Business Expansion

Small Business Loan Rates

Last updated on October 12, 2020

Jacques Famy Jr

What Are the Loan Interest Rates for Small Business Loans for October 2020?

  • Current rates for SBA 7(a) loans: 5.50% –9.75% principal & interest rate.
  • Current rates for SBA CDC 504 loans: 2.40% – 2.90% principal & interest rate.
  • Current rates for SBA Paycheck Protection Program loans: 0.5% principal & interest rate.
  • Current rates for Coronavirus SBA Disaster Loan (EIDL): 3.5% principal & interest rate

What Are the Current Interest Rates for All Other Business Funding Products for October 2020?

  • Current rates for Traditional Long-Term Business Loans:  5.50% – 9.75% principal & Interest rate.
  • Current rates for Traditional Bank Business Line of Credit: 5.50% – 9.75% principal & interest rate.
  • Current rates for Short Term Small Business Loans: 9.5%-28.99% principal & interest rate
  • Current rates for Business Cash Advance factor rate: 1.09%-1.45%
  • Current rates for Merchant Cash Advance factor rate: 1.09%-1.45%
  • Current rates for Equipment Financing or Leasing: 5.50%-28.99% principal & interest rate
  • Current rates for Invoice Financing factor rate: .5%-2%
  • Current rates for Purchase Order factor rate: 2%-5%

What Is a Good Business Loan Interest Rate?

There are many types of business funding products that charge different interest rates and terms. If you have excellent credit, strong financials, and meet the qualifications of a traditional loan, then you can expect annual percentage interest rates in the 3%-6.5% range. But if you have some credit issues, your financial statements and other qualifications are deficient, then you may be looking at less favorable loan terms with higher interest rates and fees.

Which Bank Has the Lowest Interest Rate on Business Loan?

Banks typically charge similar interest rates for a loan for small businesses and follow the treasury index or prime rate for annual percentage interest rates on business lines of credit. You may need to rely on someone to shop around for you because there are differences from bank to bank when it comes to business loan interest rates.

Are Small Business Loans a Good Idea?

Small business funding 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 versus benefit when deciding whether to get loans for your business. Always compare options when making any decision. It may be in your best interest not to get a loan if the terms don’t make sense for what you are using the money for.

The 10 Best Small Business Financing Options for Small Businesses for October 2020

  1. Small Business Administration (SBA) Loans

The Small Business Administration (SBA) provides programs, guidelines, and loan guarantees to approved lenders for businesses. The Small Business Administration’s mission is to help Americans start, build, and grow their businesses successfully. The SBA is not a lender and does not loan to small businesses directly. The SBA provides a guarantee that gives the approved lender the ability to take on the risk of business lending under SBA loan terms that they would not ordinarily do so on their own. 

The SBA guarantees are up to $4,500,000 of each loan amount made by participant lenders with rights reserved. The SBA loan amount can typically range from $25,000 to $5 million and are repaid in monthly installments. SBA loans are popular because these loans have lower interest rates and better terms than some other traditional loans.

SBA Loans Product Overview

Interest Rate: Loan interest rates starting at 5.50%, treasury index plus 1% to 2.5% or the prime rate

Loan Term: 3 to 25 years 

Fees: Origination fees 0% to 3%

Payment: Fixed monthly

Credit Score: Good to excellent preferred, but all credit considered. 

Types of SBA Loans

SBA 7(a) Loan Program. SBA 7(a) loans are SBA’s primary program designed to provide financial assistance to small businesses. The terms and conditions, 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.    

SBA Loan Program 504. The SBA 504 loan is a powerful economic development loan program that will provide small businesses another avenue for business funding while promoting business growth and job creation. 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.

SBA Disaster Loans/Economic Injury Disaster Loans (EIDL). This type of SBA loan not only provides assistance after natural disasters like tornadoes, wildfires, or floods, but when President Trump declared Covid-19 a nationwide emergency on March 13th, small businesses were able to access this program for emergency loans.

SBA Payment Protection Program (PPP) loans. The Small Business Administration (SBA) has established the SBA Payment Protection Program loan that will provide loans to small businesses affected by the COVID-19 crisis that need financial help.

  1. 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 funding option may be used for long-term projects and has lower interest rates than other loans.

Product Overview

Interest Rate: Loan interest rates starting at 5.50% or treasury index plus 1% to 2.5% or the prime rate

Terms: 2 to 10 years

Fees: Origination fees range from 0% to 3%

Payment: Monthly or bi-weekly

Credit Score: Good to excellent preferred. All types considered.

