Average Business Loan Rate: What to Know About Interest Costs
Understand interest costs and fees before you borrow to help choose the best loan option for your business.
Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
Updated · 4 min read
Written by
Senior Writer & Content Strategist 
Edited by
Managing Editor Concerned about tariffs?
Many small-business owners are under increased economic stress and uncertainty following the latest tariff announcements. NerdWallet is here to help you find answers for whatever you're looking for. Here are some resources to help you get started:
- Need emergency funding? Consider a business line of credit.
- Looking for fast access to working capital? Discover the best working capital loans.
- Want tips on how to mitigate the impact of tariffs? Read our guide.
Key takeaways
- Average business loan interest rates range from 6.6% to 11.5% at banks. Online loans may have higher rates.
- Bank and SBA loans tend to offer the lowest interest rates, but require strict requirements to qualify.
- Factors that can affect your business loan rate include the loan type, your lender, your business’s qualifications and the collateral you offer.
The average small-business bank loan interest rate ranged from 6.6% to 11.5% in the first quarter of 2025, according to the most recent data from the Federal Reserve
Understanding small-business loan costs can put you in a stronger position to choose the best option and save money as a business owner. Here's what to know about business loan rates and fees.
How much do you need?
We'll start with a brief questionnaire to better understand the unique
needs of your business.
Once we uncover your personalized matches, our team will consult you
on the process moving forward.
What are current business loan interest rates?
| Loan Type | Approximate Interest Rates | |
|---|---|---|
| Bank small-business loan | 6.6% to 11.5% | |
| Online term loan | 14% to 99% APR | |
| SBA loan | Variable: 10.5% to 14%* Fixed: 12.5% to 15.5% | |
| Business line of credit | 10% to 99% APR | |
| Equipment financing | 4% to 45% APR | |
| Invoice factoring or financing | 10% to 79% APR | |
| Merchant cash advance | 40% to 350% APR | |
| *Rates calculated with the current prime rate of 7.5%. Updated September 2025. | ||
Will interest rates go down in 2025?
The Federal rate hasn’t budged since its last cut in December 2024. Policymakers expect at least one rate cut in the second half of 2025, with potentially more to come in 2026.
But a lot depends on how things play out with inflation, jobs, tariffs and the overall economy in the coming months.
When the Fed lowers interest rates, business loan rates, including those for SBA 7(a) loans, tend to decrease as well.
What is the interest rate on a business loan?
The interest rate on a business loan is essentially how much a lender charges you for funding. Interest is usually expressed as a percentage of the amount you’ve borrowed — the higher the interest rate, the more money will be added to your original loan amount.
Typically, business lenders will quote interest as an annual percentage rate (APR). APR illustrates how much you’ll pay to borrow money over one year, including both interest and fees (e.g. origination fees, underwriting fees, closing costs). As a result, the best way to compare business loan rates is using an APR.
However, not all lenders use an APR when quoting the cost of their products. Some lenders may use:
- Monthly or weekly interest rate. Interest is charged as a percentage on the outstanding principal each week or month. This does not include loan fees.
- Factor rate. Short-term lenders and merchant cash advance providers may charge a factor rate, which is multiplied by the amount of capital you receive to determine the total cost of your funding. Factor rates typically range from 1.1 to 1.5 — and often translate into high APRs.
- Factoring fees. Also called discount rates, factoring fees are charged as a percentage of an unpaid invoice. Used in invoice factoring, these fees typically range from 1% to 5% of the invoice value per month.
You should always try to calculate these types of interest rates into an APR to get a better understanding of how much a loan costs. APRs also make it easier to compare products from different lenders so that you can make sure you're getting the best deal for your business.
Business loan interest rate example
For instance, let’s say you have excellent credit and get approved for a $50,000 business loan with a five-year term and an APR of 15%. On this loan, you’ll make monthly payments of $1,190 and pay a total of $21,370 in interest.
What if you shop around and get a loan offer with a lower rate? With an APR of 10%, your monthly payment would drop by $128 and you would save $7,629 in total interest costs, according to NerdWallet’s business loan calculator.
How to get the best business loan interest rate
To get the most competitive interest rates on a business loan, you’ll want to show the lender your business’s strengths and prove that you’re a low-risk borrower. Borrowers with good credit, strong finances and multiple years in business typically can access the lowest rates.
Here are some tips to help you get the best rate for your business loan:
- Improve your credit. You can improve your personal credit by identifying errors on your credit reports and disputing them with the appropriate credit bureau, making debt payments more frequently and paying down or paying off debt. In general, the higher your credit score, the better interest rates you’ll receive.
- Offer collateral. Securing a business loan with physical collateral, like equipment or real estate, can often help you access lower interest rates. Providing collateral (especially when it’s not required) can also help startups and borrowers with lower credit scores qualify for financing.
- Add a cosigner. If you’re a newer business — or have bad credit — adding a cosigner to your business loan may help you access affordable loan options. Your cosigner should have a strong credit and financial history.
