Interest Rates Drop for Small Business Loans

In February 2020, the Federal Reserve lowered the benchmark interest rate a half of a percentage point. This will bring the Prime Rate down from 4.75% to 4.25%.

Leo Jacobo, SmartBiz Vice President, Head of Lending Operations, shares his insight. “The decision to cut interest rates is great news for small business. Smaller firms are increasingly financed with variable rate debt and a quarter point of relief is only a good thing for the Main Street proprietor.”

This may be the only rate cut this year, so if you need business financing, now’s a good time to act. Here’s more information about interest rates and how they affect business owners.

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What is an interest rate?

An interest rate is the percentage of principal charged by the lender for the use of its money. A loan that is considered low risk by the lender will have a lower interest rate. A loan that is considered high risk will have a higher interest rate. Most lenders use business and personal credit scores as one risk measurement tool.

Why are interest rates adjusted?

The Federal Reserve lowers interest rates to stimulate economic growth. Lower financing costs can encourage borrowing and investing. On the other hand, when there is too much growth the Fed raises interest rates. Rate increases are used to slow inflation and return growth to more sustainable levels.

How does an interest rate cut affect business owners?

When interest rates are lower, it’s much more beneficial for business owners to take out new loans to invest in business expansion. When a lower interest rate is locked in on a business loan, the loan costs less in the long run.

When rates are lowered, it can also be an excellent time to refinance high-cost outstanding loans, lines of credit, or an existing commercial real estate mortgage.

What is the current Prime Rate for business loans in 2020?

Banks use the Prime Rate as a benchmark for setting rates on consumer and commercial loans. As of March 2020, the prime rate is 4.75%.

Interest rates for SBA working capital and debt refinance loans

Interest rates for SBA working capital and debt refinance loans from SmartBiz marketplace banks are now only  4.75% - 7.00%. SBA loans offered from banks in the SmartBiz lending network have a variable rate of Prime Rate plus 1.5% to 3.75%.

Interest Rates for owner-occupied commercial real estate SBA loans

Commercial real estate SBA loan rates from SmartBiz marketplace banks are even lower at 4.75% - 6.00%*

*Prime Rate plus 1.5% to 2.75%.


Use of proceeds for low-cost loans

The word “debt” can strike fear into the hearts of consumers and business owners. But all debt is not created equal. Funds from a low-cost loan can help your small business grow and save money.

To determine if funding could help your business, review these ways funds can be used to strengthen your bottom line:


SmartBiz customer Randy Jacques is known as “The Tree Guy” in Southern Utah. Jacques needed equipment to keep up with demand. An SBA loan was the right choice and he’s now successfully expanding throughout the state.


Milton Martinez owns Triple D Towing in Texas. The SmartBiz customer refinanced two expensive loans with a low-cost SBA loan. He’s now saving between $15,000 to $18,000 dollars. That’s money he can put back into growing his business or into savings.


Tasteful Additions is a shop in upstate New York that sells gourmet salts and vinegars in store and online. Owner Asha Waterstreet took out a SmartBiz SBA loan and was able to expand her product line with luxury body products and tableware. Current customers bought more merchandise and new customers were attracted.


SkateXS is a successful skateboard manufacturer in Southern California. During the holidays, the business can get over 10 times their normal orders in a single day. Owner Bryan Tracey came to SmartBiz and got a great rate on a $150,000 10-year SBA loan. They were able to sail through the holiday season this year in a much stronger financial position.

Read more about entrepreneurs who are growing successful businesses here: SmartBiz Blog Business Stories.

Know where you stand before you apply

SmartBiz Advisor is an online tool to help business owners learn how banks typically evaluate their business. Once you know where you stand, you’ll get actionable insights to help you increase your credit scores and strengthen the financial health of your business if needed.

Use SmartBiz Advisor so you have a better chance of successfully applying for funding when you need it. Sign up here today and get your unique Loan Ready Score™.