Guide to Small Business Loan Rates and Fees

Are you interested in a small business loan? There are several important things to take into account before applying for business funding. First of all, find out how much money you can get. Second, know what interest rates you’re be required to pay. Third, how long you’ll be required to repay the amount borrowed. Finally, find out all the interest rates and fees associated with your loan.

Small Business Loan Rates and Fees   

It’s important to note that the average interest rate for small business loans varies based on the type of loan product and the type of lender. Loans from traditional lenders like banks and credit unions can have APRs (annual percentage rate) ranging from 5% to 13%, while alternative or online loans can have APRs ranging from 6% to over 100%. The interest rate will be affected by your credit score, which plays an important role in determining the financial health of your business, and the term of your loan.

Merchants looking for a reputable business loan provider should consider applying to First American Merchant. FAM is a respectable business loan provider and high risk payment processor that offers small business loans no credit check. With FAM, you can enjoy the lowest possible rates and the best business funding opportunities in the industry. First American Merchant is an award-winning alternative online lender and boasts an A+ rating with the BBB.

Below you can read the types of rates and fees associated with small business loans.

Business Loans Rates:

  • Annual Percentage Rate (APR)

Annual percentage rate combines your interest rate with all types of fees and costs associated with your business loan. As a result, you get the total cost of your loan.

  • Interest Rate

Your interest rate is the basic percentage of what you’ve borrowed that you’re paying back to the lender. The riskier your business is, the higher your interest rate will be. Your interest rate can be calculated in 2 ways: as simple interest or as compound interest. Simple interest = Principal x Annual Interest Rate x Duration of Loan (Years). Compound interest compounds, or recalculates, your repayment according to your monthly payments.

  • Factor Rate

A factor rate, also called a buy rate, can be compared to an interest rate, but it’s usually used for cash advances and some short-term loans. It looks like a decimal. All you need is to multiply the loan amount by the factor rate to get what you’re paying back. Factor rates are usually found with more expensive loans.

Business Loan Fees and Costs:

  • Application Fee

Application fees are also charged for the costs lenders take on when processing your application, like checking your credit or assessing your business property.

  • Check Processing Fee

When paying your lender with checks and not via debit/credit account transactions, you may be charged a check processing fee.

  • Guarantee Fee

You’ll be charged guarantee fees only if you’re considering an SBA (Small Business Administration) loan. The SBA isn’t a lender. It guarantees certain types of loans that private lenders make to small businesses. The SBA assesses a guarantee fee, which is passed on to you by your lender.

  • Late Payment Fee

Late payment fees are charged by many lenders if you make a late payment.

  • Origination Fee

Origination fees usually appear as a percentage of the principal you’re borrowing. Lenders charge these fees so to cover their basic upfront administrative costs.

  • Prepayment Penalty

Some lenders will require to pay a prepayment penalty if you pay too early.

  • Underwriting Fee

Like the application fee, the underwriting fee is charged by the lender to recover the time and money spent underwriting your loan application.

These aren’t the only rates and fees associated with business loans. However, these are the major ones that mustn’t be overlooked when applying for business funding.