There is a lot that goes into business loan rates, and while much of it is technical, it can still be difficult to understand why one person may get one rate while another person gets another rate. What makes the difference in business loan rates between loans, lenders, and borrowers at any one time? It could be a few things. Consider the following.
Type of Loan
Certain loans are designed to have lower rates than others. An unsecured loan will have a higher interest rate than a secured loan. The cause behind this is risk. A secured loan is backed by collateral, meaning there is less risk to the lender. The lower the risk the lower the rates.
Type of Borrower
The type of borrower applying for the loan can make a difference. For example, there are many loans designed specifically for women, minorities, or veterans. These types of loans historically offer a lower rate as they are designed to increase these types of business owners.
Type of Lender
There are many types of lenders willing to make loans to business owners and entrepreneurs. Traditional lenders fall somewhere in the middle when it comes to rates. Those that offer loans backed by the Small Business Association may have lower rates, and historically those that offer quick cash, short term type loans, such as merchant cash advances, have much higher rates.
The common denominator with any of these variables is risk. If the SBA backs the loan, the risk is reduced, while if a lender offers a loan quickly with the promise of the next paycheck, the risk is increased. At the same time, a borrower with a high credit score is going to have a much better rate than one with a lower one due to, you guessed it, less risk.
Regardless of which type of loan you need or how your risk factors rank, Biz2Credit can help you find the right lender for your needs. Our network of over 1,300 lenders offers a variety of financing products for various types of borrowers. Visit Biz2Credit today to find out more.