How much does a business loan cost?

How much does a business loan cost?

There are two factors that impact how much a business loan costs: the interest you’re charged to borrow a loan and the fees that you need to pay before, during and after the loan process. The combine to create the annual percentage rate (APR), which is the cost of your loan for every year you have a balance.

Interest rate

Interest rate is almost always the main cost of your loan and will depend on a variety of factors. The major influence will be whether your loan has a fixed or variable interest rate. A fixed interest rate remains the same over the life of your loan, while a variable interest rate changes with the market, though lenders usually have a minimum base interest rate you’ll be charged.

The collateral you provide with your loan will also play a role. Unsecured loans, or loans that don’t require any collateral, will generally have higher interest rates than secured loans. This is because lenders face a higher risk when giving out unsecured loans. If you fail to repay, it won’t be able to take the collateral and sell it to recoup its losses.

Your business’s credit score — and your own, if your business is new — will also impact your loan. So will your business plan, revenue, industry and the type of loan you’re seeking. Compare business loan rates to be sure you know the general range lenders charge for interest.

Common fees

Compare business loans from top lenders

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Name	Product	Filter Values	Loan amount	APR	Requirements
First Down Funding business loans			$5,000 – $300,000	Fee Based	At least 1 year in business, an annual revenue of $100,000+, and a minimum credit score of 400	Alternative financing up to $300K with highly competitive rates.	Check eligibility More Info		loading Fetching your data...
Lendio business loans			$500 – $5,000,000	Starting at 6%	Operate business in US or Canada, have a business bank account, 560+ personal credit score	Submit one simple application to potentially get offers from a network of over 300 legit business lenders.	Check eligibility More Info		loading Fetching your data...
ROK Financial business loans			$10,000 – $5,000,000	Varies	Eligibility criteria 3+ months in business, $15,000+ in monthly gross sales or $180,000+ in annual sales	A connection service for all types of businesses — even startups.	Check eligibility More Info		loading Fetching your data...
OnDeck small business loans			$5,000 – $250,000	As low as 9.99%	600+ personal credit score, 1 year in business, $100,000+ annual revenue	A leading online business lender offering flexible financing at competitive fixed rates.	Check eligibility More Info		loading Fetching your data...
Rapid Finance small business loans			$5,000 – $1,000,000	Fee based	Steady flow of credit card sales, bad credit OK	Check eligibility More Info		loading Fetching your data...
Fundbox business loans			$1,000 – $100,000	4.99	You must have an established business.	Get flat rate, short-term financing based on the financial health of your business, not your credit score.	Check eligibility More Info		loading Fetching your data...
Kickpay e-commerce business loans			$20,000 – $1,000,000	Not applicable	At least $250,000 in the past 12 months of revenue, e-commerce business, use a 3rd party fulfillment center for storing and shipping inventory, at least one US location.	Get a loan for your e-commerce business based on your sales history.	Check eligibility More Info		loading Fetching your data...
LendingClub business loans			$5,000 – $500,000	12.15% to 29.97%	12+ months in business, $50,000+ in annual sales, no bankruptcies or tax liens, at least 20% ownership of the business, fair personal credit score or better	With loan terms that vary from 12 to 60 months, enjoy fixed monthly payments and no prepayment penalties through this award-winning lender.	Check eligibility More Info		loading Fetching your data...
Monevo business loans			$500 – $100,000	3.99% to 35.99%	Credit score of 500+, legal US resident and ages 18+.	Use this connection service to get paired with a loan you can use for business.	Check eligibility More Info		loading Fetching your data...

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7 typical business loan fees

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. Prepayment penalty. Expect to pay: Cost varies widely.
   If you settle the whole balance before the end of the loan term or make early repayments, you may be charged fees. Prepayment penalties vary widely depending on your loan type and lender. They can come as a flat fee, a percentage of the amount you owe or change depending on how much is left in your loan term. But don’t worry — some lenders don’t charge prepayment fees.
7. SBA guarantee fee. Expect to pay: Up to 3.75% of the guaranteed portion, depending on the loan amount, term and program.
   The Small Business Administration (SBA) requires all lenders to pay a fee 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?

The type of loan your business needs will influence how the interest rate is charged. There are plenty of things to know about interest before you get started, so read up on them before you start the borrowing process.

• Fixed interest rate. This rate remains the same for your whole loan term, which in turn keeps your payments the same each time they’re due.
• 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.

You may be able to deduct the cost of interest from your income

Bottom line

Taking out a business loan is a big step. By calculating the cost of your loan options, you’ll be in a good position to make a smart borrowing decision that will benefit your business for years to come. However, there are a number of other factors that you need to consider when borrowing a business loan. Read up on how business loans work so you know exactly what to expect when you apply.

Frequently asked questions

• What is the current interest rate on a business loan?

  Unfortunately, there is no set interest rate for a business loan. It will depend on the type of loan you’re looking to get, the security you provide and how the interest is calculated. You can view the comparison table above to see the starting rates for some lenders.

• How can I compare business loan costs?

  The tool most businesses use to compare loans is the APR. This gives an overall view of the cost of each loan per year, which makes it an excellent comparison tool. You should also make sure the fees you’re being charged, as well as the loan amount and term, suits your business’s needs. And with every comparison, make sure your business can afford the monthly repayments before signing on for a loan.

• How long can you get a business loan for?

  Business loan terms can be as long as ten years or as short as one month. It all depends on the type of loan and the lender you choose to work with.

• How much will a $100,000 business loan cost?

  The cost of a $100,000 business loan will depend on your repayment terms, your business’s qualifications and the lender’s rates. However, our guide on business loans of $100,000 can give you a good idea on what to expect as far as costs are concerned.