Today’s average business loan interest rates

The prime rate dropped to 6.75% in December 2025, its lowest level in almost three years. For business owners shopping for financing in 2026, this means there may be an opportunity to find more affordable financing. 

If your business needs capital, you'll want to understand what rates look like across different types of loan options and how to position your business for the best possible terms.

Today's average business loan rates by loan type

There is a wide range in the interest rates that may be offered in 2026: Anywhere from as little as 5.5% for the most qualified borrowers getting bank loans, to as high as 100% or more for some types of financing.

Bank term loans and lines of credit current rates

Traditional banks remain competitive for qualified borrowers. According to the latest Federal Reserve data, rates for new small business bank loans were:

Source: Kansas City Fed Small Business Lending Survey Q3 2025 

Current SBA 7(a), 504 & Express loan rates

SBA loans offer some of the most competitive rates available for businesses that can't access conventional bank financing. The SBA sets maximum rates that lenders can charge, but your actual rate will be lower if your business has strong qualifications.

SBA 7(a) rates are based on either the prime rate or the SBA's optional peg rate (currently 4.75% for Q4 2025), plus a spread. SBA 504 loans, which finance real estate and equipment purchases, use Treasury rates plus fees, resulting in some of the lowest rates available for business borrowing.

Online term loans, invoice factoring & merchant cash advances rates

Alternative lenders often offer speed and accessibility but then charge higher rates than banks. There is often a wide range in the rates borrowers can expect to pay: 

These products often state factor rates rather than interest rates. A 1.3 factor rate on a six-month cash advance may translate to an APR of 60-80% APR depending on the repayment schedule.

Business credit card rates

Business credit cards currently carry APRs between just above 16% to almost 29%, depending on qualifications. However, many issuers offer 0% introductory APR periods ranging from 6-12 months on purchases or balance transfers.

For qualified applicants, business credit cards can provide the following rates

Once introductory periods expire, balances incur interest at a much higher rate. 

Business loan rate outlook for 2026

Through 2025, the Federal Reserve shifted its monetary policy from a prolonged tightening cycle into gradual easing. After holding the federal funds rate at historically high levels during 2023 and much of 2024, the Fed began cutting rates in 2025 — including three quarter-point reductions in September, October, and December, bringing the target federal funds rate down to a range of approximately 3.50%–3.75% by the end of the year.

What the Federal Reserve is saying

At its December 2025 meeting, the Federal Reserve said the economy is slowing in a balanced way — employers are hiring less, but fewer people are also looking for jobs. With inflation cooling and the job market softening, the Fed cut interest rates again.

Based on the Fed’s latest outlook:

• Interest rates ended 2025 around 3.50%–3.75%, after the December rate cut.
  
  
• Rates to ease slightly more in 2026, potentially reaching 3.25%–3.50%
  
  
• Any future cuts to happen slowly and cautiously, depending on how inflation and the economy evolve

What this means for small business owners

Borrowing costs may continue to come down, but the Fed is not rushing. Lenders are likely to remain selective, and rates may fluctuate as the Fed responds to new economic data.

Predicted Fed moves and how they may affect rates

After cutting rates in December 2025, many economists now expect the Federal Reserve to move more slowly in 2026. Current forecasts point to one or two additional quarter-point cuts next year, assuming inflation continues to cool and the labor market softens without a sharp downturn.

Both Goldman Sachs Research and J.P. Morgan projects the federal funds rate settling around 3.25 – 3.50% by late 2026, which is slightly lower than where it stands following the December 2025 cut. 

Morningstar commentary suggests the outlook for 2026 is less clear and more cautious, with a slower pace of cuts expected compared with 2025. Markets and analysts are pricing in the possibility of only one additional Fed rate cut in 2026, rather than multiple moves.

What this may mean for business loans

Variable-rate loans: Rates on these loans adjust automatically when the base rate (often the prime rate) changes. After the December 2025 rate cut, the prime rate is 6.75%. If the Fed makes one or two additional quarter-point cuts in 2026, the prime rate could fall to about 6.25%–6.50%, leading to lower costs over time.

