Small Business Loan Interest Rates: 2025
- Current SBA loan rates for SBA 7(a) loans: Lenders typically charge Interest rate ranges prime rate 8.50% + 2.25 to 2.75%. 9.50% - 11.25% principal & interest rate.
- Current SBA loan rates for SBA CDC 504 loans: Lenders typically charge Interest rate ranges prime rate (8.50%) +/- 1%. 25 YEARS 6.28, 20 YEARS 6.36% and 10 YEARS 6.59% principal & interest rate.
Current Business Loan Interest Rates for All Other Business Funding Products for 2025
- Current rates for Traditional Business Loan interest rates: 5. 50% – 7.75% interest rate with potential fees including application fees, origination fees, processing fees, service fees, and potential prepayment penalties for early settling.
- Current rates for Traditional Bank Business Line of Credit: 5.50% – 9.75% interest rate, influenced by loan maturity.
- Current rates for Short Term Small Business Loans: 9.5%-28.99% interest rate, where prepayment penalties may apply if you decide to repay your loan early.
- Current rates for SBA Microloan: The SBA microloan program lends up to $50,000 to cover startup and expansion costs, with rates dependent on base rate and loan maturity. Loan security may be in the form of the financed asset or other collaterals.
- Current rates for Business Cash Advance factor rate: 1.09%-1.45% (not an interest rate)
- Current rates for Merchant Cash Advance factor rate: 1.09%-1.45% (not an interest rate)
- Current rates for Equipment Financing or Leasing: 5.50%-28.99% interest rate
- Current rates for Invoice Financing factor rate: .5%-2% flat fee, no interest rate
- Current rates for Purchase Order factor rate: 2%-7% flat fee, no interest rate
- Current rates for Business Credit Cards Introductory rates starting at 0% up to 28.99% annual interest rate. Typically a variable interest rate applies. Prime rate or Treasury rate plus applied depending on what lenders charge.
- Current rates for Export Working Capital Loans: These vary wildly as there's no maximum rate limit set for these specific types of loans.
What is a business loan interest rate?
When financing a small business, the interest rate is a crucial factor to consider. Small business loan rates can fluctuate depending on various factors, including the type of loan, your lender, creditworthiness, as well as the overall economic environment.
For instance, borrowing rates for startup business loans usually vary, and businesses open for less than two years are often seen as risky due to a lack of capital, collateral, or business credit. To give a specific example, as of January 2024, the SBA loan rates are estimated at 11%. SBA's microloan program lets owners borrow up to $50,000 for startup and expansion costs. Understanding these different factors that influence startup business loan rates can help business owners make well-informed decisions about financing and avoid overpaying for lender funds. In essence, banking smartly can prevent you from unnecessarily inflating your business costs.
What is a factor rate?
A "factor rate" also known as a "money factor" is a fixed cost charge and not an interest rate as it is not compounded interest, amortized interest or simple interest. Common business funding products that offer a factor rate instead of an interest rate include merchant cash advance, equipment leasing, invoice factoring and some short term business loans.
What's the Average Business Loan Rates?
There are many types of small business lending products that charge different interest rates and business loan terms. If you're exploring financing solutions for your startup, remember that your eligibility for traditional bank loans or SBA loan could potentially fetch you annual percentage interest rates in the 10% range, given your financials are strong, and you boast a high FICO score. Variable interest rate 7(a) loans are pegged to the prime rate, currently around 5%, a factor influencing your ultimate rate.
However, credit issues, sub-par financial statements, or not meeting stringent eligibility requirements may push you towards less favorable business loan terms with higher interest rates and more associated fees like underwriting fee or loan origination fee. Some businesses even offer collateral, to secure more favorable rates. The type and terms of the business loan options you qualify for, ranging from SBA loans to alternative lenders, considerably impact the interest rate, total cost, and even banking decisions.
So, while rates may hinge upon the lender, the loan created, and even the optional peg rate, it's always helpful to work on strengthening your appeal to lenders, from improving credit scores to making your startup's financial standing robust.
Are Small Business Loans a Good Idea?
