Business loan interest rates range from 5% for SBA 504 loans to over 150% APR equivalent for merchant cash advances. The rate you get depends on the type of financing, your credit profile, how long you've been in business, and the lender you choose.
Understanding typical rates for each product helps you set expectations, spot overpriced offers, and negotiate from a position of knowledge.
Rate Ranges by Loan Type (2026)
| Loan Type | Rate Range | Typical Rate | Min Credit | Approval Speed | |-----------|-----------|-------------|------------|----------------| | SBA 504 | 5.5-7% | 6% | 680+ | 4-10 weeks | | SBA 7(a) | 8-11% | 9.5% | 680+ | 2-8 weeks | | Bank term loans | 7-15% | 10% | 680+ | 1-4 weeks | | Online term loans | 10-30% | 18% | 580+ | 1-3 days | | Business lines of credit | 8-25% | 14% | 620+ | 1-7 days | | Equipment financing | 7-20% | 12% | 550+ | 3-7 days | | Invoice factoring | 15-45% APR eq. | 25% APR eq. | Any | 1-5 days | | MCAs | 30-150%+ APR eq. | 80% APR eq. | 500+ | 1-2 days | | Asset-based lending | 8-20% | 12% | 600+ | 1-4 weeks |
The pattern is clear: lower rates come with stricter requirements and slower funding. Higher rates buy speed and accessibility.
See the full visual comparison in our interest rate comparison chart.
SBA Loans (5-11%)
SBA loans offer the lowest rates available for small business borrowers. The federal government guarantees 50-85% of the loan, which reduces the lender's risk and allows them to charge less.
SBA 504 Loans
Fixed rates through Certified Development Companies (CDCs). Currently 5.5-6.5% for the CDC portion (40% of the loan). The bank portion (50%) carries a separate rate, typically 7-10%. Combined effective rate is still among the lowest available.
Best for: Real estate purchases, major equipment buys. Must create jobs or meet public policy goals.
SBA 7(a) Loans
Variable or fixed rates, typically 8-11%. The most flexible SBA program. Rates are tied to the prime rate plus a spread (2.25-2.75% for loans over $50,000).
Best for: Working capital, general business use, equipment, acquisitions, refinancing.
The trade-off: SBA loans require the most documentation, the longest approval process, and the highest qualification standards. But for borrowers who qualify, the savings over the life of the loan are substantial.
Use our SBA loan payment calculator to see your monthly payments and guarantee fees.
Bank Term Loans (7-15%)
Traditional bank lending with competitive rates for established businesses. Banks offer both fixed and variable rate products with terms from 1 to 10 years.
Typical requirements: 680+ credit score, 2+ years in business, $250,000+ annual revenue, collateral for larger amounts.
Best for: Established businesses with strong financials who don't want to go through the SBA paperwork but still want competitive rates.
Banks are conservative. If your business is newer than 2 years or your credit is below 680, expect either denial or rates at the higher end of the range.
Online Term Loans (10-30%)
Online lenders fill the gap between bank loans and high-cost products like MCAs. They trade higher rates for faster funding and more flexible qualifications.
Typical requirements: 580+ credit score, 6+ months in business, $10,000+ monthly revenue.
Rate drivers: Credit score is the biggest factor. A borrower with 720 credit might get 10-14%. A borrower with 580 might see 25-30% for the same loan amount.
| Credit Score | Typical Online Lender Rate | |-------------|---------------------------| | 720+ | 10-14% | | 680-719 | 14-20% | | 620-679 | 18-25% | | 580-619 | 22-30% |
Best for: Businesses that need funds in 1-3 days, don't qualify for bank or SBA products, or need smaller amounts ($25,000-$250,000).
Business Lines of Credit (8-25%)
Lines of credit charge interest only on the amount you draw, not the total credit limit. This makes them one of the most efficient products for managing working capital.
How rates work: Most lines of credit have a variable rate tied to the prime rate plus a margin. A business might have a $100,000 line at prime + 4%. If prime is 7.5%, the rate is 11.5%.
Draw fees: Some lenders charge 1-3% per draw in addition to interest. Factor this into your cost comparison.
Best for: Ongoing working capital needs, seasonal cash flow gaps, businesses that need flexible access to capital. Learn more about lines of credit.
See what a line of credit would cost with our line of credit interest calculator.
Equipment Financing (7-20%)
Equipment loans carry lower rates than comparable unsecured products because the equipment serves as collateral. If you default, the lender can repossess and sell the equipment.
Rate advantages: A business that qualifies for a 20% unsecured term loan might get 12% for equipment financing of the same amount.
Terms: Typically match the equipment's useful life. 2-3 years for technology, 5-7 years for heavy machinery.
Best for: Any equipment purchase. The collateral reduces risk for the lender, which translates to better terms for you. Explore equipment financing.
Invoice Factoring (15-45% APR Equivalent)
Invoice factoring isn't priced as an interest rate. Instead, factoring companies charge a percentage of each invoice (1-5% per month) until the customer pays.
How the math works: A 3% monthly fee on a $10,000 invoice that takes 30 days to collect costs $300. If it takes 60 days, it costs $600. Annualized, that 3% monthly fee equals roughly 36% APR.
What determines the rate: Your customers' creditworthiness matters more than yours. Invoices from Fortune 500 companies get the best rates. Invoices from small businesses with inconsistent payment histories cost more.
