If your business needs financing in 2024, you’ll want to pay close attention to the interest rate you can get on your next small business loan. Interest is an additional expense that you have to take into account when figuring out how much you can afford to borrow, and how much it will cost to pay back the loan.
Here, we’ll dive into average small business loan rates, how to understand the cost of financing, and where to find some of the best small business loan rates today.
Business loan rate expectations: Updated for 2025
The prime rate is the rate to which many small business loans (including some SBA loans) are tied. Rates rose frequently throughout 2022 and 2023, due to multiple rate increases by the Fed. However, a series of Federal Reserve cuts mean the Prime Rate is now at 7.5%, as of December 18, 2024.
Many small business loans and lines of credit carry variable interest rates. As the prime rate goes down, often the rate business owners will pay goes down as well. And certainly new loans will be impacted by the latest interest rates.
SBA loans are currently some of the most affordable loan options on the market — but even the popular SBA 7(a) loan may cost up to almost 15.5% interest at the time of writing. However, it is expected that rates will continue to decrease slightly in 2025.
What are interest rates expected to do in 2025?
The Federal Reserve began cutting interest rates in 2024, with the most recent rate cut in December 2024. It is expected to continue to lower rates in 2025, although at a slower pace. It stated, “In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”
This may provide an opportunity to for business owners to save money when they borrow.
Use Nav’s Small Business Loan Calculators to better understand the cost of a small business loan and help decide whether the loan you’re considering makes sense.
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Average business loan interest rate by loan type
There is no central source of data that collects and reports the average interest rates that business owners are paying on all types of small business loans and financing.
Understand, then, that the term “average rate” may sometimes refer to common interest rates being offered by various lenders. There is a tremendous range in the interest rates that may be offered in 2025: anywhere from as little as 3.5% (for the most qualified borrowers getting loans from banks), to as high as 100% or more for some types of financing.
Average bank small business loan interest rates 2024
When searching for a business loan, you might come across several types of lenders, including large national banks, small community banks and credit unions, online banks, microlenders, and more. Some lenders also make SBA loans, which are partially guaranteed by the U.S. Small Business Administration.
The Federal Reserve surveys banks and publishes data about those findings. Recent surveys list the following rates. A term loan refers to a lump sum borrowed, while a line of credit offers an amount against which the business can borrow as needed:
Type of Bank Loan | Median Rate* |
New bank fixed-rate small business term loan | 7.810% |
New bank variable-rate small business term loan | 8.29% |
What is the interest rate for SBA loans in 2024?
The US Small Business Administration makes a limited number of types of business loans (namely Disaster Loans, and Economic Injury Disaster Loans.) Instead it guarantees loans made by participating lenders.
Here are the maximum rates that may be charged on the most popular SBA loan programs:
Type of SBA Loan | Maximum Interest Rates |
SBA 7(a) fixed interest rate loans | up to 12.5 to 15.5% |
SBA 7(a) variable-rate loans | up to 10.5 to 14% |
SBA Express loans | Up to 12 to 13% |
SBA 504 loans | 6.09 to 6.49% |
Find more information on current SBA loan rates here.
SBA loan rates are considered competitive, especially when you consider that businesses that qualify generally can’t get similar financing elsewhere. Remember, the US Small Business Administration doesn’t make most SBA loans (except for Disaster Loans); instead it guarantees loans made by other lenders. The SBA often sets maximum rates but borrowers may be able to get lower rates depending on their qualifications.
Interest rates for other types of small business financing
Here we provide an overview of the rates you may encounter when applying for other types of small business financing. Note that alternative financing options don’t always state an interest rate, and so we have provided a range of equivalent effective rates instead.
Type of Financing | Effective Interest Rate Range |
Invoice Factoring | 25—200% or more |
Merchant Cash Advance | 35—350% or more |
Online small business loans | 15—350% or more |
Effective rate ranges alternative financing
Merchant cash advances (also known as business cash advances), for example, typically state a factor rate, not an interest rate. If you are a business owner expecting to see an interest rate you might not understand how much you are actually paying when the cost is translated to an annual interest rate.