Small business loans may be an excellent idea if you are in need of capital for the following reason(s):
- Working Capital Loans
- Cash Flow Shortages
- Business Expansion Loans
- Business Emergencies Loans
- Advertising and/or Marketing
- Debt Refinancing Loans
- Equipment Needs
- Recruitment of Employees
- Operational Needs
- Inventory
Small business owners should always consider the total cost and annual percentage rate versus the benefit of funding when deciding whether to get a business loan for your business from small business lenders. For instance, the EIDL, or Economic Injury Disaster Loan, which is not limited exclusively to small businesses, but businesses must display considerable, lasting economic damage due to a disaster. This loan supports asset purchases, working capital management, and business expansion, boasting a substantial maximum borrowing amount of $5 million.
Machinery needs, specifically, can be addressed via loans like SBA 504, offered by Certified Development Companies (CDCs). These loans are devised to facilitate business growth and job creation, allowing for the purchase of major assets such as land, buildings, machinery, and equipment.
Also, these loans arranged by CDCs can immensely help nonprofits, as these organizations aim to promote community economic development. However, always weigh options and evaluate interest rates; for instance, nonprofit microlender Kiva with a striking 0% interest rate and no fees for small business loans up to $15,000, may fit certain circumstances better.
In the broader perspective, consider the prevailing economic climate as borrowing can be impacted by high inflation, causing an increase in the primary rate that can limit monetary flow in the economy, and that sponsored product placement can also be a factor for remuneration.
It may be in your best interest not to get a loan if the terms don't make sense for what you're using the money for. Always compare business loan options.
Factors that can affect Interest Rate
Federal funds rate or other Indexes
Interest rates are based on an index and can rise or fall depending on economic conditions in the market. H3: Federal funds rate or other Indexes
Interest rates, often linked to the federal reserve's actions, are based on an index and can prominently rise or fall depending on the economic conditions in the market. As business owners look for affordable finance methods, their keen interest in these rate fluctuations is an exemplification of their integrity, adhering to integrity standards in ensuring their businesses thrive even in adverse market conditions.
Business Profile
The businesses profile can impact offers and interest rates. Here's how various elements, vetted by our editorial team, can influence the risk assessment for a small business advertiser disclosure and interest rates:
- Industry - Industries are quantified by lenders in terms of risk. For instance, advertisers may deem a restaurant as higher risk when compared to a medical practice.
- Time in Business- The longevity of your business directly influences the perceived risk for advertisers. The risk associated with a business that's been open for 6 months is higher than another that's thrived for 3 years.
- Business Revenue - Consistent and significant revenue is a substantial factor in underwriting risk. Our website rules determine that a business generating $250,000 a year might carry more risk than one generating revenues of $750,000.
- Credit - Both personal and business credit methodologies always matter when considering risk; the better the credit, the better your terms, rates, and product offerings on our website.
- Business Financials - Business' financials such as tax returns, profit & loss statements, balance sheets, accounts receivable, accounts payable, and debt schedules can sway rates and terms given by our editorial team.
All this denotes that our editorial team aims to provide our readers with accurate and unbiased information, under guidelines ensuring our editorial content remains uncompromised by any influence from advertisers.
Small Business Financing Options for 2025
1. Small Business Administration (SBA) Loans
The U. S. Small Business Administration (SBA) is a federal government agency that establishes loan programs for small businesses, such as the sba community advantage loans and SBA 7(a) loans. SBA-approved lenders actually service these loans but are given guarantees by the SBA if they adhere to program guidelines and arrange the loans pursuant to SBA guidelines.
The Small Business Administration doesn't act as the direct lender but facilitates lending via certified development companies (CDCs) and other approved institutions. It provides a guarantee to the approved lender, providing coverage for a certain percentage of the loss if the loan were to default. This guarantee encourages lenders to extend credit in circumstances they wouldn't ordinarily do so. While the SBA doesn't set the exact rates, it does regulate the maximum rate. These loans are often fixed rates and carry no early payout penalty. A detailed business plan may be a requirement for obtaining such a loan.
