Learn how to borrow funds for your business while keeping your costs down.
Deciding to get a business loan, whether your business is established or a startup, is a big financial decision. A loan can give you access to funds to keep your business growing. It’s important to determine whether your business can actually afford the loan or not. There are a range of business loans, each with different interest rate and fee structures, which can make it hard to compare costs. In this guide you’ll learn how to compare business costs so you can make an informed decision. Most business loan lenders require you to have been in business for at least a year and meet certain revenue criteria. If you have a newly established business, check out our guide on startup loans.
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- Requirements: $50,000+ annual revenue, 1+ years in business
How much does a business loan cost?
The cost of a business loan depends on the lender and the product for which you are approved. A business loan that is less risky for a lender, such as a loan secured with real estate, is likely to come with a lower interest rate and lower fees. Loans that are more flexible, such as lines of credit, or that are higher risk, such as unsecured loans, tend to come with higher rates and fees. Read further to see a breakdown of typical business loan fees and rates.
What fees can I expect to pay for different types of business financing?
| Financing type | Typical fees |
|---|---|
| Business credit card |
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| Business vehicle financing |
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| Cash-flow lending |
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| Equipment financing |
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| Invoice financing |
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| Line of credit |
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| Merchant cash advance |
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| SBA loan |
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| Short-term business loan |
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| Term loan |
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| Trade financing |
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Compare business loans from top lenders
Rates last updated October 19th, 2018
What fees can I expect with a business loan?
Lenders charge various fees, so keep an eye out for any of the following when you apply:
- Origination fee. Expect to pay: 1% to 5% of your loan amount.
Lenders charge origination fees to cover the costs of processing your loan application including verifying information, credit checks and administrative expenses. They typically take your origination fee directly out of your loan amount, so you’ll want to calculate how much you need to apply for to get the amount you want after the origination fee is subtracted. - Withdrawal fee. Expect to pay: $1 to $4 per withdrawal.
If your loan is issued with a Visa or debit card, you may pay a fee for every transaction executed with your card, especially if you’re withdrawing from another bank’s ATM. - Wire transfer fee. Expect to pay: $10 to $20 per transfer.
This fee is meant to cover the extra cost of sending a payment via wire transfer rather than direct debit. - Late payment fee. Expect to pay: Either $10 to $35 or between 3% and 5% of the amount due.
Lenders usually charge a fee if a repayment is late, typically after a grace period of 10 to 15 days. Read the terms of your loan to learn about your lender’s policy on late payments. - Nonsufficient funds (NSF) fee. Expect to pay: Either $10 to $35 or between 3% and 5% of the amount due.
Lenders charge NSF fees if you set up autopay or otherwise authorized them to withdraw an amount from your account that is doesn’t have. It’s typically the same as your lender’s late fee. - Prepayment penalty. Widely varies.
If you settle the whole balance before the end of the loan term or make early repayments, you may be charged fees. Prepayment penalties widely vary depending on your loan type and lender. They can either come as a flat fee, a percentage of the amount you owe or change depending on how much is left in your loan term. Find out which business lenders don’t charge prepayment fees. - SBA guarantee fee. Expect to pay: $0 for loans of $150,000, 0.25% for loans over $150,000 with a term of one year or less, 3% for loans $150,000 to $700,000 with a terms over one year and tack on another 0.25% for loans where the SBA guarantees a portion worth over $1 million (85% of the loan amount).
The Small Business Administration (SBA) requires all lenders to pay a fee, which some choose to pass off to borrowers. The SBA charges it in exchange for a government guarantee — essentially taking responsibility for the loan if it goes into default.
What interest rates are charged on a business loan?
Depending on your loan type, you could be charged any of the following interest rates:
- Fixed interest rate. This rate remains the same for your whole loan term, which in turn keeps your repayments the same.
- Variable interest rate. Your interest rate fluctuates throughout your loan term and your repayments can change.
- Factor rate. This is a decimal figure that is essentially a payment multiplier. The interest does not compound and is charged to the principal loan amount. It’s often applied to unsecured, short term business loans.
- Monthly fee. This type of cost structure may be used by invoice financing and factoring companies. The monthly rate is a percentage and is charged to the value of the invoices submitted.
Beginner’s guide to business loan interest rates
What should I keep in mind when comparing business loan costs?
Taking the time to compare business loans will help you narrow down the loan options available, as well as the lenders most likely to approve your application. Make sure that your business is able to afford repaying a loan before submitting an application. Besides the associated fees, don’t forget to evaluate the basics, such as loan amount and loan term. Check out our guide on business loans for more tips on how to compare your options.
Find out if business loan interest is tax-deductible
How much fee will it cost me to get a business loan of $50,000 to $100,000?
Hi Crossfaith,
Thanks for contacting finder, a comparison website and general information service.
The fees associated with a business loan depends on on the lender and the product for which you are approved.
On the page you’re viewing, we have a table in which you may go to each lender’s page by clicking the “Go to site” and “More” so you can compare the lenders and so you can make a sound decision on which option that would best suit your needs.
I hope this helps.
Best regards,
Judith