Interest rates for business credit cards
Business credit cards can also be an important source of financing, both for new businesses that may not qualify for loans from traditional lenders, as well as for established businesses looking for short-term financing.
Credit Cards | Interest Rate Range (APR) |
Business credit card | 9.99—34.99% ( may be available) |
Find more information about small business credit card rates here.
What is a good business loan interest rate?
Often the lower the interest rate you can get, the better, because that usually means you’ll pay less for the loan. A good business loan rate depends on the type of financing, and the borrower’s qualifications, such as the business or business owner’s credit profile, time in business, revenues, and other factors we’ll detail shortly.
But interest rates alone don’t determine what you pay; the length of your loan repayment period also matters. You might secure a lower interest rate with a 10-year loan, but you’ll be paying interest a lot longer than you would with a five-year loan, for example.
Three other factors you need to consider are:
Fixed-rate loans versus variable-rate loans. As you can see from the average rates listed above, variable-rate loans often have slightly lower rates but they may change if interest rates continue to rise. If you need a short-term loan you may be more comfortable with a variable rate. If you need a long-term loan, you may want to consider a fixed rate for more predictable costs.
Loan fees. Most small business loans carry fees that add to the cost of borrowing. Fees may include origination fees, underwriting fees, annual fees and more. SBA loans also may include a guarantee fee in addition to other fees.
Prepayment penalties. If your loan charges a prepayment penalty, or if the cost of financing is charged upfront (as is the case with a cash advance fee), you could end up paying more even if rates go down in the future and you refinance your debt.
Business loan rates for business lines of credit
With a business line of credit, there is a wide variation in terms of how much you’ll pay in interest. As you can see from the table above, bank line of credit rates can be quite low. On the high end, interest can be 90%+ with some lines of credit. The total interest you’ll pay largely depends on the creditworthiness of your business and/or personal credit scores, the type of lender, and other specific factors regarding your business.
Business line of credit: Compare the best options
It can be daunting to choose between all the different lines of credit available, which is why Nav pulls together your best options and offers you personalized choices based on your business data. Use Nav to see your best options.
Here are options worth considering:
Line of Credit by Fundbox
Nav recommends this product as a great solution for newer small businesses looking for a fast application process and access to a flexible LOC product. Bonus: When you click 'Apply now," we'll securely pass over your info, making applying with Fundbox a breeze. Only answer a few additional questions on their end and you're good to go.
Pros
- 625 minimum personal credit score
- No impact to credit score to apply (soft pull only)
- No draw fees
- Fast approval and funding, with funds available as soon as the next business day
- Use as much as you need, only pay interest on what you use
- Fundbox reports payment activity to all the major commercial credit bureaus via the Small Business Financial Exchange (SBFE), which can help strengthen a business's credit profile.
Cons
- Must have a business checking account with a minimum balance of $500
- May require large weekly payments (0.4% - 0.7% of the original draw amount per week) due to the short repayment duration.
Funding Amount
Cost
Repayment Terms
Funding Speed
Line of Credit by Headway Capital
Headway Capital provides businesses with a true revolving Line of Credit with no pre-payment penalties, one fixed monthly payment, and the ability to access additional capital any time you have funds available. Bonus: When you click 'Apply now," we'll securely pass over your info, making applying with Headway a breeze. Only answer a few additional questions on their end and you're good to go.
Pros
- Pre-approval process does not require hard personal credit inquiry
- Approval within hours of applying
- Only pay interest on what you use
- Offers 24-month repayment terms and monthly payments.
Cons
- Interest rates can be higher than some other line of credit providers
- Hard personal credit inquiry at the time of funding.
Funding Amount
Cost
Repayment Terms
Funding Speed
Line of Credit by OnDeck
Product Updates: No More Monthly Maintenance Fee! Monthly Payments and Extended Repayment Terms (18 and 24 month terms) NOW AVAILABLE! A line of credit can be a great asset to businesses who need capital on hand- fast. It allows you the flexibility to draw funds when you need it, and you only pay interest on what you use. Once approved, you can draw available funds quickly and easily without having to provide additional documentation.