SBA loans come with maximum guarantees of up to $4,500,000, with the loan amount typically ranging from $25,000 to a ceiling of $5 million, and are repayable in monthly installments. They're popular among small businesses due to their comparatively lower interest rates and favorable terms.
SBA Loans Product Overview
Loan Amount: Up to 5 million
Business Loan Interest Rate: Business Loan interest rates start at 5.50%, treasury index plus 1% to 2.5% or the prime rate. The SBA has a maximum business loan rates cap.
Loan Term: 3 to 25 years.
Closing Costs: Origination fees 0% to 3%.
Payment: Fixed monthly.
Credit Scores: Good to excellent preferred, but all personal credit is considered. Business credit score is also a consideration.
Requirements: Filling an application and having a business bank account and financial records are necessary procedures.
Small Business Administration (SBA) Loans/Loan Type
SBA 7(a) Loans . SBA 7(a) loans are SBA’s primary program designed to provide financial assistance to small businesses. The terms and conditions of SBA 7(a) loans, like the guaranty percentage and loan amount, may vary by the type of loans and businesses. Uses for SBA 7(a) loans include working capital, equipment, buying a business, start-up costs, and refinancing debt. There is a guaranty fee.
How the Guaranty Fee Works: SBA 7 (a) loans charges a one-time guarantee fee, also known as a guaranty fee, in addition to an annual service fee. The guarantee fee is based on the loan amount and repayment term, but are only charged on the guaranteed amount of the loan. Lenders will initially pay the guaranty fee, but have the option of passing this fee onto the borrower. Guaranty Fee Loan Amount Fee $150,000 or less 2% of guaranteed portion $150,001 to $700,000 3% of guaranteed portion $701,001 to $5 million 3.5% of guaranteed portion up to $1 million, plus 3.75% of the guaranteed portion over $1 million Short-term SBA loans with repayment terms less than one year are subject to a guaranty fee of 0.25% of the guaranteed amount.
SBA Express Loans. SBA Express Loans resemble the standard 7(a) SBA loan qualifications, business loan rates and purpose. It gives the same great opportunity such as short-term working capital loan — but even faster. For businesses looking for a loan in days instead of months — the SBA Express Loans are a great alternative.
SBA Loan Program 504. The SBA 504 loan is a powerful economic development program that will provide businesses another avenue for business funding if commercial real estate is involved in the transaction. Down payment will be required. The use of proceeds from SBA 504 loans must be used for fixed assets such as construction, commercial real estate, land or land improvements (and certain soft costs), or can also be used to refinance existing debt/loans. SBA 504 C involves commercial real estate.
SBA Disaster Loans- SBA disaster loans for businesses that are in declared disaster areas.
SBA Loan Additional Resources
U.S. Small Business Administration Business Guide
2. Long Term Business Loans
Long-term small business loans have a duration of greater than two years. Businesses are offered a fixed amount upfront and charged principal & interest. Unlike a business line, a business owner cannot draw money as you go with a long-term loan. Typically, long term business lending is for business expansion and growth or to finance large, long-term projects. This business financing option may be used for long-term projects and has lower interest rate than other loans.
Product Overview
Loan Amount: Up to 5 million
Business Loan Interest Rate: Loan interest rates starting at 5.50% or treasury index plus 1% to 2.5% or the prime rate. Typically not a variable interest rate and are fixed rate loans.
Loan Term: 2 to 10 years
Fee: 0% to 3%
Payment: Monthly or bi-weekly
Credit Score Requirements: Good to excellent preferred. All types considered. Business credit score also considered.
Annual Revenue: above $250,000
3. Business Line of Credit
A Business line of credit is a credit facility similar to that of a credit card. This option facilitates borrowing by utilizing revolving credit lines, which allow business owners to draw money as needed for various purchases or expenses. With the help of small business lenders, credit limits are established at the time of agreement issuance and must be renewed periodically based on the line of credit agreement. Remember, these lenders may assess both personal and business credit when reviewing such applications. Apart from regular purchases and expenses, lines of credit have broad business uses like working capital management and business expansion. Interest rates are subject to change due to risk, and higher interest rates may apply to qualify. Bear in mind, loans and lines are different products with distinctive features.