Learn More

  1. Business Line of Credit

A Business line of credit is an open revolving line. This type of funding allows business owners to draw funds when needed on-demand or make purchases—a business line charges a principal & interest rate. Business lines of credit do have a credit limit that cannot be exceeded without approval. They are not open-ended forever and require renewal either semi-annually or annually to be extended. This business funding option may be used for small purchases and working capital.

Product Overview

Interest Rate: 5.50% Loan interest rate or treasury index plus 1% to 2.5%

Terms: Open revolving line

Fees: Origination fees ranging from 0% to 3% 

Payment: Monthly, bi-Weekly or weekly

Credit Score: Good to excellent preferred. All types considered.

Learn More

  1. Small Business Credit Cards

Business credit cards are open revolving credit lines that charge a principal & interest rate with a limit. A card is issued that can be used for making payments or purchases. Business owners utilize business credit cards in conjunction with other small business financing options. The primary use of this financial product is for the purchase of small items or working capital. This type of loan is popular because of its flexibility and offers small loans for business purposes.

Product Overview

Interest Rate: Introductory loan interest rate starting at 0% up to 28.99% principal & interest

Terms: Open revolving line with a limit 

Fees: $0 to $500 Annual fees

Payment: Flexible monthly

Credit Score: Must have good to excellent credit and deep history

Learn More

  1. Short Term, Small Business Loans

Short term business loans are typically repaid with 6 to 18 months. This small business funding features a lump sum offered upfront with a fixed payback amount calculated using a factor rate over a short period of time. Rates are not principal & interest but a “factor rate” that costs more than traditional loans. Most businesses choose short-term loans when they do not qualify for traditional business funding. Short-term, small business loans charge more for costs, and the payments are more frequent to compensate for the greater risks business lenders take in offering this product. Short-term business loans are popular with small businesses because of the reduced documentation requirements and credit tolerances that are laxer than traditional business loans.

Product Overview

Rates: Factor rates range from 1.09% up to 1.45%

Terms: 6 to 18 months in duration (typically 12 months or less)

Fees: 0% to 5% Origination fees

Payments: Weekly, bi-weekly and in some cases daily 

Credit Score: All types considered 

Learn More

  1. Business Cash Advances 

Business Cash Advances (BCA) are also known as the Purchase of Future Sales Agreement that advances future sales at a discount to a business. The business is responsible for paying back a fixed amount known as a specified amount, which is greater than the amount that was advanced to the business. This difference between the advance amount and the payback amount is called the “factor rate or cost.” This is not principal & interest costs. The advance is repaid by taking a fixed percentage of future overall deposits called the specified percentage. The payments are collected by an ACH fixed daily or weekly based on the specified percentage of future sales. 

At the end of every month, reconciliation can occur. If the fixed payments taken are more than the set future percentage of sales, a business owner can request a refund back to the business for overpayment so that the set specified percentage of sales collected for the business matches the revenue volumes. Repayment continues until the payback amount is paid back in full. There is no term limit with advances as the fixed payback percentage changes due to fluctuating revenue. Business cash advances are not loans but advances off of future sales.

Product Overview

Rate: Factor rates range from 1.09% up to 1.45% 

Terms: No term limits. Payments continue until paid in full based on specified percentage collection method and are dependent on future revenues

Fees: Origination fees that range 0% to 5% 

Payment: Weekly or daily

Credit Score: All types considered.

Learn More

  1. Merchant Cash Advances

A Merchant Cash Advance (MCA) is also known as a Purchase of Future Sales Agreement that operates very similarly to BCA’s. The biggest difference is the repayment process, which is connected to future credit card revenues instead of overall sales. MCA’s take a set percentage of future credit card sales at the time of batch of credit cards 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 small business funding is used primarily for working capital needs. Merchant cash advances are not loans but advances off of future credit card sales

Product Overview

Rate: Factor rates that range from 1.09% up to 1.45% 

Terms: No term limits (payoff depends on future credit card sales)

Fees: Origination fees range from 0% to 3%

Payment: Fixed percentage of future credit card revenues

Credit Score: All types considered.

Learn More

  1. Equipment Financing

Businesses that use equipment to operate often turn to equipment loans for the purchase of equipment that uses the equipment as collateral. Business owners must have very good to excellent credit, but limited paperwork is necessary to get approved. 

Product Overview

Rate: Factor rate ranging from 1.09% up to 1.45%

Terms: 2 to 7 years

Fees: Origination fees range from 0% to 3% 

Payment: Weekly or daily 

Credit Score: All types considered.

Learn More

  1. Invoice Financing

Invoice financing advances the outstanding balance to a business owner to increase the speed of cash flow to the business. This solution provides cash quickly, and there is no need to wait for outstanding invoices to be collected and received by the client. Invoice financing has affordable costs ranging from 1% to 2.5% fee off of the face value of the invoice advanced.