Lines of credit: Most credit lines carry variable rates that reset monthly or quarterly, so you may see a fairly immediate benefit from prime rate cuts on outstanding balances.

Should you lock a fixed rate vs variable

Choosing between fixed and variable rates depends on several key factors:

Source: Nav

What is a good business loan rate today?

"Good" is a relative term, and usually depends on the lender, loan type, and qualifications, including revenue, time in business, and/or credit profile.

As of December 2025, here are comparisons of what competitive rates may look like by qualification tier:

The lowest rates often go to small businesses with:

• Two or more years in business.
• $250K+ annual revenue.
• No recent bankruptcies or major derogatory marks.
• Adequate cash flow to service debt.

Business line of credit rates explained

Lines of credit offer flexible borrowing — you draw what you need, pay interest only on what you use, and repay on your schedule (within limits). Rates vary significantly by lender and borrower qualifications. 

Business lines of credit often carry variable rates tied to prime, for example: prime + 2-5% depending on qualifications.

Compare top business line of credit options

For this section, just add offer cards for each LOC option

Fundbox

Headway Capital

OnDeck

Compare multiple options before committing. A five-point difference in APR on a $100,000 line used for six months could cost your business roughly $2,500 in additional interest. 

Add callout for Nav marketplace

Do small business loans have high interest rates?

Whether a business loan has a high rate depends on what you're comparing the rate to, as well as the rate your business can get. An SBA loan at 14.75% may seem expensive compared to a bank loan rate of 11%, but inexpensive when compared to some credit cards at 22% or merchant cash advances with an effective APR of 60% or more. 

You also need to think about the return on investment (ROI) of any capital you use. 

That 14.75% SBA loan might feel expensive, but if it enables growth that generates 25% returns, it may be worth it. The question is whether the capital creates value greater than its cost, and that is something you need to carefully consider. You may want to discuss it with your accountant or a business advisor. 

Where to find today's current business loan rates

Don't rely on advertised "starting at" rates. Your actual rate depends on your qualifications, and lenders determine this through underwriting. Here’s how you may want to approach this process:

1. Check your business and personal credit scores before applying.
2. Prequalify with 3-5 lenders to see actual rates.
3. Compare total cost including fees, not just interest rates.
4. Use a business loan calculator to help translate costs to an APR.

Nav's small business lending marketplace lets you compare options from multiple lenders without impacting your credit score. 

Are startup loan rates higher?

It depends. Many loans are not available to pre-revenue businesses. Businesses with at least six months of documented revenue may be able to find options but rates may be higher and/or a personal guarantee may be required.  

Why the penalty?

Many businesses fail within the first two to five years. They often have limited financial history to assess cash flow stability, and may not have established business credit. They may also have fewer assets to pledge as collateral.

Options for startups

• Consider SBA loans, including SBA microloans.
• Get business credit cards with 0% intro APR offers for short-term financing.
• Explore equipment financing (using equipment as collateral).
• Pursue revenue-based financing if your business has strong sales.
• Look into crowdfunding, including Kiva’s interest-free loans.
• Build business credit and start with supplier payment terms

Interest rate vs APR

The terms interest rate and annual percentage rate (APR) are sometimes interchanged, but can offer different insights into the cost of financing. 

Interest rate: The rate charged on your principal balance.

APR (Annual Percentage Rate): Includes the interest rate plus certain fees, expressed as an annual percentage. This is considered a better representation of the true cost of borrowing.

Example showing the difference:

Loan: $100,000 Interest rate: 8% Origination fee: 3% ($3,000) Term: 1 year

• The 8% interest rate generates $8,000 in interest.
• Adding the $3,000 origination fee means you pay $11,000 total.
• The APR is roughly 11%.

In many states, business lenders are not required to state an APR, which means it can be more difficult to understand loan costs. Two loans with the same interest rate can have vastly different APRs when fees are included. 

