Small Business Loan Interest Rates Explained
Current Rate Ranges by Lender Type
Rates vary dramatically across lender categories. Here are the realistic ranges for 2026 based on the current prime rate environment.
Bank term loans: 6% to 13% APR. The lowest rates in business lending, reserved for borrowers with 700+ credit scores, 2+ years in business, strong revenue, and often an existing banking relationship. Bank loans also have the strictest qualification requirements and slowest approval timelines (2 to 8 weeks).
SBA 7(a) loans: 10% to 13% APR. SBA rates are capped at the prime rate plus a spread (prime + 2.25% to 2.75% for most loans). With the prime rate at 7.5% in mid-2026, the maximum SBA rate is approximately 10.25%. Some lenders offer slightly above this for higher-risk borrowers. SBA loans offer the best combination of reasonable rates and accessible qualification standards.
SBA microloans: 8% to 13% APR. Slightly wider range than 7(a) because intermediary lenders set their own rates within SBA guidelines. The higher end reflects the smaller loan amounts and higher administrative cost per dollar lent.
Business lines of credit (bank): 7% to 15% APR. Variable rates tied to the prime rate, with the spread based on your credit profile and relationship with the bank.
Business lines of credit (online): 10% to 80% APR. The wide range reflects the diversity of online lender risk profiles. BlueVine starts at 6.2%. Fundbox starts at 4.66% for 12-week terms (which annualizes to roughly 20% to 25%). American Express charges monthly fees that translate to 18% to 108% effective APR depending on the fee tier.
Online term loans: 15% to 80% APR. OnDeck starts at 29.9%. Funding Circle starts at 7.49%. The range depends heavily on your credit score and business strength.
Revenue-based financing: 12% to 40% effective APR. Quoted as flat fees (6% to 17% of the advance), but the effective annual rate depends on repayment speed. Faster repayment means higher effective APR for the same flat fee.
Merchant cash advances: 40% to 200%+ effective APR. Quoted as factor rates (1.1 to 1.5), which disguise the true annual cost. MCAs are consistently the most expensive form of business financing. See our MCA guide for detailed cost analysis.
Understanding Rate Formats
APR (Annual Percentage Rate) is the standardized rate that includes both the base interest rate and any origination fees, expressed on a yearly basis. APR allows direct comparison between products because it accounts for the total cost of borrowing over a standard time period. Banks, SBA lenders, and most online lenders are required by law to disclose APR, though some bury it in fine print while highlighting more favorable-sounding metrics.
Factor rate is a decimal multiplier applied to the loan amount to determine total repayment. A factor rate of 1.25 on a $40,000 advance means you repay $50,000 total ($40,000 x 1.25). The $10,000 difference is the cost. Factor rates look low compared to APR but are dramatically more expensive than they appear because the cost is calculated on the original amount, not the declining balance. A factor rate of 1.25 on a 6-month repayment period translates to roughly 80% to 100% APR. On a 12-month period, it translates to roughly 40% to 50% APR.
Monthly fee rate charges a percentage of the original loan amount each month, regardless of how much principal you have repaid. A 2% monthly fee on a $30,000 loan costs $600 per month in fees even after you have repaid $20,000 of the principal. This structure means you pay fees on money you no longer owe, inflating the effective cost. A 2% monthly fee translates to roughly 40% to 45% effective APR.
Flat fee is a single percentage charged on the total amount financed. Revenue-based lenders like Clearco and Shopify Capital use this format. An 8% flat fee on $100,000 means you pay $8,000 total, period. The effective APR depends entirely on how long repayment takes. If repaid in 4 months, the effective APR is roughly 24% to 28%. If repaid in 10 months, roughly 10% to 12%.
What Determines Your Specific Rate
Personal credit score is the single biggest factor for most lender types. Each credit tier corresponds to a significantly different rate range. At 760+, you access the lowest rates available from every lender type. At 700 to 759, you pay 1% to 5% above the minimum. At 650 to 699, you pay 5% to 15% above. Below 650, your options narrow to online lenders and alternative financing, with rates reflecting the elevated risk.
Time in business affects rates because newer businesses default at higher rates than established ones. Lenders compensate for this additional risk with higher rates. A business with 5 years of profitable history commands better rates than an identical business with 1 year of history, all else being equal.
Annual revenue and profitability determine both your eligibility and your rate within a lender's pricing grid. Higher revenue means more capacity to service debt, which lowers the lender's risk. Lenders also evaluate revenue trends: growing revenue suggests decreasing risk (and earns better rates), while declining revenue suggests increasing risk (and costs more).
Loan amount and term influence rates through different mechanisms. Larger loans sometimes get volume discounts on rates. Longer terms carry more risk (more time for things to go wrong), so they often command slightly higher rates than shorter terms. However, the relationship is not always straightforward; some lenders offer their best rates on mid-range terms (3 to 5 years) rather than the shortest or longest terms available.
Collateral dramatically reduces rates by reducing lender risk. A secured loan backed by real estate, equipment, or cash deposits might be priced 3% to 8% lower than an equivalent unsecured loan, because the lender has a fallback recovery option if you default.
Industry matters because some industries have higher failure rates than others. Restaurants, retail, and construction are considered higher risk by many lenders and may face rate surcharges. Technology, professional services, and healthcare are generally considered lower risk.
How to Get the Lowest Rate
The most impactful action is improving your credit score before applying. A 50-point improvement in your personal credit score can reduce your rate by 3% to 10% depending on where you start and the lender type. Pay down credit card balances, dispute report errors, and maintain perfect payment history for 3 to 6 months before applying. See our business credit building guide for the complete strategy.
Apply to the cheapest lender type your profile supports. If you qualify for SBA loans, apply there first. If you qualify for bank loans, explore those before online lenders. Each step up in lender accessibility costs 5% to 20% more in APR.
Get multiple quotes and negotiate. Lenders have pricing flexibility, especially for strong borrowers. If you have a competitive offer from one lender, present it to another and ask them to match or beat it. This works best with banks and SBA lenders, where loan officers have pricing discretion. Online lenders use algorithmic pricing with less room for negotiation, but some will match competitor rates for retention.
Offer collateral if you have it. Pledging equipment, real estate, or other business assets as security can reduce your rate by several percentage points. The reduced rate over the life of the loan often saves significantly more than the theoretical risk of losing the collateral.
Borrow when your financials are strongest. If your business is seasonal, apply during or just after your peak revenue period when your bank statements show the highest balances and most consistent deposits. Lenders evaluate recent financial history heavily, so timing your application strategically can influence both approval and pricing.