How much does a business loan cost? | finder.com

How much does a business loan cost?

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Not sure what to expect when it comes to business loans? Here’s what you might pay.

A loan can make the difference when you’re looking to expand your business. Knowing the costs your business will face can help you make a smart decision. If you aren’t sure how to calculate them or what you should be looking for, start by comparing the interest rates and fees each lender charges. Just be aware that these will vary widely between lenders, so you’ll have to be prepared for a long comparison process before you start applying.

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    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 will remain 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

    Financing typeTypical fees
    Term loan
    • Annual
    • Origination
    • Documentation
    • Check processing
    • Late payment
    • Prepayment
    • Returned payment
    Line of credit
    • Annual
    • Cash advance
    • Draw
    • Origination
    • Late payment
    • Maintenance
    • Renewal
    • Returned payment
    SBA loan
    • Check processing
    • Origination
    • Guaranty
    • Late payment
    • Packaging
    • Prepayment
    • Returned payment
    Equipment and vehicle financing
    • Annual
    • Application
    • Documentation
    • Origination
    • Check processing
    • Late payment
    • Prepayment
    • Returned payment
    Business credit card
    • Annual
    • Balance transfer
    • Cash advance
    • Check processing
    • Exceeded credit limit
    • Foreign transaction
    • Late payment
    • Returned payment
    • Reward program
    Short-term business loan
    • Application
    • Check processing
    • Documentation
    • Origination
    • Late payment
    • Prepayment
    • Returned payment
    Cash-flow lending
    • Annual
    • Application
    • Check processing
    • Documentation
    • Origination
    • Late payment
    • Monthly
    • Prepayment
    • Returned payment
    Invoice financing
    • Discount
    • Documentation
    • Origination
    • Factoring
    • Late payment
    • Monthly
    • Prepayment
    • Processing
    • Returned payment
    • Service
    Merchant cash advance
    • Annual
    • Application
    • Documentation
    • Origination
    • Factor
    Trade financing
    • Commission
    • Documentation
    • Origination
    • Excess drawing
    • Handling
    • Issuance
    • Monthly
    • Negotiation
    • Withdrawn application

    Compare business loans from top lenders

    Rates last updated December 13th, 2018
    Unfortunately, none of the business loan providers currently offer loans for these criteria.
    Name Product Product Description Min Loan Amount Max. Loan Amount Requirements
    LoanBuilder, A PayPal Service Business Loans
    Customizable loans with no origination fee for business owners in a hurry.
    $5,000
    $500,000
    Annual business revenue of at least $42,000, at least 9 months in business, personal credit score of 550+.
    Lendio Business Loan Marketplace
    Submit one simple application to potentially get offers from a network of over 75 legit business lenders.
    $500
    $5,000,000
    Must operate a business in the US or Canada, have a business bank account and have a personal credit score of 560+.
    LendingTree Business Loans
    Multiple business financing options in one place including: small business loans, lines of credit, SBA loans, equipment financing and more.
    Varies by lender and type of financing
    Varies by lender and type of financing
    Varies by lender, but you many require good personal credit, a minimum business age and minimum annual revenue.
    Credibly Business Loans
    Funding to cover business expenses with daily or weekly repayments.
    $5,000
    $250,000
    500+ personal credit score, 6+ months in business, $15,000+ average monthly deposits
    National Funding Small Business Loans
    Working capital loans and equipment financing, some high-risk industries may be eligible.
    $5,000
    $500,000
    Be in business at least one year and make at least $100,000 in annual sales. Other loan types have additional requirements.
    LendingClub Business Loans
    With loan terms that vary from 1 to 5 years, enjoy fixed monthly payments and no prepayment penalties through this award-winning lender.
    $5,000
    $300,000
    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
    OnDeck Small Business Loans
    A leading online business lender offering flexible financing at competitive fixed rates.
    $5,000
    $500,000
    500+ personal credit score, 1+ years in business, $100,000+ annual revenue
    Fora Financial Business Loans
    No minimum credit score requirement and early repayment discounts for qualifying borrowers.
    $5,000
    $500,000
    Business age 6+ months. Monthly revenue $12,000+. No open bankruptcies.

    Compare up to 4 providers

    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: $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?

    The type of loan your business needs will influence how the interest rate is charged. Of course, 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.

    Beginner’s guide to business loan interest rates

    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.

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    2 Responses

    1. Default Gravatar
      CrossfaithOctober 16, 2017

      How much fee will it cost me to get a business loan of $50,000 to $100,000?

      • finder Customer Care
        JudithOctober 16, 2017Staff

        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

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