As well as shopping around, business owners can take positive steps to ensure that they pay the lowest possible interest rate on any business loans:. A variable interest rate will be lower than a fixed rate, but comes with the risk it could rise in the future. Borrowing money to finance your business is often the first step toward growth and innovation, but it only makes sense if you can keep the cash flowing in. Partnering with a payment platform like GoCardless makes this as simple as possible, and this includes the more complex aspects such as dealing with ad hoc payments or recurring payments.
GoCardless is used by over 60, businesses around the world. Learn more about how you can improve payment processing at your business today. Learn more Sign Up. The payments transformation allows for instant transactions.
Contact sales. Skip to content Open site navigation sidebar. Why GoCardless? For use case Subscription payments Recurring payments built for subscriptions Invoice payments Collect and reconcile invoice payments automatically. Most small business credit cards and many lines of credit have variable interest rates.
Financial institutions such as banks and credit unions often offer the most competitive rates, but they also often have the most stringent qualifications.
They often prefer to make larger loans to well-qualified borrowers. Small business lenders will generally look at the following criteria when evaluating loan applications:. Other factors such as loan amounts, collateral, and even the industry of the business may have some impact on the rate that will be charged.
But there are some things that you can do to reduce your overall credit risk to lenders. Many business lenders not only look at your business credit history but also at your personal credit score. Start by checking your personal and business credit reports and look for areas where you can improve. Then work to address those issues directly. A few examples include paying down high credit card balances, getting caught up on late payments, and avoiding unnecessary debt.
When you sign up for a free Nav account. This will let you see if the business credit bureaus already have you on file. Fees to watch out for include application fees, origination fees, processing fees, service fees, prepayment penalties, and closing fees. Because secured loans typically come with lower interest rates than unsecured loans, it might be worth using assets from your business to secure the loan. This is especially easy to do with equipment financing because you can use the equipment itself as collateral.
Just keep in mind that you may lose the asset you put up if you default on the loan. But some business loans tend to charge higher interest rates, regardless of how solid your credit history and financials are. For example, short-term loans, invoice factoring , and merchant cash advances all tend to charge higher loan rates than traditional term loans.
In some situations, you might need to take advantage of them. The average business loan interest rate can vary depending on the type of lender you borrow from and the type of business loan products you choose. However, the interest rate you get can end up above or below that average, based on your creditworthiness and how your business is doing. As you compare business loan products , look at both the interest rate and fees to understand the total cost of credit.
Also, look for opportunities to improve your credit so that you pose less of a risk to potential lenders. This article was originally written on November 5, and updated on August 9, This article currently has 46 ratings with an average of 4 stars. Ben Luthi is a personal finance and travel writer who loves helping consumers and business owners make better financial decisions.
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