Average Business Loan Rates for 2026
Understanding interest rates can help you select the best loan option for your business. Learn more about current business loan rates and how they could impact your business in this article.
- The average business loan interest rate ranges from around 7.2% for fixed-rate term loans to 7.8% for variable-rate loans.
- Business loan rates vary widely depending on the loan type, the lender and the business applying for financing.
- Interest rates affect the size of your loan payments and the total cost of the loan, both of which can impact your cash flow and potential business growth.
What are business loan rates & how are they expressed?
Business loan interest rates represent the primary cost of borrowing with a small business loan, line of credit or another type of financing. Rates vary between lenders, loan types and financing agreements. However, you may encounter a few different types of interest rates in your search for financing, including:
- Annual percentage rate (APR). Annual percentage rates are commonly used to measure the full cost of financing, including both interest and fees. An APR on a business loan is usually the best representation of the true cost of borrowing.
- Simple interest rates. Some lenders charge a simple interest rate, also called a flat interest rate, which reflects the total interest you’ll pay without any fees. Keep in mind that the actual cost of the loan will be higher.
- Monthly interest rates. Though less common, some lenders might use monthly interest rates, which represent the interest charged on a monthly basis. Like simple rates, this figure doesn’t include any fees. It can seem deceivingly low, but remember that it doesn’t reflect annual costs.
- Factor rates. Factor rates are displayed as decimal figures, not percentages. They are typically associated with higher-risk business lending, such as merchant cash advances. Converting factor rates to simple interest rates can make it easier to compare loan offers.
Fixed vs. variable interest rates
Interest rates for business loans may be fixed or fluctuate over time.
- Fixed rates: The interest rate doesn’t change during the loan term. Fixed rates are common with business term loans, some SBA loans and equipment financing.
- Variable rates: Interest rates are subject to change during the life of the loan. Variable rates are often associated with business lines of credit, merchant cash advances and some SBA loans.
Budgeting for fixed-rate loans is often easier because your payments stay the same throughout the loan’s term. But variable interest rates are often lower, which could save you money — especially with short-term funding, which can be less likely to be impacted by major market fluctuations.
Current business loan interest rates
| Business loan type | Median interest rates |
|---|---|
| Term loans | Fixed: 7.23% Variable: 7.79% |
| Lines of credit | Fixed: 7.20% Variable: 7.80% to 8.10% |
| SBA 7(a) loans | Fixed: 11.75% to 14.75% Variable: 9.75% to 13.25% |
| Merchant cash advances | 1.10 to 1.50 factor rate |
| Invoice financing | 1.00% to 5.00% factoring fee (also called a discount rate) |
- Term loans: Rates based on second quarter 2025 Federal Reserve data, specifically the median interest rates for new fixed-rate and variable-rate loans.
- Lines of credit: Rates based on second quarter 2025 Federal Reserve data, specifically the median interest rates for fixed-rate and variable-rate LOCs at urban and rural banks.
- SBA 7(a) loans: Rates based on the most recent data from the SBA and the SBA’s FTA Wiki.
- Merchant cash advances: Rates based on our research on merchant cash advances, for which lenders typically charge a factor rate.
- Invoice factoring: Rates based on our research on invoice factoring companies, which charge a factoring fee (or discount rate) in exchange for financing.
Term loans
If you want a lump sum of cash with scheduled repayments, a business term loan could be a good choice. While alternative business loans offer speedy turnarounds and flexible eligibility, they typically charge higher interest rates and offer less attractive terms. Banks tend to have higher underwriting standards, so interest rates tend to be lower and repayment terms may be more flexible.
The median fixed rate on business term loans is currently 7.23%, while variable rates are slightly higher at 7.79%. However, interest rates can vary widely depending on the lender and the applying business. For example, rates on unsecured business loans can range from 4.66% to 40% or higher. Generally speaking, secured business loans offer lower rates than unsecured loans.
Lines of credit
If you prefer more flexibility than you can get with a small business loan, a business line of credit could be a better option. Like a credit card, a line of credit allows you to borrow up to a set limit on an as-needed basis. You only pay interest on the withdrawn amounts, though some lenders may charge additional maintenance or withdrawal fees.
Fixed-rate business lines of credit currently have a median rate of 7.20%. Median costs for variable-rate lines of credit, which are more common, range from 7.80% to 8.10%. But like term loans, interest rates can vary significantly, with unsecured credit lines offering rates from 3.00% to 56.60% or higher.
SBA 7(a) loans
The U.S. Small Business Administration (SBA) partners with financial institutions to provide SBA loans for those who may not qualify for traditional financing. Since the SBA reduces lender risk by guaranteeing a portion of the funds, these loans typically have low interest rates and flexible repayment terms.