- Provide a thorough business plan. Including a detailed business plan with your loan application can give the lender more confidence in your business, and therefore, help you qualify for the most competitive rates. Your business plan should show that you have a solid business model, a profitable market for your products or services and financial projections to prove your creditworthiness.
Is a small-business loan a fixed or variable interest rate?
A small-business loan may have a fixed or variable interest rate. With a fixed-rate loan, the interest rate and monthly payment don't change over the life of the loan, making it easier to budget for repayment.
Lump-sum term loans typically have fixed rates. This type of loan is best for one-time business purchases and long-term financing needs, like funding a major business expansion, buying real estate or refinancing debt.
A variable-rate loan may carry a lower initial rate than a fixed-rate loan, but that rate can rise or fall because it’s tied to an underlying index that fluctuates with the market. This means your payments can vary, which can make budgeting tougher.
A business line of credit may come with a variable interest rate. It allows you to borrow money and pay it back continuously, like you would with a credit card. This type of loan is better for business owners who don’t need a set amount of money, but need easy access to cash, whether it’s for emergency funds or short-term working capital.
How much are business loan fees?
Business loan fees are often unavoidable and can make borrowing more expensive. Small-business lenders charge varying amounts for upfront fees depending on factors like the size of your loan, the length of the repayment term, your credit score and the type of business loan.
When you apply for a small-business loan, your lender should be transparent about what each fee covers and explain any that you don’t understand.
Here are some common fees that may be included with a small-business loan:
- Origination fee. An upfront fee charged for processing a new loan.
- Underwriting fee. Fees collected by underwriters who review and verify the documents you’ve provided, including financial statements, personal bank statements, credit reports and tax returns.
- Closing costs. Fees associated with servicing the loan such as a loan-packaging fee, a commercial real estate appraisal or a business valuation.
- SBA loan guarantee fee. SBA loans typically come with a guarantee fee of 0% to 3.75%, based on the size of the loan. Annual service fees may range from 0% to 0.55% depending on the size of the loan. The SBA evaluates and updates these fees every fiscal year
.
Factors that affect business loan interest rates
Several different factors impact the interest rate you’ll receive on a business loan. Understanding these factors — and how you can control them — will help you qualify for the lowest interest rates:
- The lender. Bank small-business loans typically have the lowest rates but tough qualifications. Online lenders have looser eligibility requirements but cost more: Interest rates on some types of online business loans can range from 14% to 99% .
- The loan type. Lenders offer many types of small-business loans, and rates vary by product. The best deal is often on loans backed by the U.S. Small Business Administration. SBA loan rates range from 10.5% to 14% .
- Your financial situation. The lender will look at traditional business loan requirements like your credit score, time in business and business income. If you appear to be a risky borrower, the rate you're offered will likely be higher.
- Your collateral. Lenders may offer you a better rate if you secure your loan with business collateral, such as inventory or property. This reduces the lender's risk because it can seize these assets for nonpayment.
Other factors that may influence interest rates on business loans include market conditions, the total amount borrowed and the length of the repayment period.
➡️ Ready to get funding?
- If you have good credit and multiple years in business, start your search with our roundup of the best low-interest business loans.
- If you’re a newer business or have a lower credit score, consider exploring microloans. These loans can offer competitive interest rates, but tend to have more flexible qualification requirements.
Frequently asked questions
What is the average interest rate on a business loan?
Business loan interest rates typically range from 14% to 99% APR. According to the most recent data from the Federal Reserve, average rates on business bank loans fall from 6.6% to 11.5% . Ultimately, the interest rate you receive will depend on the loan type, lender and your business’s qualifications, among other factors.
What is a good rate on a business loan?
A good rate on a business loan can range from 6% to 17%. You may find higher rates, however, on some online loans, especially if you’re a startup or borrower with bad credit.
Do business loans have higher interest rates than personal loans?
In some cases, business loans may have higher interest rates than personal loans. Personal loan rates typically range from 6.99% to 35.99% — although they can reach as high as 300% in some states. Unlike business loan rates, maximum personal loan rates are restricted by a state’s usury laws.
Ultimately, the rate you receive on a business or personal loan, however, will depend on the loan type, your lender and your qualifications.
» Learn more about how business loans compare to personal loans.
Article sources
NerdWallet writers are subject matter authorities who use primary,
trustworthy sources to inform their work, including peer-reviewed
studies, government websites, academic research and interviews with
industry experts. All content is fact-checked for accuracy,
timeliness and relevance. You can learn more about NerdWallet's
high standards for journalism by reading our
editorial guidelines.
- 1. Federal Reserve Bank of Kansas City. Small Business Lending Survey - Q1 2025 Aggregate Data. Accessed Aug 1, 2025.
- 2. U.S. Small Business Administration. SBA Information Notice. Accessed Aug 1, 2025.