Product Overview

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: Credit of the clients need to be favorable, NOT the business owner advancing off invoices.

Learn More

  1. Purchase Order Financing

Purchase order financing offers businesses the ability to raise capital to pay suppliers upfront for verified purchase orders. Purchase order loans will finance an entire order or a portion of it, depending on the purchase order funder. When the supplier is ready to ship the order, the purchase order financing company collects payment directly from the customer. The purchase order funder will subtract their fees and then send the balance of the invoice to your business. 

Product Overview

Rate: None 

Terms: No term limits 

Fees: 1% to 3% fee for each purchase order. Monthly service fees depending on volume may also apply.

Credit Score: All parties need favorable business credit history but all credit considered

Learn More

Different Types of Business Loan Originators That Offer Business Funding

  • Traditional banks (Bank of America, Wells Fargo, Chase, etc.)
  • Credit Unions
  • Business Lenders (Fintech) or Online Lenders
  • Business Originating Marketplace’s
  • Business Loan Broker’s
  • Long-Term Business Lenders
  •  Equipment Financing Companies
  • Invoice Factoring Companies
  • Alternative Lenders
  • Private Business Lenders
  • Hard Money Business Lenders
  • Commercial Real Estate Lenders 

Every business originator differs in terms of what products and services they offer, so it’s important to ask what type of business finance products they offer upfront to see if they can provide you the best options available in the business finance marketplace.

Frequently Asked Questions

Where Do I Find a Small Business Loan Originator? 

It is not difficult to find or obtain business funding. A simple google search for “Business Loan Broker” or a specific product you are looking for like “small business loan”, “long-term business loan” will do the trick and provide many options. Another option is any recent mail offerings that you may have received and saved. 

Should I Pay Any Fees Upfront Fees to a Small Business Loan Originator?

You DO NOT need to pay upfront fees to get most business loan products. Keep in mind, business funders and/or business lenders will charge fees that are deducted from proceeds at the time of funding. Always check the terms and conditions of all business financing you are considering.

What Are Small Business Loan Rates in 2020?

The rates and origination fees can vary widely between business loan offers. The key is to shop and compare, so you know you are getting a competitive offer.

Can I Qualify for a Small Business Loan If I Have Bad Credit?

Yes, you can get approved for business funding if the business owner’s personal credit is considered bad credit. Be aware that options will be affected by your credit risk and what can be offered to you.

If I Am a Start-Up Business, Can I Get a Small Business Loan?

Yes and No. It depends if the business loan broker is connected with SBA loan offerings or private business loan investors. If they are, then yes, they may be able to help you secure a “Start-Up” business loan.

Can Small Business Owners Trust a Business Loan Originator With Their Personal and Business Information? 

If you do a proper check, then you have taken the necessary precautions to consider your data safe and secure. Remember, there are no guarantees, so always use credit monitoring services and take the security steps to always protect your personal data and information.

Additional Resources

U.S. Small Business Administration Business Guide[link] https://www.sba.gov/business-guide

U.S. Small Business Administration Coronavirus (COVID-19): Small Business Guidance & Loan Resources and Coronavirus Funding Options [link] https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

The Bottom Line: Advice and Tips About Applying for a Business Loan for My Small Business

Whether it’s a Business Loan Broker, Direct Business Lender, or a Business Finance Marketplace Platform, it’s important to ask questions and do your research about the business loan originator you are choosing.

 As a business owner, always ask yourself the key questions when getting a business loan for your business. What types of business financing products are offered? Does the Business Loan Originator have the experience and knowledge to assist me in finding the best product for my needs? Does the business loan originator not only have great customer service on the origination of my loan but also on the processing, funding, and servicing of my loan on the back end? 

Always start by asking, Why do I need the money? How am I going to put it to good use for the business? Have I been given all business financing options in the marketplace? Am I getting competitive rates, costs, and terms for my situation and credit profile? Have I done my cost verse benefit analysis for borrowing money for the business?

Always check your proposals and agreements for terms and conditions, which should include the cost of money (interest rate or factor rate), all closing or funding fees, term duration, payment frequency, personal or business guarantees, and any collateral requirements. If you ask the tough questions of yourself, you will be better armed to make great decisions.

How to Apply for a Business Loan Using Advancepoint Capital’s Marketplace

Applying for a loan with AdvancePoint Capital is as simple as 1, 2, 3. Let AdvancePoint Capital help you get the business finance option that fits your needs. Start with this online form, then fill out the short application page, wait a few hours for your approval, and then get your money!

The fast, convenient, and straightforward way to get approved and get the money you need for your business – now! Get your quote today by filling out our simple form. 

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