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How To Compare SBA Loan Interest Rates

by Martha Simmonds

A Small Business loan from the Small Business Administration can make a huge difference in the operation of your business. Get the best small business loan rate when you take the time to compare the kind of rates available for your specific needs.

Understanding Terms

It’s important to understand exactly what’s going on at any given time with your small business loan. Before you begin, it’s very helpful to know the kind of specific terms that apply to these types of loans.

As the experts at Lantern by SoFi remind their clients, “Part of considering small business loans and other financing options for your company is knowing how much you’ll pay in interest over the term of the loan.” Comparing the varied types of rates can help you pick the best option for your small business this year.

Varied Factors

Any small business owner should be aware of the many factors that can influence such rates. This rate will vary. It is influenced by the prime rate that is set by the Federal Reserve. The experts at the Federal Reserve and the Small Business Administration want to ensure that a business owner has access to capital. They also want to help banks earn a good rate of return on their own capital.

Officials at the SBA will add a small amount to the money lent to their lenders. The same is true of all banks that work with the SBA. At the same time, there are things you can do in order to help lower your own SBA loan interest rates. If you can show you have a working business model, long-term goals, and a history of profits, you’ll likely benefit from lowered interest rates. Lenders will consider you more creditworthy and decrease the costs of access to capital.

What to Consider

Different types of loans will have many different interest rates. In general, it helps to consider two important factors. You should know how much money you would like to borrow before you start. You should also know how long you intend to pay it back. Borrowers who wish to borrow more money over a longer period of time will be charged more interest than those who borrow less money and pay it back more quickly.

As the Small Business Administration guarantees their loans, this means that such loans are in great demand by many business owners. A loan can also be a very specific one. For example, the SBA offers financing for a business owner who is trying to purchase a fixed asset like machinery or land.

These loans may have additional requirements such as the need to have at least ten percent of the purchase price on hand. Small loans such as microloans up to fifty thousand dollars have additional requirements you should know about before filling out an application.

A loan of this kind can make a difference and help you keep your business in great shape.

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