Business Loan Interest Rates

Find out what factors you need to know to compare business loan rates and find the best deal for your situation with Savvy.

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, updated on September 21st, 2023       

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The interest rates are generally the first thing people want to know when comparing business loans. But to get useful information, you need to be looking at more than just the number. Learn how to compare different types of business loan with this guide.

How do I compare interest rates on different business loans?

The interest rate on a business loan is one of its most significant features, and when you’re comparing loans it’s sensible to start there. A small discrepancy in interest rates can make a massive difference to the cost of a large loan, often thousands of dollars, so it makes sense to hunt for the business loan with the lowest interest rate.

The table below – looking at a three-year small business loan for a large piece of industrial equipment – gives you a sense for how the interest rate can affect the overall cost.

Loan amount Loan term Interest Rate Fortnightly repayment Total amount to pay Overall interest paid
3 Years
3 Years
3 Years
3 years
3 years

As you can see, a difference of just 2% on a business loan interest rate can lead to over $1,000 in savings over the life of the loan.

If you’re on the lookout for a small unsecured business loan with low interest rates to help out with commercial expenses, Savvy is a great place to compare your options. You can quickly find the right business loan with the best rates for your business with our rate tables, without ever needing to leave your office.

It’s worth remembering that the interest rate isn’t the only factor that affects how much you pay on a loan – the fees play a significant role in determining your overall spend. You also need to understand the differences between various types of commercial loan and what affects their interest rates. For example, a secured business loan will have a relatively low interest rate compared to an unsecured one, but the trade-off is that you need a large asset to offer as collateral. When it comes to interest rates, you need to compare several factors to help you secure the cheapest loan available to you in Australia.

What factors affect the interest rates on a business loan?

The reality is that the interest rates you can get on a business loan can vary a lot, depending on a number of factors. So, what are some of the things that can influence the rate?

  • Security / Collateral – A secured loan – when you offer an asset (such as a property) as collateral on the loan – will have much lower interest rates than a similar loan with no security. The asset acts as insurance for the lender in the event that you become unable to fulfil your loan obligations, which decreases the risk and allows them to offer better terms.
  • Credit rating – Your business’ credit rating can have a significant effect on the interest rates you get offered on a commercial loan. Good credit ratings tend to get you better interest rates, as it indicates to the lender that there’s little risk in loaning money to you.
  • Business track record – A business that’s well established with steady cash flow and signs of growth is generally going to be able to get better interest rates than a new start-up. If a business has been growing steadily for 25 years, it’s probably a safe bet that they’re going to be able to make their repayments consistently.
  • The type of loan – There are many different types of business loans in Australia and the interest rates between them can vary considerably, even those that seem quite similar. For example, equipment finance and hire purchase are similar types of loan (giving you access to commercial equipment for your business), but hire purchase will generally have higher interest rates as you end up keeping the equipment.

Types of business loan

Why compare business loans through Savvy?

What should I consider when comparing business loan interest rates?

Frequently asked questions about business loan interest rates

What's a comparison rate and how is it different to a business loan interest rate?

A comparison rate is an interest rate figure that also includes the fees in the figure, so it gives you an idea how different loans compare once you include things like account keeping fees. It gives you a better idea of the overall cost of a loan. It normally includes setup fees and monthly account keeping fees, but it can’t account for everything. For example, early repayment fees will depend on how many early repayments you make. For a more representative indication of the cost of your loan, you can input your loan's comparison rate into Savvy's repayment calculator for an indication of what it might cost you.

Are there other aspects of my business that could affect my interest rate?

Potentially. A lender assessing your business loan application is trying to build up a picture of how established it is, and whether it’s likely to be growing in the future. Secondary factors like how visible your business is (either physically, or in virtual spaces like social media), how broad or niche your market is, and whether your industry is growing or in decline can all factor into that assessment, and affect the final interest rate you get offered.

Can I still get a good interest rate on a loan with a start-up business?

Probably not – generally, lenders offer better rates to a business with a proven track record and good cash-flow. A start-up business should still be able to get a commercial loan – they just shouldn’t expect interest rates as low as a well-established business with a strong, growing customer base.

Is there a downside to offering collateral on a loan?

Offering an asset as collateral is certainly a good way to get better rates on a loan, but there are some downsides. Firstly, you lose some control of your asset. For example, if you’ve offered a property as loan security, you can’t sell it and move to a smaller property to free up capital. There’s also a small chance of losing the asset – the idea of collateral is that if something goes wrong, the lender can sell the asset to cover costs. This is normally a last resort, though – it’s very rare that this actually happens.

Can a bad credit rating stop me getting a low business loan interest rate?

Yes – your credit score will affect the interest rates you get offered. You should still be able to get a loan, though; many smaller online lenders are tolerant of credit ratings, so bad credit loans are always an option. If your credit score is low, though, you probably can’t expect great interest rates.

Can I check my credit rating before I apply for a business loan?

Yes – you can for a credit report for your business from one of Australia’s major credit agencies, most notably Equifax, Experian, and illion. You can find out more details on their websites. There’s generally a small cost involved.

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