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Frequently Asked Questions
What are typical business loan interest rates? ▾
Rates vary significantly by loan type and lender. SBA 7(a) loans: prime + 2.25-4.75% (approximately 10-13% in 2026). Bank term loans: 6-12% for established businesses. Online lenders: 8-30%+ depending on risk. Lines of credit: 7-25%. Equipment financing: 5-15%. Your rate depends on credit score (personal and business), time in business, annual revenue, and collateral. Rates above 20% for long-term debt are generally unfavorable and should prompt comparison shopping.
SBA loan vs conventional business loan — which is better? ▾
SBA loans offer longer terms (up to 25 years for real estate, 10 years for working capital), lower down payments, and competitive rates because the SBA guarantees a portion of the loan. The tradeoff: extensive paperwork, 60-90 day approval timelines, and personal guarantee requirements. Conventional bank loans are faster (2-4 weeks) but require stronger financials and more collateral. Online lenders are fastest (1-5 days) but most expensive. Match the loan type to your urgency and cost tolerance.
How much business debt is too much? ▾
A common benchmark is a debt service coverage ratio (DSCR) of at least 1.25 — meaning your net operating income should be at least 1.25x your annual debt payments. Most lenders require this minimum. A DSCR below 1.0 means the business can't cover its debt from operations — a red flag. Total debt-to-equity ratio under 2:1 is generally considered healthy for most small businesses. Beyond ratios, ensure monthly debt payments don't exceed 20-25% of gross revenue.