The popular SBA 7(a) loan can cover a wide range of business expenses, such as working capital, commercial real estate, equipment and more. Though SBA lenders set their own interest rates, the SBA has rate caps in place to keep costs from getting too high. Maximum interest rates are determined based on the prime rate (currently 6.75%), loan amount and repayment term.
SBA 7(a) variable loan interest rates
| Loan amount | Maximum rate for variable-rate SBA loans Based on the current prime rate of 6.75% |
|---|---|
| $0 to $50,000 | 13.25% |
| $50,001 to $250,000 | 13.00% |
| $250,001 to $350,000 | 11.50% |
| Over $350,000 | 9.75% |
SBA 7(a) fixed loan interest rates
| Loan amount | Maximum rate for fixed-rate SBA loans Based on the current prime rate of 6.75% |
|---|---|
| $0 to $25,000 | 14.75% |
| $25,001 to $50,000 | 14.00% |
| $50,001 to $250,000 | 13.00% |
| Over $250,000 | 11.75% |
Merchant cash advances
A merchant cash advance (MCA) provides a cash advance in exchange for a portion of your future credit and debit card sales. MCAs typically charge a factor rate rather than a standard interest rate. The lender multiplies the advance amount by the factor rate to determine how much you need to pay.
For example, if you borrow $10,000 and the factor rate is 1.30, you’ll owe $13,000, including principal and interest. It’s worth converting this to a simple interest rate to more accurately compare it against other offers. The calculation is as follows:
(Factor rate – 1) x 100 = simple interest rate
Using this formula, a factor rate of 1.10 converts to an interest rate of 10.00%, and so on. Factor rates generally range from about 1.10 to 1.50, but the rate you get can vary based on your credit score and business history.
Invoice financing
Invoice factoring allows businesses to sell their unpaid invoices for a cash advance — typically 80% to 95% of the invoice’s face value. The factoring company then collects money from your customers on your behalf and sends you the remaining balance, minus their fee.
Factoring companies charge a factoring fee — also called a discount rate — per invoice, which can increase the longer an invoice remains unpaid. Factoring rates typically fall between 1.00% and 5.00% per invoice. While fast and convenient, invoice factoring tends to be more expensive than other forms of financing.
Factors that influence business loan rates
Your final business loan interest rate could depend on multiple factors, such as your credit history, business finances and more. The following factors play a role in setting business loan rates.
Type of lender
Traditional banks and credit unions typically have lower starting rates than alternative lenders, though eligibility requirements are stricter. If your business meets the criteria to qualify, you could save on interest costs by going with a traditional lender. Some banks also offer discounted rates for customers with an existing banking relationship.
Loan amount and term
Larger business loans may have lower interest rates because the fixed costs of underwriting and servicing the loan are spread out over a larger period of time.
Loan terms can also impact rates. For example, short-term loans are often provided by online lenders, who may charge higher interest rates in exchange for fast funding to cover emergency expenses.
Creditworthiness
Small business lenders typically consider both your personal and business credit history. If you have yet to build your business credit, lenders may put more stock in your personal FICO Score when reviewing your loan application.
A higher credit score generally leads to a lower interest rate. Some lenders may require a personal guarantee from borrowers with scores below a certain threshold. This can reduce lender risk, making the business owner personally responsible for the debt if the business fails to keep up with its loan payments.
Ability to repay
Your business’s financial standing indicates your ability to repay a business loan, which can impact your interest rate. If a lender perceives you as a high-risk borrower, you would likely receive a higher rate.
Much like credit criteria, small business lenders set specific time in business and annual revenue requirements. Be prepared to share your revenue, cash flow statements and profitability documents. Lenders may also ask for a business debt schedule to better understand your current debt burden — and whether it could impact your ability to repay a new loan.
Collateral
One way lenders lower their risk is by requiring borrowers to pledge collateral. This is the case with secured business loans, which use business assets like equipment, cash savings and real estate as collateral. If the business defaults, the lender can seize the pledged assets to recover some of its losses.
Because collateral reduces lender risk, secured loans typically have lower interest rates than unsecured loans. In some cases, providing collateral may be able to help businesses acquire more favorable rates, though other factors will still play a role.
Market conditions
Economic trends and market conditions can also impact business loan rates. While this factor is entirely out of your control, it’s important to understand how economic fluctuations can directly affect the rates you might receive.
In general, both traditional and alternative lenders are more likely to offer favorable loan rates during periods of strong economic growth and stability. This is because the lender is benefitting from a healthy economy, which provides stronger cash flow, and reduces the risk that they will go into the red if a borrower defaults on their loan.
Fees and other costs
Depending on the loan type, some lenders may charge origination fees, draw fees, prepayment penalties and other added costs, which can increase the total cost of borrowing. Although these fees don’t impact simple interest rates, they are factored into the APR, which represents the cost of the loan including both interest and fees.
