Average Business Loan Interest Rate in 2018

In the market for business financing? Check out the interest rates on some of the most popular options so you can compare and learn more about what they mean for your business.

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SBA 7(a) Loans

The Small Business Administration sets a cap on how much lenders can set interest Rates. The SmartBiz Loans website outlines the interest rates on SBA loans offered through their bank partners. The maximum rate is calculated by adding the Prime Rate, determined by the Federal Reserve and currently at 4.75%, with an additional markup.

As of May 2018, here’s how it breaks down for 7(a) loans:


Loan Size Repayment Term under 7 years Repayment Term 7 years and over
Less than $25,000 Prime Rate + 4.25% max = 9% Prime Rate + 4.75% max = 9.5%
$25,000 to $50,000 Prime Rate + 3.25% max = 8% Prime Rate + 3.75% max = 8.5%
Over $50,000 Prime Rate + 2.25% max = 7% Prime Rate + 2.75% max = 7.5%


At SmartBiz, our interest rates are:

  • Prime Rate plus 1.50% to 2.75% for commercial real estate loans $500,000 - $5 million
  • Prime Rate plus 2.75% to 3.75% for loans $30,000 - $350,000

Learn more about SBA loans through the SmartBiz® streamlined process here.

Bank Term Loans

Applying for a term loan through a traditional bank is another common source of funds for small business owners. Depending on the specific loan product and financial institution, interest rates can vary.

  • Large domestic banks: 2.09% - 4.30%
  • Small domestic banks: 2.25% - 4.64%

Bank lenders often charge competitive interest rates, especially when compared to “alternative” lenders who offer convenient yet pricey loan products. On the other hand, they generally have longer application and approval processes, so you might find it takes more time to get funded.

Business Lines of Credit

While business lines of credit are typically advertised as having low interest rates, you might find that they’re actually much costlier than they seem. Interest rates will depend on the lender you choose and your business financials, but overall, they can range anywhere from 5% to well over 30%.

With a line of credit, the fact that you can withdraw funds as you need them can be both a blessing and curse. While the system is convenient and easy to use, the costs you’ll face might negatively affect your business’s cash flow. For more in-depth information, check out this post from the SmartBiz Small Business Blog: How Does a Line of Credit Work and When is It Useful? You’ll learn pro tips to get the most of out a line of credit.

Equipment Financing

When it comes to equipment financing, you can apply the proceeds from bank and SBA-guaranteed loans to make equipment purchases. If you’re looking specifically for a business equipment loan though, interest rates can vary from 6% to 30%. The actual rate depends on various factors and can sometimes grow over time. Make sure you know exactly what the lender will charge so that you don’t see unexpected charges that negatively impact your business cash flow.

It’s a good strategy to explore a low-cost loan, like an SBA loan, for equipment purchases. In addition to purchasing equipment proceeds from an SBA loan can be used in a variety of ways – from high cost debt refinance to marketing.



Factors Affecting Interest Rates

The different interest rates you’ll encounter will mostly be determined by the lender you work with. Generally, here are some of the key characteristics that will have an effect on your interest rate:

Credit Scores

It’s probably not a surprise to you that both your personal and business credit scores will matter when it comes to getting the terms you’re looking for. These numbers give lenders a picture of your borrowing history and help them determine how risky the loan will be. The less risk, the better the deal.

Loan Specifics

The loan term, simplicity of the application process, and how fast you get funded are all factors that influence your final interest rate. You’ll usually have to face a tradeoff between ease and cost. Typically, with great convenience come high interest rates and fees. On the flip side, putting in more work to prove that you’re eligible can lead you to lower rates and longer terms.

With SmartBiz, you don’t have to make those sacrifices. You’ll get the benefit of a clear, streamlined online application, fast funds, and a low-cost SBA loan. See if you pre-qualify in 5 minutes and you’ll be ready to start the process.

Revenue Trends

Lenders want to see a business that’s on track in terms of revenue so that they have enough available cash flow to cover the expenses of the loan payments. If you can show that you’re growing and profitable, this can give you an advantage when searching for the rates and terms that work best for you.

Read more about business revenue trends on the SmartBiz Small Business Blog. You’ll learn how business revenue trends are considered a more valuable measure of financial health than just flat revenue numbers per year. Banks prefer to lend to growing businesses because they are less likely to default on their debts.

Market Trends

One important aspect that doesn’t change is current market rates. With bank and SBA loans, you’ll find that interest rates are tied to the Prime Rate. This percentage is set by the Federal Reserve and typically serves as a minimum to which lenders can then charge an additional spread.

In Conclusion

No matter what financing option you’re considering for your business, understanding what you’ll owe should inform your decisions. For an even more accurate picture, look at the Annual Percentage Rates (APRs) as well. With all the fees and additional costs taken into account, this number will help you understand what you’ll really be paying every year. Make sure your lender is transparent about these calculations, so you can plan ahead.

Interested in SBA loans through SmartBiz? Find out more about them here and use our handy Working Capital, Debt Refinance, and Commercial Real Estate loan calculators to see the estimated payments associated with your desired loan amount.

Before you apply, learn about factors banks typically use when evaluating your business by signing up for SmartBiz Advisor*. This online, educational tool will give personalized recommendations to help you strengthen your application and improve the likelihood of your qualifying for the best rates and terms for your business.


¹ Federal Reserve, Survey of Terms of Business Lending

* The information provided through SmartBiz Advisor, including the Loan Ready Score, is for educational purposes and is not the same as scores used by lenders for credit decisions. SmartBiz Advisor is not a financial or legal advisor as defined under federal or state law. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.