Pros
- No monthly maintenance fees
- Monthly Payments available and Extended Repayment Terms (12, 18 and 24 months) Minimal paperwork
- As soon as same-day approval and funding sent by next business day
- Transparent pricing
- Use as much as you need, only pay interest on what you use
- Access available funds with one click.
Cons
- Not available in all states.
Funding Amount
Cost
Repayment Terms
Funding Speed
Do small business loans have high interest rates?
Some small business loans and financing options have high interest rates, or high effective rates. (Not all types of financing express cost as interest rates. Some charge fees, factor rates, or other types of expenses that aren’t expressed as “interest rates.”)
There may be competitive rates available, depending on your personal and business qualifications.
Where can I find business loan interest rates today?
With so many different commercial lenders out there, there’s no central place where you can view all current rates. It’s also important to note that the interest rate you get will be based on your creditworthiness and the strength of your business’ financials and credit history.
With traditional commercial lenders, you might need to apply to get an idea of what rates you qualify for. Some online lenders, however, will let you get prequalified with just a soft credit check to view your rates before you apply.
Where to compare business loan rates
Comparing rates from different lenders is not the most straightforward process since there’s no central location for the range of rates offered. This is especially difficult because rates can change daily. Also, the rates you can get depend on your business and personal details.
Nav can help you find financing options based on your qualifications. Don’t let a lack of funding hold you back. Find the best small business loans for your company and take your business to new heights with Nav.
Are startup business loan rates higher?
In general, it’s going to be harder to get loan for a startup than for an established business. This is because the chances of a startup failing are much higher than for a company that already has a solid track record. As a result, interest rates may be higher
In some cases, it might be difficult even to get approved for a business loan when you’re just starting out, as traditional banks often prefer to lend to businesses that have been in business for at least two years. You may need to opt for a microloan, business credit cards, or alternative financing to get the working capital your business needs. Crowdfunding may also be a viable option for certain types of businesses.
As you build your business credit history and establish a good history of strong revenues and cash flow, however, you’ll have a better chance of getting approved for a business loan with a lower rate.
Fixed vs. variable rates
Some types of business financing carry fixed rates, which means the rate will remain the same for the life of the loan. Others carry variable rates, which means the rate can change. Loans with variable interest rates may be tied to the prime rate or other rates in the economy.
Variable rates are often lower than fixed rates but they may carry more risk for the borrower since both the rate and payment may change. Most business credit cards and many lines of credit have variable interest rates.
Interest rate vs. APR
You may hear these two terms used with regards to small business loans, and wonder if they can be used interchangeably.
The interest rate is typically used to describe what you pay to borrow money over the course of a year. So if you borrow $10,000 and have 3% interest, you’ll pay $300 per year on the loan. If you take five years to pay it off, you will pay $1,500 in interest over the life of the loan.
APR, or annual percentage rate, also covers the annual cost of a loan, but often includes other fees. APR is usually higher than the interest rate.
What is the minimum interest rate for a business loan?
Again, there’s no single answer to this question. Lenders want to make money, so they will charge some interest for business lines of credit and loans. But it’s often based on current economic conditions. Interest rates have risen steadily over the past year and so have loan rates.
If you’re looking for a rock-bottom rate, nonprofit microlender Kiva charges 0% interest and no fees for its crowdfunded small business loans of up to $15,000. Those loans aren’t a good fit for every business, of course, but the cost is certainly attractive.
How much does a business loan cost?
When taking out financing, it’s important to understand the true cost of financing. You can borrow hundreds of thousands of dollars…at a price. The interest you pay, as well as any fees the lender charges, contribute to your cost for financing. And if you miss a payment or are late, more fees can incur.
In the application process, carefully review the loan terms and conditions so you understand how much you will pay for the loan. You may be able to pay off the loan early to save on interest, though make sure you won’t be charged an early repayment penalty fee.
What other fees are associated with a business loan?
