Average Small Business Loan Interest Rates in 2022: Comparing Top Options

Average Small Business Loan Interest Rates in 2022: Comparing Top Options

Compare Small Business Loans

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The average small business loan interest rate varies by the type of lender, loan product and whether your interest rate is fixed or variable. Choosing the right loan for your business depends on several factors, including your intended purpose, business history, revenue, credit score and the type of lender.

Remember, the loan that appears to be the least expensive up front might not always be the case. Consider the loan from all angles, and keep an eye on its interest, fees, term and any prepayment penalty fees.

Average small business loan interest rates by lender

The average rates for small business loans will vary by lender and loan type, and the lowest rate may not always be best for your unique business needs. The table below shows some of the most common types of business loans, as well as their averages, and maximum and minimum annual interest rates along with the average loan amount.

Business Loan Interest Rates
Average Annual Interest Rate (AIR)
Minimum AIR
Median AIR
Maximum AIR
Average Loan Amount
New Fixed-Rate Loans2.54%0.47%2.73%7.65%$59,046
New Variable-Rate Loans3.90%1.90%4.25%6.25%$319,117
Outstanding Fixed-Rate Loans2.69%1.00%2.89%8.02%$59,716
Outstanding Variable-Rate Loans4.19%1.84%4.68%7.50%$159,243

Note that the average loan amount tends to be much higher for variable-rate loans, while fixed rate loans offer less money, but tend to have the lower average annual interest rate. Fixed interest means it stays the same over time, while variable means the interest rate can change over the course of the loan. Those changes are based on the market, usually a financial benchmark set by the bank.

With a variable-interest rate loan, you risk the interest increasing drastically but you could also potentially see the benefits of the interest dropping quite low. A fixed interest rate may offer a higher maximum annual interest rate (AIR), but you would know exactly how much the loan will end up costing you in full from the moment you take it — assuming you make your payments on time.

Alternative business lenders

When compared to banks, online and alternative lenders have higher interest rates, as they typically have fewer eligibility requirements and faster underwriting processes. For example, some alternative lenders may only require six months in business and a stated annual revenue of $100,000 to qualify for a loan. These lenders may also return a credit decision within a few hours.

Due to the reduced eligibility criteria, online lenders are generally a better option for businesses or borrowers that may be considered unbankable — startups, low revenue businesses or applicants with lower credit scores. In the table below, we compare the APRs of online business loans from several alternative lenders.

Lender
Annual percentage rates (APR)
American Express (business loan)6.98% - 19.97%
American Express (merchant financing)7.00% - 28.00%
Balboa Capital3.00% - 30.00%
BlueVine (invoice financing)15.00% - 68.00%
BlueVine (line of credit)4.80%
Big Think Capital8.33% - 18.00%
Credibility Capital6.99% - 21.99%
Credibly9.99% - 36.00%
Currency3.00% - 20.00%
Fundbox (line of credit)4.66% - 8.99%
Funding Circle4.99% - 19.49%

Average small business loan interest rates by loan product

The type of loan you apply for, along with your time in business, credit score and revenue, will affect your interest rate. Some alternative products — such as merchant cash advances or invoice factoring — will have higher APRs than traditional options, such as bank or SBA loans. We recommend borrowers consider conventional financing options before turning to alternative ones.

In the table below, we compare APRs for various types of loan products from data we gathered directly from lenders.

Type of loan
Range of annual interest rate (AIR)
Traditional bank term loan3% to 7%
Online term loan11% to 44%
Line of credit8% to 80%
Invoice factoring13% to 60%
Merchant cash advance1.10 to 1.50 factor rate

SBA 7(a) loan interest rate ranges

The Small Business Administration (SBA) guarantees SBA loans, which are offered by banks it partners with to help serve small businesses. These loans are among the most in-demand on the market because of the long terms and relatively low interest rates offered to borrowers. In particular, the SBA 7(a) loan is a versatile one, and helps cover a range of business financing needs, like purchasing equipment or working capital. These loans can be awarded for up to $5 million with terms as long as 25 years.

The exact interest rate borrowers pay will depend on several factors, including the amount of the loan and whether you’ve opted for variable or fixed interest rates, as shown in the tables below. In addition, the partner bank working with the SBA will likely have fees that can vary slightly from lender to lender.

