What Is The Average Small Business Loan Interest Rate?

The time has come for you to fulfill your destiny and feed your entrepreneurial spirit. You are going to follow your heart and live the dream of running your own company. There’s only one snag… Who is going to fund this dream? For every problem, there is a solution. There are a multitude of lending companies, both large and small, that can potentially help. With so many options however, there are many business owners that are overwhelmed with the wide range of rates, terms and agreements.

If you are in need of a commercial loan, but don't know which products to choose, the Halo Capital Group can help. We are a network of lenders and investors whose goal is to provide business owners with the best financing solution for their specific circumstance. We will match you with reputable and affordable lenders that align with your goals. For more information, fill out the form to the right and a loan specialist will quickly be in touch to discuss your options.

What is the Average Interest Rate on Business Loan?

So, what is the average interest rate exactly? The average interest rate on a business loan is what the banks, and other lending institutions, will charge you for borrowing money to fund your business. The absolute lowest interest rate a bank will charge is called the prime rate. Business loan rates typically will have a prime rate of 3.25 percent, which been in place since 2009. The lender will tack on an additional two to ten percent after assessing your qualifications. The low prime rate is typically given to clients with the lowest chance of defaulting, like large corporations with strong cash flow. So be prepared to repay your loan at a higher rate percentage than average commercial loan rates if you bring a lot of risk to the table. Things such as bad credit, previous bankruptcies and current debts will all make your business riskier to lenders.

What is the Average Small Business Loan Amount?

Careful consideration should also be given to how much you will need to fund your business venture. The average amount in the banking industry is around $130,000, but as time passes and the economy changes, so do the needs of individuals looking for the average small business loan. Whether you want to start the next blockbuster app development company or expand your bed and breakfast, be prepared to divulge an abundance of information in order for lenders to approve your business loan. Have your business plan ready and your personal finances in order as well, as some institutions look for your business to have been profitable for two to three years and your personal credit score to range between 660 and 850 to offer the average interest on business loan.

Average Business Loan Terms

As potential lenders evaluate your financial health, they will use the information to determine the terms and conditions of your loan. These terms will go beyond stating the rate, which may be above or below the average business loan interest rate. The terms will also establish how the loan will be repaid along with what will be needed to secure funding. Many lenders may require you to put up collateral; either from your business’ assets or your own personal ones, like your house or car. However, there are many alternative lending institutions that don't require collateral if you have been profitable for some time. Some institutions may also limit the amount of financial commitments you can take on. Typically, a larger loan amount will have a rate lower than the average business loan rate. This is because smaller loans will be repaid at a faster rate than larger loans.

Average Interest Rate for Small Business Loan vs. Large Business Loan

So what is the average small business loan interest rate? The average interest rate on small business loan is often between six to eight percent at most banks. Loans less than $100,000 have an average business loan interest rate of seven to eight percent, while loans higher than that carry an interest rate between six and seven percent. However, some institutions will require business profits to be set aside, along with collateral and a significant down payment. Not to mention, the rigorous screening process to get approval for the loan itself. But once you are approved and have your capital, make sure to pay it back on time according to your loan terms.

What is the Length of an Average Business Loan?

Time is almost always on your side when contemplating the average length of business loans. While it’s fairly uncommon for the average small business loans to exceed seven years, some loan terms may extend far beyond that. Intermediate term loans are for three years or less and are usually repaid in monthly installments from your business’ cash flow. Long term loans stretch between three to ten years, and can even spread to twenty.

So you have a dream to start a business. Improve your chances for approval by having everything in order before you approach any banks or lending institutions for funding. You will, more than likely, have to start your business prior to seeking lending options so that you can attain assets for your company as well as establish a history of profitability. Lenders want to be assured that their clients will not default on their loans and are more likely to offer you an amount below the average commercial loan rates. Also, be sure to do your due diligence and research the average small business loan interest rate, as well as the average length and amounts in order to have the best information available to better negotiate the terms. You can also consider a lender who offers loan options for businesses that may not have the assets or collateral.

 

 

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