Interest may not be the only fees you pay for a business loan. Depending on the lender, there may be other fees.
Some charge an origination fee, which is an administrative fee you pay to process your loan application. Some lenders may also charge prepayment penalties if you decide to pay your loan off early. And if you’re interested in refinancing a loan, keep in mind that there may be fees associated with this.
Before signing a loan agreement, read the fine print to see what, if any, fees you will be responsible for.
Which banks give the lowest rates for small business loans?
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. If you don’t have great credit, at least a year or two in business, and solid documented revenues that aren’t decreasing recently, they may not be an option.
Banks and lenders offering SBA loans also offer competitive rates, and the requirements, while high, may be less difficult to meet than traditional bank loans. But SBA loans still require good credit to qualify and the application process can be involved. Learn more about SBA loan qualifications here.
What factors affect business loan rates?
Every lender looks at different factors to determine eligibility for term loans, but most, particularly banks and SBA lenders, look first at your creditworthiness. They may look at both personal and business credit scores, and they may have a threshold you have to meet to qualify. The lower your scores, the higher interest rates you may be offered.
Additionally, how long you’ve been in business may determine whether you qualify for financing or not. Startups may have difficulty getting bank loans because they haven’t been in business long enough to prove financial stability.
For some types of loans, like commercial real estate loans, you may also be required to provide collateral to secure financing.
Other types of loans, such as merchant cash advances, short-term loans, and invoice factoring, may not consider your credit at all, and may instead look at your monthly or annual revenues. You’ll usually need to provide documentation from your merchant account or your business bank account to help qualify.
What does it take to qualify for a low interest rate?
Small business lenders will generally look at the following eligibility requirements when evaluating loan applications:
- Owner’s personal credit scores and/or business credit
- Time in business
- Annual revenue or average monthly revenue
The borrower’s credit profile will be very important when it comes to qualifying for many small business loans. Bad credit may disqualify the application, while good to excellent credit makes it easier to qualify, and may earn you a better rate. Some lenders check business credit scores, some check personal credit, and some check both.
Revenue is also very important. Many lenders will require business bank statements and/or business tax returns to verify revenues. Some lenders (including many banks) may also require financial statements, especially for larger loans.
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.
It’s not possible to control every factor that goes into your eligibility and your interest rate for a small business loan. But there are some things that you can do to reduce your overall credit risk to lenders.
Improve your personal and business credit to get better rates
As mentioned before, some business lenders look at your business credit history, many review personal credit scores, and some check both. This is because you might need to provide a personal guarantee in case your business can’t repay the debt.
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. Make sure your business is up to date on business taxes as well. (Tax liens may appear on business credit reports.)
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Finding the loan with the best interest rate
No matter how much capital your business needs or what your credit situation, there are a variety of financing options for you to explore. Just know that the better your credit, the lower interest rates you can find. It’s up to you whether to take out a loan with higher interest or work on improving your credit so you qualify for better rates later.
Understand Fees
While fees aren’t included in your interest rate, they are part of the calculation of your annual percentage rate (APR) and can increase the overall cost of the loan. Fees to watch out for include application fees, origination fees, processing fees, service fees, prepayment penalties, and closing fees.
While you can’t necessarily avoid all these fees, compare what different lenders charge to see if you can lower the amount of money you ultimately have to pay.
Consider Collateral
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 loans 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.
Don’t Only Focus on Payments
It’s tempting for borrowers to focus on monthly payments and repayment terms without fully understanding the cost of 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 more than traditional term loans (at least compared to what well-qualified borrowers can get.)
That doesn’t mean these financing options aren’t viable options. In some situations, you might need them. But you want to make sure you’re getting the best loan possible based on your qualifications, and you want to be confident that you can repay the financing.
Are high business loan interest rates tax deductible?
Generally, small business owners can deduct interest on business loans in the taxable year. However there are some exceptions under what’s known as the “section 163(j) limitation.” The IRS explains these limitations in detail here. Discuss interest expenses limitations with your accounting professional.
What is the business lending outlook for 2025?