In addition, some types of financing may use fees instead of rates, or different ways to describe costs, such as factor rates. Nav’s free business loan calculators can help you translate some of these cost structures to APRs. 

What does it take to qualify for a low interest rate?

Lenders and other companies that offer small business financing may look at a variety of factors, including: 

Credit scores

Some business lenders check personal credit, some check business credit, and some check both. A few don’t check credit at all and rely on other factors. 

Personal credit scores are often important, especially for younger businesses.

Personal credit score impact on rates

When lenders consider personal credit scores (such as FICO^® scores or VantageScore^®  credit scores), each one will decide what credit score ranges are acceptable. However, there are some general guidelines: 

• 760+: Typically qualify for best rates
• 700-759: Near-best rates, often lower rates
• 660-699: Good but somewhat higher rates, more scrutiny
• 640-659: More limited options and/or higher rates
• Under 640: Mostly alternative lenders at premium rates

Learn about the main personal credit scoring factors here

Business credit scores impact on rates

Business lenders may also use business credit reports from bureaus such as Dun & Bradstreet (D&B), Equifax, or Experian to help evaluate your business for a loan. 

There is a wide variety of business credit scores that may be checked, including:

• D&B^® PAYDEX^® Score
• Equifax Business Delinquency Score^® for Others
• Experian Intelliscore Plus^SM 
• FICO^® Small Business Scoring Service℠ (SBSS℠) 

Strong business credit scores may help your business qualify for certain types of financing, as well as lower rates. 

Read: How to improve your business credit scores

Note to Editor: How to offer this free guide? Gated content?

Time in business

Lenders often view business age as a proxy for stability. Each year in operation helps reduce risk and may improve your options:

• Less than one year: Higher rates (if approved at all).
• From one to two years: Still considered new, rates somewhat higher.
• From two to five years: Established, rates approach standard.
• Five or more years: Mature business, best rate opportunities

Annual revenue and cash flow metrics

Revenue is important to lenders in a couple of ways. First, without revenue, your business won’t have money to repay debt. Additionally, higher revenue from a variety of sources can be associated with stronger cash flow. 

Most lenders set minimum annual revenue thresholds:

• Traditional banks: Often $250K+ minimum, some much higher
• SBA loans: Cash flow must be sufficient to repay the debt
• Online lenders: As low as $50,000–$100,000+

Debt service coverage ratio (DSCR)

This metric compares your available cash flow to required loan payments. When used, lenders calculate it as follows: 

Net operating income ÷ Total debt service

• DSCR of 1.25x: Minimum for most term loans
• DSCR of 1.5x+: Comfortable approval territory
• DSCR under 1.0x: Cash flow can't cover debt

Higher revenue and stronger DSCR may translate to lower rates. As an example, a business with 2.0x DSCR might get rates two to three points better than one with 1.2x DSCR.

Are business loan interest rates tax deductible?

Generally, yes, business loan interest is tax-deductible as a business expense in the year paid, with some limitations. 

Section 163(j) still limits the business interest deduction for tax years beginning after 2025 (i.e., 2026 and beyond), but the rules were revised by recent tax law so that the deduction is generally capped at 30% of adjusted taxable income (with EBITDA-based adjustments). Businesses under the inflation-adjusted gross receipts threshold (around $31 million annually) are exempt from this limitation.

The bottom line

Business loan rates are coming down from their 2023 peak, but they may not drop significantly in 2026. 

While you can’t control what the Fed does with regard to rates, there are factors at least partially within your control, such as credit scores and revenue. Work on strengthening both. 

When you shop for financing, compare loan types and lenders. And remember: the lowest interest rate doesn't always mean the lowest total cost. Factor in fees, prepayment penalties, and loan terms when evaluating offers.

The lending environment remains competitive despite higher rates. Lenders want to make loans, and qualified borrowers will have options. 

Frequently asked questions about business loan rates