Small business loans can serve as a critical engine to get your venture up off the ground. Whether you are expanding your operations, acquiring a physical space, or making an investment in working capital, there are many rates and lending options available for your business.
While the average interest rates of small business loans vary depending on the type of lending and loan you are looking for, it’s essential to know the available options for you before committing to one.
What Are Average Small Business Loan Rates?
To get the most out of your funding for your business, knowing the ins and outs of various small business loan types and rates is essential.
Loan rates will be dependent upon the type of loan for which you are applying. There is also some variation depending on the amount you need and the specific terms.
The truth is that small business loan rates from alternative lenders can also be higher than traditional bank loans. However, there's a tradeoff: while some business owners may not qualify for financing through a traditional lender, an alternative lender can fill that gap.
Alternative lending can also offer more convenience and flexibility in terms. Plus, recent data shows that as of January 2021, alternative lenders had a significantly higher approval rate for small business loan applications. If you're in need of a loan right away, an online lender could be the perfect solution.
While it's always crucial to read the terms thoroughly, it's easier than ever to secure an excellent business loan rate with an alternative lender.
Average Small Business Loan Rates
The average small business loan involves an interest rate somewhere between 2 percent and 13 percent. An SBA 7(a) loan has a bit narrower range; from 5.5 percent to just over 11 percent.
Average Small Business Loan Rates from Alternative Lenders
A rate under 13 percent sounds doable for many businesses. But how do those rates compare to average small business loan rates from alternative lenders? It's possible to take out a loan via an alternative lender for as little as 7 percent interest. Rates can also range up to as much as 100 percent in some cases, though.
Finding the best rate involves knowing your terms, understanding the rate and other fees, and choosing the right lender. Rates can vary between 5.99 to 35.99 percent depending on the lender.
To get the best possible deal, it's worth connecting with a lender you can trust and building a working relationship with them. Determining how much you may qualify for, as well as whether you meet the lender's qualification criteria in the first place, is an excellent first step toward securing the financing you need.
Using a Small Business Loan Calculator
Utilizing a small business loan calculator enables you to outline a clear strategy for incoming funds. You can gain access to different types of these tools online, including SBA loan rate calculators. Once you define your budget and how much you are willing to pay per month or year, you can use the small business loan rates calculator.
You will need to input these three crucial elements:
- Annual interest rate
- Loan term in months or years
- Loan amount
The result will display the number of your monthly payments, including the interest paid on the principal loan. Many calculators will also outline a detailed amortization schedule, which shows a full monthly payment schedule leading to the last day when the loan gets paid off.
Do I Qualify for a Small Business Loan?
The process required to qualify for a small business loan can present many challenges. There are five components that traditional banks will examine closely to evaluate your eligibility.
- Capital – making sure you have enough for a quality down payment is critical for gaining approval.
- Current income – your business's cash flow or income is a determining factor in your ability to repay any borrowed funds.
- Credit history – much like other forms of financing, your credit history and score will play a key role in your acceptance rate with your application.
- Collateral – it is important to note that your personal property may become collateral for the loan approval process.
However, alternative lenders tend to have less restrictions when it comes to applying for a small business loan. Down payments are rarely required, credit score isn't typically a factor and there programs that do not require collateral or a personal guarantee.
Where to Apply for a Small Business Loan
When you start searching for places to apply for a small business loan and rates, you will find a wide range of financial institutions from which to select. The first place to start is an online lender; you can access financing options almost immediately.
Online lending has more lenient lending options than your local financing institutions, and are typically faster in their approval and funding process. They also require less paperwork.
Small Business Loans are also available at:
- Local banks
- National banks
- Online lenders
- Credit unions
Your business provides value to the world, and it deserves the funding to take it to the next level. If you are looking for the best solutions for business loan options? Apply today and start your journey to finding the best small business loan rates today for your business.
About the Author, Madison Taylor
Madison Taylor is the Brand Ambassador at ROK Financial. She is responsible for raising brand awareness and business relationships with business owners across the country. Madison loves that she plays a small role in getting Business Back To Business Through Simple Business Financing and looks forward to hearing what you think about the blogs she creates! Madison has been working in the financial space for six years, and loves it! When she is not at work, you will find her at home learning a new recipe to test out on her family or going on new adventures with her friends.