How Business Loan Interest Rates Work

Our guide breaks down interest rates, what affects them, and how to use interest rates to compare lenders.

WRITTEN & RESEARCHED BY
Erica Seppala
Editor & Senior Staff Writer

Dec 17, 2025

UPDATED

Our content reflects the editorial opinions of our experts. While our site makes money through , we only partner with companies that meet our standards for quality, as outlined in our independent .

Key Takeaways

Business loan interest rates vary based on lender type, loan type, and borrower risk.
Factors like your credit score, business revenue, and collateral can impact the interest rate you receive for a business loan.
Comparing loans using the Annual Percentage Rate (APR) helps you understand the total cost of borrowing.

Business loan interest rates determine how much a loan will ultimately cost.

Rates vary widely based on the type of loan, the lender, and your business’s financial profile. Here’s a breakdown of how interest rates work and what affects them, so you can make the right financial decision for your business.

Table of Contents

What Are Business Loan Interest Rates?
What Affects Business Loan Interest Rates?
What Are Typical Business Loan Interest Rates?
Are Business Loan Fees The Same As Interest Rates?
How Can You Find The Best Business Loan Interest Rates?
The Bottom Line On Business Loan Interest Rates

What Are Business Loan Interest Rates?

A business loan interest rate is the cost a lender charges for borrowing money, expressed as a percentage of the loan’s principal. In addition to repaying the amount borrowed, you’ll pay interest over the life of the loan.

Interest rates vary based on factors like lender type, loan structure, economic conditions, and borrower risk. Because interest isn’t the only cost involved, it’s also important to account for fees and other charges when comparing financing options.

What Affects Business Loan Interest Rates?

Business loan interest rates vary based on both the lender and your business’s financial profile. Some of the most common factors include:

Type Of Lender

Traditional banks and credit unions typically offer the lowest interest rates, but they also have stricter borrowing requirements.

Online and alternative lenders are often more flexible, although their loans usually come with higher rates to offset increased risk.

Type Of Loan

Different loan products carry different levels of risk for lenders:

SBA loans generally have lower rates because they’re partially guaranteed by the government, but they come with stricter requirements and longer application timelines.
Short-term loans are easier to qualify for and fund faster, but they typically have higher interest rates and shorter repayment terms.

Your Business Profile

Lenders evaluate several aspects of your business when setting rates, including:

Personal and business credit scores
Time in business
Revenue and cash flow

Businesses that appear higher risk — due to limited credit history, low revenue, or inconsistent cash flow — are more likely to receive higher interest rates.

Business & Personal Collateral

Securing a loan with collateral, such as equipment, inventory, or property, can lower a lender’s risk and potentially reduce your interest rate. Some lenders may also allow personal assets to be pledged.

Keep in mind that offering collateral increases risk for the borrower, since the lender can seize the assets if the loan defaults.

What Are Typical Business Loan Interest Rates?

Business loan interest rates vary widely based on the lender, loan type, borrower qualifications, and broader economic conditions. While rates change over time, historical data can help set general expectations.

Bank Loan Interest Rates

Traditional banks typically offer some of the lowest rates available to qualified borrowers. Based on Federal Reserve data, typical bank loan rates often fall within these ranges:

Loan Type	Typical Interest Rate Range
Term Loan (Fixed)	6% – 7%
Term Loan (Variable)	7% – 8%
Line Of Credit (Fixed)	6% – 7%
Line Of Credit (Variable)	7% – 9%

Bank loans usually require strong credit, steady revenue, and a longer time in business.

SBA Loan Interest Rates

SBA loan rates are tied to the Prime Rate, plus a lender markup capped by the SBA. Because of these caps, SBA loans often have competitive rates compared to other financing options.

Typical maximum rates include:

SBA Loan Type	Maximum Interest Rates
7(a) Loans	Prime + 4.75%
Express Loans	Prime + 6.5%
CDC/504 Loans	Based on 5- and 10-year Treasury Rates

Actual rates depend on loan size, term length, and market conditions.

Alternative & Online Lender Rates

Online and alternative lenders offer faster access to capital and more flexible requirements, but rates can vary significantly depending on risk and loan structure.

Loan Type	Average Interest Rate
Term Loans	6% to 90%+
Lines Of Credit	10% to 90%+
Invoice Financing	10% to 80%+
Merchant Cash Advances	Often expressed as factor rates rather than interest

Because pricing models differ, borrowers should focus on the total cost of borrowing, not just the stated rate.

Are Business Loan Fees The Same As Interest Rates?

Business loan fees are separate from interest rates and can significantly impact the total cost of borrowing.

While interest is charged on the loan principal over time, fees are typically assessed upfront or periodically and are not included in the interest rate itself.

Common business loan fees include:

Origination fees: Charged by lenders to process and fund a new loan
Underwriting fees: Cover the cost of reviewing and verifying borrower information
Closing costs: May include loan packaging, appraisals, or business valuations, depending on the loan type
SBA guarantee fees: SBA loans may include a one-time guarantee fee (up to 3.75%, depending on loan size) and an annual service fee of up to 0.55%, both set by the SBA and subject to change

How Can You Find The Best Business Loan Interest Rates?

The simplest way to compare business loans is by using the annual percentage rate (APR), which includes both interest and most fees.

Because some lenders don’t clearly disclose APR, always ask for the total cost of the loan or calculate the APR yourself before comparing offers.

The Bottom Line On Business Loan Interest Rates

Business loan interest rates play a major role in how much financing ultimately costs, but they shouldn’t be the only thing you look at. The right loan depends on the lender, loan structure, fees, and your business’s financial profile — not just the rate itself.

Before committing to financing, take time to understand the full cost of the loan, confirm you meet the lender’s requirements, and compare offers carefully from the best small business lenders. Doing so can help you avoid unnecessary costs and choose funding that supports your business long-term.

Bio
LinkedIn
Latest Posts

Erica Seppala

Editor & Senior Staff Writer at Merchant Maverick

Erica has been writing about small business finance and technology since 2008. She joined Merchant Maverick in 2018 and specializes in researching and reviewing business software, financial products, and other topics to help small businesses manage and grow their operations. Her expertise has been cited in MSN, Reader's Digest, Vox, U.S. News & World Report, and Real Simple. She is a Certified ProAdvisor for QuickBooks Online and QuickBooks Payroll, a graduate of Limestone University, and currently resides in Greenville, South Carolina.

View Erica Seppala's professional experience on LinkedIn.