easy.

National is a leading business financing marketplace that allows you to select the best business loan rates from a range of personalized offerings. After filling out a simple application, our Business Financing Advisors will contact you about your qualifications and financing goals. From there, you’ll be presented with a range of financing solutions you can compare and contrast to select the most optimized fit. 

Curious to learn what business loan rates you could qualify for? Get started here.

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Last Updated on December 10, 2021

National Business Capital is the top FinTech marketplace offering small business loans and financing. Harnessing the power of leading technology and smart people, we’ve streamlined the application process to secure over $1 Billion in financing for business owners nationwide.

Our Business Financing Experts work within our 75+ Lender platform to match you with the right option. Easily access the best low-interest SBA loans, short and long-term loans, business lines of credit and equipment financing all in one place.

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About the Author, Phil Fernandes

Phil serves as VP of Financing for National Business Capital. He boasts 15 years of sales experience, 10 years of managerial experience, and has been with National for over 6 years. His role at National focuses on managing and directing National’s team of Business Finance Advisors and overseeing project development. Phil is also responsible for Financial Reporting, where he prioritizes results and revenue growth. Phil is passionate about sharing his expertise and insight with small business owners, and regularly contributes articles on National’s blog. 


Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advise from National Business Capital and the author. Do no rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely in this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there maybe errors, omissions, or mistakes.