What is the typical interest rate on a business line of credit?
Jackson Reed
Updated on February 17, 2026
Average small business loan interest rates by loan product
| Type of Loan Product | Average APRs |
|---|---|
| Online Term Loans | 7.00%-99.70% |
| Lines of Credit | 2.58%-80.00% |
| Merchant Cash Advances | 20.00%-250.00% |
| Invoice Factoring | 13.00%-60.00% |
What is a good APR for a line of credit?
Currently, the average credit card APR is around 16 percent. If your card’s APR is below the national average, that’s an excellent APR. Even a credit card at the national average is a good option, especially if you’re looking at one of today’s best credit cards that comes with rewards, bonuses and perks.
Do you pay interest on a business line of credit?
When you open a business line of credit, the business receives access to a stated amount of funds to use as needed. A monthly statement reflecting the amount of credit used will also include any interest charges (unlike a term loan, you only pay interest for the funds you use as you use them).
When should you get a business line of credit?
A business line of credit works best when you need to finance short-term expenses, such as replenishing inventory or covering unexpected costs. A small-business term loan finances large one-time expenses, like equipment purchase.
How do I manage my business line of credit?
How to Effectively Manage your Business’ Line of Credit Financing
- Borrow only if it has significant returns. A business line of credit is an open jar that a business can dip a hand into for funds when it needs to.
- Do not mix personal and business finances.
- Effective cash flow management is crucial.
What is the purpose of a line of credit for a business?
The number-one reason to open a business line of credit is to gain access to short-term funding. Most businesses use these funds to support financing for operational expenses like supplies and payroll or for increasing inventory.
What’s the interest rate on a business line of credit?
The typical interest rate for a business line of credit can begin as low as 5 percent but also run more than 20 percent. It only reinforces the need to shop and compare lenders for the lowest interest rate on your business line of credit
What’s the average interest rate on a small business loan?
Loans from traditional lenders, such as banks or credit unions, can have annual percentage rates (APRs) ranging from 4% to 13%, while alternative or online loans can have APRs ranging from 7% to over 100%. Average Rates by Lender Average Rates by Loan Product Other Factors That Affect Your Rate
How to qualify for a business line of credit?
How to qualify for a line of credit Annual revenue $75,000+ Loan term Up to 5 years Repayment period 6 months after each draw Rates Variable (prime rate + additional rate) Recurring fees $150-250 annually
Why do business loans charge higher interest rates?
Some business loans tend to charge higher interest rates, regardless of how solid your credit history and financials are. For example, short-term loans, invoice factoring, and merchant cash advances all tend to charge higher loan rates than traditional term loans. That doesn’t mean these financing options aren’t legitimate.
