What will my interest rate be on my business loan?
Since business loans are borrowed by businesses and not people, the business’s finances and credit are what’s scrutinized by a lender. These factors help determine if the business qualifies for a loan, how much it can borrow and the rates and terms it’s offered.
A business loan's interest rate can be impacted by
The type of financing
Different types of loans may offer different interest rates. For example, long-term installment loans tend to have lower rates than business credit cards.
The type of business
Some businesses are riskier than others, and lenders may take this into account when setting interest rates.
Time in business
Lenders may also consider how long the business has been around. Some lenders won't offer financing to new businesses at all, and others may charge new businesses a higher interest rate.
Market interest rates
Lenders may base their loans' rates, in part, on a Benchmark – WSJ Prime. As general interest rates rise or fall, new borrowers may receive higher or lower rates on their loans.
The business's credit
Businesses can establish and build credit that's separate from the business owner's personal credit. Credit history and scores can impact the ability to get a loan and the rates the business receives.
The business's finances
ou may need to share copies of your business's financial statements—the balance sheet, cash flow statement, and income statement—as part of the application process. A strong financial position could help you qualify for lower interest rates.
The owner's finances and credit
For many small and new businesses, the owner's personal finances and credit will be a factor when getting a loan. The owner may also need to personally guarantee that the loan will be repaid if the business isn't able to fulfill its obligation.
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