Whether you’re looking for financing to help pay for equipment upgrades or to get your new business off the ground, understanding current business loan interest rates and different loan types will help you pick the loan option that’s right for you.

The overall cost of getting a  business loan can vary significantly with various loan options and a range of interest rates.

The right option will depend on how soon you need the money, the interest rate you qualify for, and if your business can afford the payments.

Take a look at the snapshot of current business loan interest rates in September 2025 below, and keep reading for a breakdown of interest rate structures, factors that affect interest rates, and how to understand the true cost of a business loan.

Current small business loan interest rates: September 2025

Loan type Average interest rate (expressed as APR)
Business term loan 10-28%
SBA loan Variable: 10.5-14%
Fixed: 12.5-15.5%
Business line of credit 10-28%
Equipment financing 9.9-24%
Accounts Receivable financing 24-36%
Revenue-based financing 10-40%

*SBA rates are calculated with the current prime rate of 7.5%. Updated September 2025. Interested in an SBA loan? Read our guide to SBA loan interest rates by program type.

How do business loan interest rates work? 

When you borrow money for your business, you don’t just repay the amount you received. You also pay the lender a cost for using that money. That cost is the business loan interest rate, and it's the key number that determines how much financing really costs you.

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Think of the interest rate as the price of capital. A lower rate means you’ll repay less over the life of the loan, while a higher rate can make financing more expensive. However, higher interest rates may also give you faster access to funds, or get you approved with fewer requirements when you’re in a crunch.

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To figure out the basic interest you will pay on a loan if you do not pay it off early, you can use the following equation:

Interest paid formula

Principal of the loan X interest rate X years of term = total interest paid

The term of your loan, the loan type, and the interest rate all affect how much money the funding will cost you, as well as other factors.

Factors that influence business loan interest rates

No two businesses get quoted the exact same loan rate. That’s because lenders weigh several factors when deciding what you’ll pay for capital. The most important factors include:

  • Credit Profile: Both personal and business credit scores matter. A higher score signals lower risk to lenders, which translates into lower rates.
  • Time in Business: Startups or younger businesses often face higher costs because they lack a long track record of stability.
  • Revenue and cash flow: Lenders want to see consistent income. Stronger, predictable revenue can unlock more competitive rates.
  • Collateral: Loans backed by assets, such as commercial real estate, equipment, or receivables, generally carry lower interest rates than unsecured financing.
  • Loan product type: An SBA loan may come in near 11%, while revenue-based financing could cost 30% or more. Different products have different pricing models, which we’ll explore below.
  • Economic environment: Broader market conditions, such as the Federal Reserve’s rate decisions or economic inflation trends, can push business loan rates up or down over time.
  • Industry: Depending on your lender, higher or lower interest rates may be quoted by industry. This is usually influenced by market conditions and stability (or instability) in industry-wide trends.

Business loan interest rates are a reflection of both your business profile and the broader market. While you can’t control the economy, you can improve important factors like your credit score, cash flow, and collateral to qualify for better terms.

Types of business loan interest rate structures

Lenders may use a variety of rates depending on loan type or financing structure. APR, or annual percentage rate, is the most common. However, many others rely on factor rates, flat fees, weekly charges, or the prime rate. Understanding the differences will help you compare offers as you grow your business.

Annual Percentage Rate (APR)

APR is the all-in cost of borrowing expressed as a yearly percentage. It includes interest plus certain fees, which makes it a reliable way to compare loan products. 

Example: A 12% APR on a $100,000 loan means you’ll pay about $12,000 per year in interest (before the principal).

Where it’s used: Term loans, SBA loans, business credit cards, lines of credit from traditional lenders.

Tip: If you can get APR quotes, they’re the most straightforward way to compare loan costs.

Factoring fees

Factoring fees are a one-time payment, calculated as a percentage of the total value of accounts receivable being factored. 

Example: A 2.5% fee for every 30 days an invoice is outstanding. 2.5% for 30 days works out to about 30% APR over a year.

Where it’s used: Accounts receivable factoring, invoice factoring or financing.

