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How Much Do Business Loans Cost?

Important Notice: For SBA Paycheck Protection Loans consider Fundera

Loan Amounts$5,000 to $500,000
APR RangeTerm Loans: 7% – 30%
Startup Loans: 7.9% – 19.9%
Repayment TermsTerm Loans: Up to 10 Years
SBA Loans: Up to 25 Years
Time to FundingVaries
Click “Check Rates” to apply to Fundera

When we think about small business loans, we often think about the stress of whether or not we’ll be able to get one, and every thought is driven toward making sure we get the money we need to move our businesses forward. Of course, this isn’t the only factor that goes into small business loans, they also cost us money. After all, lenders don’t offer their money for free.

So, what can you expect, and how much is a small business loan?

How Much Is a Small Business Loan?

Obviously, the cost of a small business loan depends on a few factors:

  • How much money you’re looking to borrow
  • How much you can actually afford to pay back each month (sometimes small business loans are paid back differently, so that can also be a factor)
  • How long your loan will be
  • And of course, the APR and interest rate you get, which will be based on your credit-worthiness and if the loan is secured or unsecured.

How Is APR calculated?

APR (annual percentage rate) is the amount your lender charges for lending you the money.

Any lender offers a range of APRs which they’ll offer customers based on how good their credit score is, how much they want their custom, and how much of a risk they’re deemed to be. For example, someone in their 40s with a near-perfect credit score, might be offered an incredibly low APR to borrow money, such as 3-7%. Meanwhile, for the same loan a 23-year-old with good history but has only been borrowing for a few years and doesn’t have a mortgage, may be offered a higher APR, such as 16-24%.

When you borrow a loan upfront, the overall cost is easy to calculate, as most lenders will tell you the overall cost upfront as you compare loans. Calculating APR from scratch can be tricky, so an accurate way to do this is to use this APR calculator from Calculator Soup.

This is one of the key numbers you need to pay attention to as you consider which business loan to go with. To put it simply, the lower the interest rate, the lower the overall cost.

Once you have a good idea (or an accurate one) of how much a potential loan will cost you, you’ll know if it’s something you can afford. If a lender does not believe you’ll be able to afford your repayments, they won’t approve you for your loan, so think carefully about the amount you’re looking to borrow and how much revenue your business makes.

What Is APR vs. Interest Rate?

So, are APR and interest rate the same thing? While the two terms are often used interchangeably when we’re talking to others, they aren’t actually the same thing. So, what’s the difference?

Interest rate is the rate you’re charged for borrowing the principle (aka the starting) amount. This rate is often fixed when it comes to small business loans, which means it stays the same for the life of your loan, while some are variable (changes).

The APR is the overall cost of the loan because it includes your interest rate plus all other fees.

The interest rate will give you a good idea of your monthly costs, while the APR will estimate the overall cost of the loan.

Average Business Loan Costs and Terms

So now we understand the difference between interest rate and APR, we can look at how much the different types of business loan may cost you. We know what the fundamental differences are that change how much a small business loan will cost you (total amount, your credit, the repayment schedule, etc.), but how do the different types of loan product differ?

How Much Is An SBA loan?

SBA loans are one of the very best options for small business loans, thanks to their low rates and flexibility, but they’re also difficult to get. Overall, an SBA loan is likely to cost you 7-8% APR, over a term of 5-25 years, and payments are made monthly.

How Much Is a Term Loan?

There are two types of term loans, short-term loans and medium-term loans. Short-term loans are generally for fast cash, and last 3-18 months. These loans are typically (but not always) the pay-day-loan equivalent of the business loan, so you need to do your research and think carefully about taking out a term loan like this. These loans often have extremely high APR (typically 10-110% APR) and take the money they’re owed directly from your bank account on a daily basis.

However, medium-term loans are a great way to finance your business. While the rates aren’t as good as SBA loans, as they’ll cost 7-30% APR, they offer shorter terms of 1 – 10 years and, in most cases, are paid back monthly or bi-monthly.

How Much Is a Line of Credit?

A line of credit is like a cross between a loan and a credit card, and are great for businesses looking for flexible borrowing. Essentially, you agree to a maximum amount you can borrow with your bank, and you can withdraw this money as you please, straight into your own bank account. You’ll only pay interest on what you borrow, and when that money is paid back you can use it again.

Business lines of credit vary from 7-80% APR, and typically have terms of 6 months – 5 years, though this is much more flexible with this type of credit since you can borrow and pay back the money relatively quickly. Repayment frequency is typically monthly, bi-monthly, or weekly, though you should research this as you look at potential lenders if your cash flow varies significantly.

How Much Are Other Business Loans?

There are other ways to get the funding you need or increase your cash flow.

How Much Is Invoice Factoring?

Invoice factoring is essentially where you “sell” your outstanding invoices to another company, who will pay you 80% of the invoice amount there and then, and collect the invoice from the client for you. When the client pays, they’ll give you the rest of the amount, minus their fees.

Invoice factoring isn’t always a cheap way to borrow, but is a great way to keep your cash flow moving and be less dependent on outstanding invoices. This can be especially helpful in businesses that work with clients who typically have a longer invoice-to-payment cycle.

