Interest rates are one of the most significant factors in the cost of a business loan. In 2025, bank term loans average between 6.7% and 7.8% for borrowers with top-tier credit, according to the Federal Reserve. Other business loans, like short-term working capital loans, can reach 150% APR or more.
With such a wide range, it’s hard to know if you’re getting a good deal unless you understand typical rates by loan type. Below, we break down average business loan rates and how to qualify for the most competitive offers.
When it comes to business loan interest rates, there’s no “one size fits all.” In fact, the range of rates available for small business loans varies so much that it makes more sense to break down the rates by the type of business loan.
Of course, other factors affect your rate, like your credit score, revenue, collateral and time in business.
When evaluating business loans, always compare APRs, not interest rates, to calculate how much your loan will cost. The APR includes both the loan’s interest rate and any applicable fees, so it shows the total cost of borrowing better than just the interest rate.
Since some business loans come with fees rather than interest, let’s take a look at how average APRs compare for the most common loan types. Keep in mind that lenders can vary widely in how much they charge, and the rate you qualify for depends largely on your credit score and business financials.
| Type of loan | Interest rate |
|---|---|
| Bank term loan | 6.78% to 10.43% |
| Online business loan | 8% to 75% |
| Business line of credit | 8% to 60%+ |
| SBA loans |
|
| Equipment financing | 5% to 25%+ |
| Merchant cash advance | 25% to 250%+ |
| Invoice factoring and financing | 13% to 60% |
In general, bank term loans have the most competitive rates, especially for existing customers, while short-term working capital loans from online lenders tend to have the highest rates.
While the Small Business Administration (SBA) establishes the maximum interest rates that lenders can charge for SBA loan programs, these rates are largely based on the Prime Rate or US Treasury security rates and the underwriting guidelines of the lender, and they come with rate limits.
For SBA 7(a) variable loans:
| Loan amount | Maximum rate |
|---|---|
| $50,000 or less | Base rate + 6.5% |
| $50,001 – $250,000 | Base rate + 6% |
| $250,001 – $350,000 | Base rate + 4.5% |
| $350,001+ | Base rate + 3% |
SBA 7(a) loans can have either fixed or variable interest rates.
SBA 504 loans have fixed interest rates that are pegged to yields on 10-year US Treasury securities, plus a margin. Rates for SBA Microloans and Community Advantage loans are also subject to SBA maximums but vary depending on the lender.
A business loan interest rate is the cost of borrowing, expressed as a percentage of the loan amount that your lender charges regularly. There are two types of interest rates: Fixed or variable. There are also two types of interest calculations: Simple or compound.
Here’s a rundown of the differences, plus an explanation of how a business loan’s interest rate differs from the annual percentage rate (APR).
Some business loans combine both fixed and variable rates during the term, though these are less common.
Unlike an interest rate, the APR includes both the interest and fees of a given loan, as a percentage, that applies to your loan per year. Lenders often advertise a loan’s APR, instead of its interest rate. That’s because it’s a more accurate picture of how much your loan will cost.
When comparing APRs, make sure you’re also comparing loans with similar terms and amounts. For example, a loan with a 100% APR and a six-month term might actually cost less in the long run than a loan with a 15% interest rate and a five-year term.
Here’s a list of the main factors that affect your business loan interest rate:
Here are 6 tips to follow to get the lowest rate possible on your loan:
While rates are an easy way to compare loans, they’re not the whole picture. In addition to the interest rate, these fees may also apply to certain loans.
| Fee | Typical range | When it applies |
|---|---|---|
| Origination fee | 1% to 10% of the loan amount | Not all lenders charge an origination fee, but if it applies, it’s typically deducted from your funds before you receive them. |
| Referral fee | Varies | Some business loan connection services charge a referral fee if you get funded by a lender through their service. |
| SBA 7(a) and 504 guarantee fees | 0% to 3.75% of the guaranteed portion of the loan | This fee is either added to your SBA loan amount or deducted from your funds before you receive them. Some borrowers may qualify for a waived SBA guarantee fee. |
| Closing costs | Varies | Loans like SBA loans and commercial real estate mortgages often come with closing costs, such as appraisal fees, loan-packaging fees and others. |
| Late fee | Typically between $10 and $35 or 2% to 5% of your loan amount | A fee charged if you miss a payment. Many lenders have a grace period of around 15 days before the late fee applies. |
| Nonsufficient funds fee | $15 to $35 | A fee charged if your bank account doesn’t have enough funds to cover your loan payment. |
| Withdrawal fee | $1 to $4 per withdrawal | A cost for using your credit or debit card, if your loan is issued using a card — especially if you’re withdrawing from another bank’s ATM. |
| Prepayment penalty | Varies | Some SBA loans and commercial real estate loans have prepayment penalties if you pay the loan off within a certain timeframe. |
| Wire transfer fee | $15 to $35 | Covers the extra cost of sending a payment via wire transfer. |
Because there are so many flavors of business loans, there’s really no such thing as an average business loan interest rate. But knowing the general range of rates you can expect on a specific type of loan or from a specific lender can help you find the best small business loan for your situation.
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