Tip: The longer your customers take to pay, the more expensive invoice factoring becomes.

Factor Rate

Factor rates are expressed as a multiplier (e.g., 1.3x). Instead of interest, you agree to repay a fixed multiple of what you borrow.

Example: You borrow $100,000 at 1.3x. You agree to repay $130,000, regardless of how quickly you pay the loan back.

Where it’s used: Revenue-based financing, equipment leasing or financing.

Tip: Factor rates look simple, but they can translate to high APRs if you repay the loan quickly. To compare factor rate to APR for a broad comparison, do this:

  1. Subtract 1 from your factor rate to determine the total financing cost. Ex: 1.3-1=.3, or 30%
  2. Divide total financing cost by repayment term in years. Ex: .30/ 1 (1 year) = 30% APR equivalent. .30/.05 (6 months) = 60% APR equivalent.

Fixed vs. variable interest rates

When comparing business loans, you’ll often see the choice between fixed rates and variable rates. Both can be good options, but they work very differently.

Fixed rate loans

The interest rate stays the same for the entire term of the loan, making your payments predictable and easy to budget for. 

Where it’s used: term loans, equipment financing, and some lines of credit.

Variable rate loans

The interest rate can go up or down over time, as it’s tied to a benchmark like the prime rate or SOFR (Secured Overnight Financing Rate). Payments may start lower than a fixed-rate loan, but they can increase if market rates rise.

Where it’s used: SBA loans and some bank-issued credit lines.

Tip: Choose a fixed rate if you value predictability and stable payments, and choose a variable rate if you can handle some payment fluctuation and want the chance to save if market rates fall.

Monthly or weekly interest rates

Some alternative lenders quote rates as a percentage per month or per week instead of APR. 

Example:

  • 1.5% per month (about 18% APR),  or 0.5% per week (about 26% APR).

Where it’s used: Short term loans, fee-based lines of credit

Tip: Try to convert monthly or weekly rates into APR so you can compare them to other offers.

A note about term length and interest rates

40% interest rate? Yikes. If the rates above are giving you a case of sticker shock, it will help to break down the difference between the total interest paid vs the interest rate.

While a home mortgage will typically have lower interest rates, that loan is paid back over a period of years or decades with the total interest paid adding up over time. Many business loans are paid back in six months to a year, so even though the interest rate is higher, the total interest rate paid will be similar to a loan with a lower interest rate.

Loan type Interest % Amount financed Total interest paid
5-year loan 8.95% $30,000 $7,325
6-month loan 26% $30,000 $7,800

Calculating the true cost of a business loan

Your interest rate is only one portion of the cost of a loan for your business. Depending on the type of loan and the lender, there may be additional fees that you’re responsible for paying.

These fees may include:

  • An origination fee to process your loan application
  • An underwriting fee
  • Closing costs
  • Early payoff fee or a charge to refinance the loan later

It is essential to thoroughly understand the total cost of the loan by reading the loan agreement before you sign since these other business loan fees can change the cost of your loan.

To understand the cost of your loan, you will want to look at the annual percentage rate, which includes the percentage rate, as well as other loan fees like origination, underwriting, and closing costs. Not all lenders will provide an APR, so to accurately compare options, ensure you understand how they calculate the percentage. 

A handy tool for estimating the true cost of a business loan is a loan calculator. You can plug in your loan amount, term, and interest (or factor rate) to see your:

  • Monthly or weekly payment
  • Total repayment amount
  • Total financing cost
  • Amortization schedule

This helps you compare different products side by side and decide which option fits your cash flow best.

Lendio's loan calculators

How to get the best loan rate for your business.

When looking for the best loan rate, you should look at the average APR of different loan types to decide which loan may be best for you.

Depending on the type of loan you think would be best, you’ll want to explore the best lender and get ready to apply for a business loan. 

Your final interest rate will depend on your credit history, time in business, and business financials. The lender will also evaluate your business’s ability to repay the loan. Sometimes, the lender may also look at collateral from your business to help you get a better rate.

Some online lenders may be able to get you prequalified with a soft pull on your credit to give you an idea of your rate before you apply.