Product Overview
Interest Rate: Average 1% per month simple interest
Terms: Open revolving line
Fee: 0% to 3%
Payment: Monthly, bi-Weekly, or weekly
Credit: Good to excellent preferred. All types considered. It's worth noting that certain small business lenders, similar to credit score requirements, might also implement specific revenue prerequisites.
No Prepayment Fees
4. Small Business Credit Cards
Business credit cards are open revolving credit lines that charge a annual interest rate with a cap. A card is issued that can be used for making payments or purchases. Business owners utilize cards in conjunction with other small business financing options. The primary use of this financial product is for the purchase of small items or pay expenses. This type of loan is popular because of its flexibility and offers small loans for business purposes.
Product Overview
Average Interest Rate: Introductory rates starting at 0% up to 28.99% annual interest rate. Typically a variable interest rate applies. Prime rate or Treasury rate plus applied.
Terms: Open revolving line with a limit
Fee: $0 to $500 Annual fees
Payment: Flexible monthly payments
Credit: Must have good to excellent personal credit score and deep history. business credit scores not required.
5. Short Term Business Loans
Short-term business loans are loans with terms that range from 3 months up to 36 months depending on your qualifications and lender. Short-term loans are a fixed loan amount, fixed term, and fixed payment. The cost charged is either an interest rate or a factor rate determined by a credit risk scoring model. A well-known platform like Lendio could be an option for you.
Short-term business loans are commonly used when traditional business financing is not an option, or when the microloan rates are too high. They cost more because the qualifications are more lenient than other options, like SBA microloans. This extra cost covers the lender for the greater risks they take in offering this product.
Product Overview
Loan Amount: $10,000-$500,000
Business Loan Interest Rate: Factor rates range from 1.09% up to 1.45%, which might be more competitive than microloan rates in certain scenarios.
Terms: 6 to 18 months in duration (typically 12 months or less than the length of an SBA Microloan)
Fee: 0% to 5% fees
Payments: Weekly, bi-weekly, and in some cases daily
Credit: All types considered. Business credit score, much as in the SBA microloan program, is also considered.
Annual Revenue: above $250,000
6. Business Cash Advances
Business Cash Advances (BCA) are also known as the Purchase of Future Sales Agreement that advances future sales at a discount. The business is responsible for paying back a fixed amount known as a specified amount, which is greater than the amount that was advanced.
This factor rate is the cost of the business funding. This is not principal & interest costs. Repayment is structured unconventionally with a set percentage of future overall revenue going towards repayment of the advance. Payments are collected by a convenience ACH fixed payment daily or weekly based on the specified percentage of future sales.
Reconciliation can occur periodically to determine if the fixed payment matches up with the set percentage of monthly revenue. If there is a discrepancy between the amount collected via ACH payments and the set percentage of monthly deposits a refund of the difference can occur. There is no term set due to fluctuating future revenue. Business cash advances are not loans but advances off of future sales.
Product Overview
Rates: Factor rates range from 1.09% up to 1.45%
Terms: No term limits. Payments continue until paid in full based on a specified percentage collection method and are dependent on future revenues
Fees: Origination fees that range from 0% to 5%
Payment: Weekly or daily
Credit: All types considered.
Annual Revenue: above $250,000
7. Merchant Cash Advances
A Merchant Cash Advance (MCA) is also known as a Purchase of Future Sales Agreement that operates very similarly to BCA. The biggest difference is the repayment process, which is connected to future credit card revenues instead of overall sales. MCAs take a set percentage of future credit card sales at the time of batch until the advance is paid back in full.
Business owners find this valuable when they have fluctuating revenues and don’t want to be locked into a fixed payment that could negatively impact capital or margins of profit if revenues decline or fluctuate. This business funding is used primarily for cash flow needs. Merchant cash advances are not loans but advance off of future revenues.
Product Overview
Rates: Factor rates that range from 1.09% up to 1.45%
Terms: No term limits
Fees: Origination fees range from 0% to 3%
Payment: Fixed percentage of future revenues
Personal Credit Score: All types considered.
