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What counts as a good interest rate on a business loan?
A rate is good when the money it buys earns more than it costs and the payment fits. Those are two different tests, and neither is a number you can look up.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What is a good interest rate for a business loan?
There is no market rate to quote you: pricing on business credit depends on the product, the term, the security, the lender's cost of funds and your own file, and most non-bank lenders publish nothing at all. A rate is good if the payment fits your free cash flow with room to spare and the money earns more than it costs. Illustrative only — two offers on $60,000 that cost within $624 of each other in total dollars can differ by $5,269 a month in what they demand, which is the comparison that actually decides.
Why nobody can give you the number
Business credit is not priced off a single published curve. The rate on any given file moves with the product, the term, the collateral, the guarantor, the industry, the lender's own funding cost, and how much competition there is for the deal. Roughly one in eight lender product records in our directory publishes any price at all, which tells you how much of this market discloses in advance.
Anyone quoting you a typical rate without seeing your file is quoting an average of things that are not your deal.
The two tests that replace it
Why the rate alone will mislead you
Illustrative only — $60,000 on two structures.
A 36-month term loan at a 14% nominal rate has a payment of $2,050.66, repays $73,823.76 in total, and costs $13,823.76.
A ten-month advance at a 1.22 factor repays $73,200 in monthly instalments of $7,320, costs $13,200, and annualises to 45.5%.
In dollars the second is $623.76 cheaper. In rate the first is a third of the price. The real difference is $5,269.34 a month in outflow, which is the figure that determines whether the business gets to month ten.
The term moves the price more than the rate does
Before shopping for a better rate, find out what a different term does to the same one.
Over 18 months: payment $3,714.91, total $66,868.38, cost $6,868.38.
Over 36 months: payment $2,050.66, total $73,823.76, cost $13,823.76.
Over 60 months: payment $1,396.10, total $83,766.00, cost $23,766.00.
Identical rate, identical lender, identical file. The 60-month version costs $16,897.62 more than the 18-month version and asks $2,318.81 less a month. Winning a full point off the rate on the 36-month structure — 14% down to 13% — would save $1,044.72 across three years. Moving between those three terms moves the answer by nearly seventeen thousand.
That is the order of operations. Decide the term from what the payment has to be and what the money is for, then negotiate the rate inside it. Doing it the other way round is how owners spend a week arguing about half a point and accept a term that costs them twenty times as much.
The four things that move your price and that you can change
Rate is an output. These are inputs, and all four are within reach in a way that the lender's cost of funds is not.
What good looks like in practice
- The lowest total cost among the offers whose payments you can service in your worst month.
- No prepayment charge, or one you have priced.
- Fees itemised in dollars before signing.
- Reporting to a business credit bureau, if you want the next facility to be cheaper.
- A rate you can reproduce yourself from the schedule, rather than one you were told.
Run every offer through how to compare two offers with different structures and the calculators. The answer to "is this a good rate" is a comparison, and it needs at least two real offers to exist.
How to make a rate reproducible
The rate you were told is worth exactly as much as your ability to recompute it. Take the cash figure and the payment schedule, and solve for the periodic rate in any spreadsheet — the RATE function takes the number of payments, the payment, and the present value, and returns the periodic rate, which you multiply by the periods in a year.
If your answer matches theirs, the quote is honest and you can compare it with anything. If it comes out higher, the difference is the fees they left out of the finance charge, and the gap is worth naming out loud. If you cannot compute it at all, you were not given a schedule, and the correct response is to ask for one rather than to assume the number.
What to refuse
Refuse a rate quoted without a total in dollars beside it. The two together are honest; either alone is not.
Refuse a fee schedule delivered verbally. Ask for the document, and ask the closing question: is this the complete list of amounts payable at or before funding?
Refuse to compare a factor against an APR. A factor rate has no time in it. Converting it needs the term, and the conversion has to be shown.
Refuse an offer where the payment only works in an average month. Test every quote against your worst month of the last twelve, because that month will recur and the payment will not care.
Where this applies
Related questions
What is a good interest rate for a business loan?
There is no market rate to quote you: pricing on business credit depends on the product, the term, the security, the lender's cost of funds and your own file, and most non-bank lenders publish nothing at all. A rate is good if the payment fits your free cash flow with room to spare and the money earns more than it costs. Illustrative only — two offers on $60,000 that cost within $624 of each other in total dollars can differ by $5,269 a month in what they demand, which is the comparison that actually decides.
Which funding products does this apply to?
Working Capital, Term Loan, Business Line of Credit, SBA Loan. Each has its own page listing the funders in this directory that offer it and what each one publishes about its terms.
Are the figures here quotes?
No. Every worked example is labelled illustrative and exists to show the arithmetic. What a particular lender charges is on that lender's page, where it publishes it at all.
Who writes this?
The Find Me Funders research desk. Some drafting is AI-assisted, and every page that is says so at the top, including whether a person has checked its claims yet.
How do I know a figure here is right?
Where a page carries the green notice, its claims were checked against the sources listed at the end and a reviewer is named. Where it carries the amber one, nobody has verified it yet and you should confirm anything you plan to act on.
Are the examples real deals?
No. Every worked example is labelled illustrative and exists to show the arithmetic. What any particular lender charges is on that lender's page, where it publishes it.
Why do you never say what a typical rate is?
Because we cannot source it. A market average assembled from lenders who do not publish prices is a guess with a decimal point on it. Where a lender publishes a figure, we show that figure and say where it came from.
Is this financial or legal advice?
No. It is general information about how these products work. Outcomes depend on your contract and your state, and a lawyer or accountant licensed where you are is the person to ask about your situation.
Can I reuse this content?
Quote a paragraph with a link back. Do not republish whole articles.