How to compare business loan rates
To compare business loan offers, you’ll need to consider several factors. If your top priority is securing the lowest interest rates possible for your business, make sure you look beyond the advertised rate. When possible, use APR to compare the full cost of borrowing including fees.
In addition to the rate itself, here are some things to consider as you compare financing options:
- What is the term length? This impacts the amount of interest you’ll pay over the lifetime of the loan. Though long-term loans give you more time to repay your debt, they often end up costing you more over time — even if they have a lower rate.
- What is the repayment schedule? This can also impact the amount of interest you need to pay. For example, if two lenders have similar rates but one requires daily or weekly loan payments, that loan will likely end up costing you more.
- Is the rate fixed or variable? Variable rates may be lower, but they can fluctuate over time. If you would prefer a set rate and a monthly payment that won’t change, you might be happier with a fixed rate, even if it is slightly higher.
- Are there repayment or draw charges? Depending on the loan type, there could be additional costs that are not included in the APR. For example, lenders may charge a draw fee each time you make a withdrawal from your business line of credit, and they could also charge a processing fee each time you make a payment.
Using a loan calculator can make it easier to assess and compare total costs between lenders.
For instance, let’s say you’re looking to borrow $50,000. Lender A offers you a fixed rate of 8.00% and a loan term of three years. In this scenario, you’ll pay more than $6,400 in interest with a monthly payment of $1,567.
Lender B is offering a fixed rate of 10.00% and a loan term of five years. With this lender, you’ll pay significantly more interest — around $13,741 — but your monthly payment will be lower at $1,062 per month. The right option for you depends on your business finances.
As you compare your options, make sure you also consider factors beyond rates, including the lender’s reputation, the amount of time it will take to receive your funds, and whether you’ll face a prepayment penalty if you decide to pay off your loan before the end of the term.
Strategies to secure lower business loan rates
To improve your odds of getting a more favorable business loan rate, consider the following tips.
1. Offer collateral
Some types of funding may require collateral, such as equipment financing or accounts receivable financing. But even if the lender doesn’t require collateral, offering it could help you receive more favorable business loan rates. As we’ve covered, collateral reduces lender risk, allowing the lender to potentially offer you a lower rate.
2. Improve your personal credit
The higher your credit score, the less risky you may seem to a business lender, which could result in lower-interest financing. It may be a good idea to spend some time working on your credit before you apply for financing. Here are a few ways to improve your credit score:
- Paying down any existing debt, including credit card balances
- Making on-time or early bill payments
- Disputing any errors that appear on your credit report
You can monitor and track your credit score for free with LendingTree Spring.
3. Build your business credit score
While personal credit scores have a fairly standardized rating system, business credit scores vary depending on the company calculating the score. For example, with Dun & Bradstreet (D&B), timely payments to vendors could help you boost your score.
Building your business credit profile can help unlock more competitive rates and terms. You can get started by:
- Opening a business credit card
- Making early payments on bills and loans
- Requesting a DUNS number and asking vendors to report payments to D&B
4. Establish a relationship with a lender
Banks and alternative lenders may be more willing to approve a business loan application if you’ve opened a business checking account with the institution. And if you’ve previously borrowed from the lender and made on-time payments, you could have a good shot at getting a second loan.
Some banks offer rewards programs for members, such as interest-rate discounts if you decide to take out a business loan or line of credit. Although circumstances could prevent you from borrowing and banking in the same place, it’s worth trying to do so if possible.
5. Shop around
Comparing rates can be tricky because most borrowers don’t qualify for the lowest advertised rate. Your final rate will be based on factors like loan amount, credit score, time in business and annual revenue.
The best way to lock in the lowest rate is to apply to multiple lenders and compare your options. This way, you can see exactly what you’ll pay and pick the best offer. You can typically rate shop for 14 days without any further impact to your credit.
You can also compare small business loan rates with LendingTree. Our network includes more than 30 individual business lenders, so you can fill out one simple form to identify and compare lenders that might be a good fit for your business.
What business loan rates could do next
Interest rates are impacted by the federal funds rate in a roundabout way. The Federal Reserve Bank sets this rate, which affects benchmarks like the prime rate, which lenders often use to set loan pricing.
If the Federal Reserve wants to stimulate the economy, it may lower the federal funds rate to make borrowing more appealing. But if the Federal Reserve is worried about rising inflation, it may increase the federal funds rate to curb demand and stabilize the economy.
Though rates were previously holding steady throughout the year, the Federal Reserve cut interest rates by 0.25% in September and again in October and December 2025. During the October meeting, Fed officials indicated that there may be at least one cut in 2026. This means that interest rates could continue to drop over the coming months, though circumstances are subject to change with the economy.
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