8. Equipment Financing
Businesses that use equipment to operate often turn to equipment loans for the purchase of equipment that uses the equipment as collateral. Such machinery purchase often represents a major fixed asset in the company's balance sheet. Business owners must maintain very good to excellent credit, but limited paperwork is only necessary to get approved for this lump sum loan.
Product Overview
Interest Rate: Factor rate ranging from 1.09% up to 1.45%. Typically not a variable interest rate.
Terms: 2 to 7 years
Fees: Origination fees range from 0% to 3%
Payment: Weekly or daily
Personal Credit Scores: All types considered.
9. Invoice Factoring
Invoice financing companies purchase invoices from issuers at the time of issuance at a discount for funds now for the issuers. This product accelerates receivables for invoice issuers for a nominal fee. Since the invoice factoring company purchased the invoice, they now collect it on the invoice. The invoice factorer buys the invoice at a discount and also earns money on monthly service fees.
Product Overview
Loan Rate: None
Terms: No term limits
Fees: 1% to 3% fee based on the invoice. Monthly service fees may apply depending on the volume of invoices factored
Credit Score: The credit history of the clients needs to be favorable, NOT the owner advancing off invoices.
Different Types of Business Lenders
- Traditional banks (Bank of America, Wells Fargo, Chase, etc. ) provide loans to businesses directly without involving a 3rd party, ensuring consistent banking amenities.
- Credit Unions
- Business Lenders (Fintech) or Online Lenders like Lendio, which offer a variety of lending options
- Business Originating Marketplace’s
- Small Business Loan Brokers such as the sba microloan program, letting small businesses borrow up to $50,000
- Long-Term Business Lenders
- Equipment Financing Companies
- Invoice Factoring Companies
- Alternative Lenders
- Private Business Lenders
- Hard Money Business Lenders
- Commercial Real Estate Lenders
- Certified Development Companies (CDCs), certified by the SBA and can provide SBA 504 loans to promote business growth with amounts ranging up to $5 million
- Financial Institutions
Every lender varies in terms of what products and services they offer including lender funds. Therefore, it's crucial to inquire about the type of business finance products they provide upfront to see if they cater to your requirements in the business finance marketplace. Online lenders, in particular, offer unique business financing options. When evaluating offers, please review the lender's or financial institution's terms and conditions of products and services. It could also be beneficial to consider nonprofit microlenders like Kiva, which offer small business loans at 0% interest.
The Bottom Line: Tips When Applying for a Business Loan
How to get the best business loan interest rates?
No matter how good a lending offer may seem, there are a few questions you, as a business owner, should always consider before making any major decisions:
- What types of financing programs or products are offered?
- Does the loan originator know to assist me and my needs?
- Can the loan originator walk me through my loan’s processing, financing, and servicing?
Of course, in turn, be sure to answer questions that the lender may ask you:
- Why do I need the money?
- How can I use it in the best way for my business?
- Will the money improve how my business works?
- Have I checked all my financing options?
- Am I getting competitive rates, costs, and terms?
- Have I conducted a cost-benefit analysis yet? If yes, what does it show?
Before you sign anything, ensure that you have the answers to these questions and understand the terms and conditions. Most lenders will include the cost of money (the maximum interest rate or a factor rate), closing and financing fees, payment frequency, guarantees, and collateral requirements.
How to Apply for a Small Business Loan Using Advancepoint Capital’s Marketplace?
Applying for a loan with AdvancePoint Capital is as simple as 1, 2, 3. In addition to the SBA 7(a) common loans, we also cater to SBA microloans and Community Advantage loans that carry relaxed eligibility criteria, an advisable consideration.
Let AdvancePoint Capital, your helper in the allowance of appropriate finance options, assist you through our small business lenders network of online lenders that can provide placement for all available solutions in the market. Initiate with this online form, then fill out the short application page, wait a few hours for your approval, and eventually receive your money!
*Advancepoint does not provide California finance lender loans and works with federally chartered banks in California if providing business loans.