Here’s a rundown of the interest rates you could expect:

SBA 7(a) variable loan interest rates
Loan amountLoans with a maturity under 7 yearsLoans with a maturity 7 years or more
Rate standardVariable rate maximum (with current 3.25% prime rate)Rate standardVariable rate maximum (with current 3.25% prime rate)
$0 - $25,000Base* + 4.25%7.50%Base + 4.75%8.00%
$25,001 - $50,000Base* + 3.25%6.50%Base + 3.75%7.00%
$50,000 or aboveBase* + 2.25%5.50%Base + 2.75%6.00%

*Variable interest rate 7(a) loans are pegged to the Prime rate (currently at 3.25%), the LIBOR rate or the SBA optional peg rate.

According to the SBA, fixed interest rate 7(a) loans are based on the Prime rate in effect on the first business day of the month of your loan.

SBA 7(a) fixed loan interest rates
Loan amountFixed rate maximumFixed maximum allowable (with current 3.25% prime rate)
$0 - $25,000Prime + 8.0%11.25%
$25,001 - $50,000Prime + 7.0%10.25%
$50,000 - $250,000Prime + 6.0%9.25%
Over $250,000Prime + 5.0%8.25%

In addition to the more general 7(a) loans, the SBA offers other business loans that are more specific. For example, the SBA’s 504 CDC loan is specifically for businesses looking for financing to purchase fixed assets like land, machinery or real estate. These loans require at least 10% down for borrowers. Up to 40% of the loan is offered by a certified development company (CDC) and the remaining percentage (at least 50%) is offered by a bank. The benefit is that these loans have fixed rates that are fairly low, but they are dependent on the loan amount.

Other more specific loans include the SBA microloan program for certain types of small businesses and startups. These loans are for smaller amounts, usually up to $50,000, and they’re provided by microloan lenders specific to certain states and regions of the country.

Other factors that affect your small business loan interest rate

Besides the type of loan you select, your business history and profile as a borrower will also play into determining the interest rate you’ll pay.

Credit profile

Most small business lenders will evaluate both your personal and business credit score during the loan application process. Lenders want to see that you can repay your other personal or business debt obligations on time.

Most lenders require minimum credit scores to qualify for their loan products. These can vary greatly: Banks sometimes require FICO credit scores of 680 and above, while some alternative lenders may accept scores as low as 500. Your credit score will be a determinant in what interest rate you receive, with higher scores generally translating to lower interest rates.

Business financials

Lenders will also consider your current and projected business finances as part of the application process. Most lenders make requirements regarding your time in business and the minimum amount of annual revenue your business must generate. While specific requirements for cash flow or profitability are less common, you should be prepared to show relevant documentation if asked. You'll also need to demonstrate how you plan to use the loan proceeds and how the funds would benefit the business in the long run — this should be carefully outlined in your business plan and strategy.

Lender relationship

Another factor that affects your interest rate is your relationship with the lender. Some lenders may offer lower interest rates or reduced fees to applicants who have a deposit account with the institution or have taken out loans in the past. This is true for both banks and alternative lenders, so it may be a smart idea to do all of your borrowing and banking in one place.

Types of fees

APRs include the interest that needs to be repaid as well as any applicable fees. Business financing usually comes with a number of fees that can inflate the overall APR. Be wary, as you don't want to be misled in underestimating the true cost of a loan if interest rates are low but all other fees are high.

Here are some common business loan fees to keep an eye out for:

Fee Type
Description
Application fee (usually bundled with origination fee)Nonrefundable
Origination feeCovers the labor in processing loan
Prepayment penaltyFor borrowers who pay off loans early
Late payment feesFor borrowers who miss predefined payments

What does it take to qualify?

Traditional brick-and-mortar banks qualify borrowers based on personal and business credit scores, annual revenue, profitability and more. Due to their high standards for approval, some business owners may find this form of business financing challenging to obtain.

Online lenders, meanwhile, offer much more lenient eligibility requirements, including lower credit score and revenue thresholds. In exchange, they'll likely charge much higher rates to make up for the increased risk they incur by lending to "riskier" businesses. Keep in mind that even if you do meet the minimum requirements set forth by a lender, your rates and terms will still vary depending on the strength of your application.

Here's a quick comparison of typical eligibility requirements for both traditional and alternative lenders. Exact requirements will vary by lender.

Traditional Lender
Alternative Lender
Personal credit score680+600+
Annual revenue$250,000+$100,000+
ProfitabilityRequiredNot required
Age of business2+ years6 months to 1+ years

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