Invoice factoring typically has an APR of 10-65%, the term is for as long as it takes the client to pay the invoice, and they collect their fees automatically from your final payment.

» MORE: Compare Invoice Factoring Options

How Much Is Equipment Financing?

Equipment financing are loans that are taken out especially to buy equipment, and then the equipment is used as collateral, making the loan secured. If you need expensive equipment, this is a great way to get it and often get a lower rate, because it is secured. APR is 8-30%, terms are 1-5 years, though this does vary on the life of the machinery, and payments are typically paid monthly.

» MORE: Compare Equipment Financing Options

How Much Is Merchant Cash Advance? 

A merchant cash advance isn’t a great way to borrow money – and should only be used as a last resort. If you find yourself turning to merchant cash advances frequently as a way to borrow, it may be time to look at your costs and see if you can cut them down. It’s where you borrow a relatively small amount of money based on your future credit/debit card sales, through your merchant account.

APR is 40-350% here, making it one of the most expensive ways to borrow, and in most cases, they’ll deduct a fee from every sale you make on a transaction, daily, or weekly basis until the amount is paid in full.

» MORE: Compare Merchant Cash Advance Options

How Much Is Considered a Small Business Loan?

Small business loans can range anywhere from $5,000 – $2 Million, depending on the size of the small business, their growth, and a huge range of other factors. We’ve written a full guide to the average amount small businesses borrow, so if you’re more interested in this, you can read that here.

How Much Collateral Is Needed For a Small Business Loan?

Not all loans require collateral – Term loans typically rely only on your personal and business credit score, credit worthiness, and any additional information you supply.

However, if you want a better chance at getting your small business loan, or want a lower rate, collateral is a way to do both. Collateral is a physical guarantee that your loan will be repaid – and if this promise is broken, they’ll be able to collect the collateral to cover the money lost.

This is typically property, inventory, equipment, or even invoices. Property can be real estate or vehicles, such as trucks or even planes. This can include your home. For short-term loans, invoices can be “sold”, and of course inventory and equipment can be put up as collateral for the loan, provided they are of high enough value.

For SBA loans, you are offering a personal guarantee, which means the government is actually your co-signer on the amount. That means the risk for the lender is reduced significantly – hence why SBA loans are so popular.

Remember, if you’re offering something as collateral, the lender can legally take it from you if you don’t keep up on your payments. This can be life-altering, so try to ensure it’s a part of the business, when possible.

How much collateral is needed for your loan will vary just as much as the loan cost.

Small Business Lenders and Costs

So, what small business loan lenders do we recommend, and what are their associated costs?

Best for SBA Loans: SmartBiz

SmartBiz is our recommended lender for SBA loans, and offers loans of $30,000 to $350,000. Rates are typically 9.7-11.04%, and come with a maximum term of 10 years. Time from application to funding typically takes 1-2 weeks. You’ll need a personal credit score of 675 or better and annual revenue of $50,000 or more.

Loan Amount:$30,000 – $350,000
APR Range:9.7% – 11.04%
Time To Fund:Typically take several weeks to fund, but can fund as quickly as within seven days.
Loan Term:Maximum loan term is 10 years.
Origination Fee:4.00%
How To Qualify:675+ Personal credit score
$50,000+ Annual revenue
Great Option For:Borrowers with good credit
SBA loans
Funding real estate purchases
Refinancing debt
Credit Check?Soft credit check and hard pull
Co-Applicants Accepted?No cosigners
Direct Pay-Off To Creditors?No
Click “Check Rates” to apply to SmartBiz

Best for Term Loans: OnDeck and Funding Circle

We have two lenders we recommend for term loans, OnDeck and Funding Circle.

OnDeck offer short-term loans of 3-36 months and promise fast funding. They lend between $5,000 and $500,000, with daily or weekly repayments. This is best for short-term financial needs. Unlike the short-term lenders we talked about above, OnDeck’s rates start at 9.99%.

Funding Circle are great for loans of 1-5 years, and rates of 4.99-26.99%, depending on your circumstances. They offer loan amounts of $25,000 – $500,000. You will need a personal credit score of 660 or above, with at least 2 years in business.

Loan Amounts$5,000 to $500,000
APR RangeAs low as 9.99%
Repayment TermsTerm loans up to 3 years
Time to FundingAs fast as 1 day
Click “Check Rates” to apply to OnDeck

Loan Amount:$25,000 – $500,000
APR Range:4.99% – 26.99%%
Time To Fund:10 days on average
Loan Terms:One to five years
How To Qualify:660+ Personal Credit Score
No Minimum Annual Revenue
Great Option For:Established Businesses, Not Sole Proprietors
Click “Check Rates” to apply to Funding Circle

Best for Invoice Factoring: BlueVine

BlueVine offers invoice factoring with upfront advances of 85-95%, for amounts between $5,000 and $5 Million. Rates are 15-68% and repayment terms can be anywhere between 1 – 13 weeks, since it depends on your client. If you work on large projects with clients who typically don’t pay for 30-60 days, this is a great option. 


Line Of Credit
Loan Amounts$5,000 to $250,000
APR Range15% to 78%
Repayment Terms6 or 12 months
Time to FundingAs fast as 24 hours
Click “Check Rates” to apply to Blue Vine

Compare Business Loans

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