The outlook for small business lending in 2025 can be described as “cautiously optimistic.” The S&P Global Outlook predicts 2025 offers “promise and peril. The descent in policy interest rates and soft landings in many major economies may deliver on the promise of more
favorable credit conditions. On the other hand, intensifying geopolitical and trade tensions increase the peril present in an already tumultuous environment.”
And a January 2024 Fed survey anticipates loan demand to strengthen across all loan categories.
What are interest rates expected to be in 2025?
Rates will likely drop starting in mid-2024, and with further adjustments in 2025. Morningstar expects the Fed to continue cutting through the end of 2025, bringing the federal-funds rate down by over 300 basis points. It expects “the federal-funds rate target range to fall from 5.25% to 5.50% currently to 4.00% to 4.25% by the end of 2024, to 2.50% to 2.75% by the end of 2025, and to 1.75% to 2.00% by end of 2026, after which the Fed will be done cutting.
The bottom line
Higher interest rates are making it harder for some small businesses to stay afloat. In the Fed’s 2024 Small Business Credit Survey, just over a third (34%) of firms reported that making payments on debt was a financial challenge. And more than half of all firms (54%) said higher interest rates were contributing to increased debt costs. And more than a third of businesses surveyed said they delayed expansion or capital spending because of higher interest rates.
As a business owner it’s important to find the best rate based on your qualifications and loan options.
The average interest rate for a business loan can vary depending on the type of lender you borrow from and the type of loan products your business needs. However, the interest rate you get can end up above or below that average, based on your creditworthiness and how well your business is doing financially.
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. Understanding your financing options before you desperately need money can also help; you’ll have more time to apply for the best types of financing.
While there’s no guarantee you’ll get approved with the lowest rate a lender offers, these actions can help you qualify for more favorable terms.
Frequently asked questions about business loan rates
What Questions Are Asked In A Business Loan Application?
Each lender is different, but when you fill out an application for a business loan, you’ll need to provide details about yourself and your business. You may need to provide a Social Security Number for a credit check. You may need to provide documentation (such as business bank statements or access to your business checking account) to verify you meet annual revenue requirements. Some loans even require business tax returns and/or a business plan but that’s not common with online lenders.
What is the Prime Rate Today?
The prime rate is based on the rate the top banks charge their commercial customers. It is often considered a starting point for other interest rates. Banks typically look at the prime rate and add a number of points (usually three) to determine the interest rates they charge borrowers. The current prime rate is 8.5%. The prime rates has increased several times in 2022 and 2023 as the Fed raised interest rates to fight inflation. (Although the Fed doesn’t set the prime rate, interest rates often move as a result of Fed rate policy.)
Which Bank Gives The Lowest Interest On Business Loans?
The interest rate you can get as a borrower depends on a number of factors, but options with the lowest interest rates typically come from traditional banks and credit unions. The lowest interest rates often go to the most qualified borrowers, taking into account factors like your creditworthiness, time in business, and revenues. Additionally, some lenders prefer to lend to businesses in certain industries. If you don’t have high credit scores, you may need to consider alternative lenders. If your business does not have strong qualifications, you may need to consider alternative lenders.
How Long Are Business Loans Usually For?
The repayment period for business loans depends on the type of funding. A term loan might have a repayment term as short as one or two years, or as long as ten or even twenty-five years. Longer-term loans are usually used to finance large purchases such as real estate or heavy equipment.
A business cash advance may carry a term as short as six months to a year. Lines of credit are often extended for one to five years.
Remember: The longer your loan repayment period, the lower your monthly payments may be, but the more interest you might pay in total since you’re paying interest for a longer period of time.
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Gerri Detweiler
Education Consultant, Nav
Gerri Detweiler, a financing and credit expert, has been featured in 4,500+ news stories and answered 10,000+ credit and lending questions online. In addition to Nav, her articles have appeared on Forbes, MarketWatch, and Startup Nation. She is the author or co-author of six books, including Finance Your Own Business, and she has also testified before Congress on consumer credit legislation.