Best for: B2B businesses with creditworthy customers on 30-90 day payment terms. Calculate factoring costs with our invoice factoring calculator.
Merchant Cash Advances (30-150%+ APR Equivalent)
MCAs are the most expensive form of business financing. They use factor rates (1.2-1.5) instead of APR, which makes the cost look lower than it is.
Why so expensive: MCAs fund the widest range of borrowers (credit scores as low as 500, businesses as young as 4 months). The high cost reflects the high risk.
Factor rate to APR: A 1.3 factor rate repaid over 6 months is roughly 100% APR. Over 12 months, it's about 55%. The faster you repay, the higher the effective annual rate.
Best for: Last resort only. When no other financing is available and a specific, short-term opportunity justifies the cost. Convert factor rates with our factor rate to APR calculator and calculate payback with our MCA payback calculator.
What Determines Your Rate
Six factors influence the interest rate you receive:
1. Credit Score (Biggest Factor)
Your personal credit score has more impact on your rate than any other single factor. Every 50-point improvement in credit can lower your rate by 2-5 percentage points. A borrower with 750 credit might pay 10% for the same loan that costs 20% for someone with 620.
2. Time in Business
Businesses under 2 years old are considered higher risk. Crossing the 2-year mark opens up bank and SBA products with dramatically lower rates. Even within online lending, 2+ years of history typically qualifies for the lower end of the rate range.
3. Annual Revenue
Higher revenue signals stability and repayment capacity. Most lenders have revenue tiers that affect pricing. A business with $1 million in annual revenue will generally receive a better rate than one with $100,000 for the same loan type.
4. Industry Risk
Some industries face higher rates due to higher default rates. Restaurants, construction, and seasonal businesses often pay a premium. Professional services, healthcare, and technology businesses tend to get better rates.
5. Collateral
Secured loans cost less because the lender has recourse if you default. Pledging real estate, equipment, or other assets can reduce your rate by 2-5 percentage points compared to an unsecured product.
6. Loan Amount and Term
Larger loans sometimes qualify for lower rates because the lender earns more in total interest. Shorter terms carry higher monthly payments but often lower rates.
Rate vs Total Cost: Why They're Different
A lower rate doesn't always mean a lower total cost. Fees, term length, and payment structure all affect the final number.
Example: Two $50,000 loans:
- Loan A: 12% APR, 3-year term, 2% origination fee = $58,900 total repayment
- Loan B: 10% APR, 5-year term, 3% origination fee = $65,250 total repayment
Loan A has the higher rate but costs $6,350 less in total because of the shorter term and lower fee. Rate is one piece of the puzzle.
Calculate the all-in cost of any offer with our total cost of capital calculator.
See how different rates affect your monthly payment with our loan payment calculator.
How to Get the Best Rate
Improve your credit before applying. Pay down revolving debt below 30% utilization, dispute errors, and avoid new accounts in the 60 days before applying. Even a 30-point improvement can meaningfully change your rate.
Show strong, consistent revenue. Lenders want to see deposits hitting your bank account consistently. Avoid lumpy revenue patterns in the months before applying.
Offer collateral. If you have equipment, real estate, or other business assets, offering them as collateral can reduce your rate.
Compare at least 3 lenders. Rates vary significantly across lenders, even for the same loan product. Shopping around is the single most effective way to get a better rate.
Consider SBA if you have time. If your loan isn't urgent, the SBA application process takes longer but saves you thousands in interest over the life of the loan.
Frequently Asked Questions
What is the average interest rate for a small business loan?
The average varies significantly by loan type. SBA loans average 8-10% APR. Bank term loans average 9-12%. Online lenders average 15-25%. Equipment financing averages 10-15%. The overall average across all small business lending is roughly 12-18% APR. Your specific rate depends on credit score, revenue, time in business, and loan type.
What credit score gets the best business loan rates?
A personal credit score of 720 or higher qualifies you for the best rates across all loan types. SBA and bank lenders offer their most competitive pricing at this level. Between 680 and 719, you still have strong options but rates may be 1-3 points higher. Below 680, online lenders become the primary option with rates starting around 15%+.
Are SBA loan rates lower than bank rates?
Generally yes. SBA 504 loans (5.5-7%) are the lowest available. SBA 7(a) loans (8-11%) overlap with bank rates but often come in at the lower end, especially for larger amounts and longer terms. The SBA government guarantee reduces lender risk, which translates to lower rates for borrowers. The trade-off is more paperwork and a longer approval process.
How do I lower my business loan interest rate?
Five strategies: improve your credit score before applying, offer collateral to secure the loan, show strong and consistent revenue, compare offers from at least 3 lenders, and consider SBA products if you have time. You can also negotiate directly, especially if you have competing offers. On existing loans, refinancing to a lower rate is an option once your profile improves.
Is a fixed or variable rate better for a business loan?
Fixed rates provide payment predictability. Your payment stays the same regardless of market conditions. Variable rates start lower but can increase if benchmark rates (usually prime) rise. For loans with terms under 3 years, variable rates are generally safe because the exposure period is short. For loans 5+ years, fixed rates offer protection against rising rates. In a declining rate environment, variable rates work in your favor.
Want to know what rate you'd qualify for? Get a personalized quote with no credit impact.