Discover the most popular questions in Business banking
What are business loan rates?
Business loan rates are the interest rates which need to be paid to the lender when a business loan is subscribed by a company. Business loan rates are usually annual percentage rates, and can range anywhere between 5% and 20%, depending on the type of loan subscribed, the size of the facility, the lender, and the borrower. Business loan rates can be affected by three main factors related to the business borrowing the funds: type of business, capacity and collateral.
Business loan rates will depend on business specifics, because these specifics affect the borrowing capacity and collateral. Borrowing capacity refers to how much money a business can borrow, and this depends on how much money a business has left after it has paid its monthly liabilities. Borrowing capacity, and therefore, business loan rates will also depend on how many years a business has been making profits - it will be hard to get a business loan at all if it hasn’t been at least three years. Business loan rates also depend on the type of business, as some are riskier than others.
But rates will also depend on specific characteristics of the loan, as unsecured business loans, for example, carry much higher interest rates than secured business loans.
Finally, the very financial situation of the business owner or owners, his, her or their credit history, also makes a difference, as a director’s guarantee is often required by lenders to issue any kind of business loan.