Bank Business Loan Rates: Are They Really That Low?

Last Updated on January 31, 2020

Where can you really get the lowest small business loan rates? Banks will almost always win if you just compare flat bank business loan rates to numbers from other sources.

But when you step back to look at the whole process, you may discover getting a lower rate doesn’t always translate to a higher ROI.

bank business loan rates

What are the Average Small Business Loan Rates in 2020?

The gap between bank business loan interest rates and fintech rates has closed. 

This change has come as fintech lenders have grown their market share, with qualification requirements and easy access playing a huge role.

If you apply for financing in 2020, bank loan interest rates can reach as high as 13%. Across the board, financing rates through other lenders start at:

  • 2% for bank loans
  • 4% for equipment loans
  • 5% for online loans
  • 6.5% for SBA microloans
  • 7.25% for SBA 7(a) loans
  • 9.5% for SBA Express loans

That’s well above the 7% point that many online lenders charge.

Although bank loan rates have dropped slightly since 2020, the lowest rates are usually reserved for perfect businesses with excellent credit and spotless financial records. You should also take into account that banks are very strict to begin with—receiving funding at all can be next to impossible. 

However, the central problem still remains: business owners can’t wait around for banks to approve and issue payment. This lengthy process has pushed many business owners to fintech lenders, with more flexible requirements and faster funding processes.

In response, banks are starting to adopt the technology that enables fintech companies to evaluate applicants and underwrite loans so quickly. Some are partnering with fintech lenders in an attempt to provide a similar customer experience. This evolution of the financing landscape is likely to have a continued effect on loan rates in the future.

Time vs. Money: When is it Better to Choose the Lowest Loan Rates?

As a business owner, you need to make cost-effective decisions in all areas – and especially when it comes to financing. The right business financing product could pave the way for a brighter future and a better bottom line. 

When you’re choosing between a bank and a fintech lender, it all comes down to the numbers. 

Weighing the Pros and Cons of Bank Business Loan Rates

Qualifying for a low bank loan rate requires a lot of preparation and paperwork. Banks will request piles of paperwork as proof that you’re up to their standards, including:

  • A detailed business plan
  • An explanation of how you plan to use the loan (and how it will increase profits)
  • Legal documents, including licenses, permits and proof of registration
  • Business insurance information
  • Business and personal credit rating, bank statements and tax returns
  • Financial statements, including cash flow, balance sheet, debt schedule and profit and loss
  • Details on aging accounts payable and accounts receivable
  • Proof of collateral 

In some cases, it can take the better part of a year to compile all these documents. If your business plan is innovative and not quite straightforward, it could take longer. 

Using accounting software may speed up financial statement preparation, but third parties can also cause delays.

After submitting your application and documentation, it takes two to three months to be approved for an SBA loan and several weeks to several months for bank loan approval. 

The bank may also request even more information, which delays the process even more.

Considering the Fintech Lending Alternative: Faster Process for Sudden Opportunities

Applying for a loan from a fintech financing company requires only a few documents and some basic information. This may include:

  • Proof of identity
  • Contact details
  • Bank statements

Many online lenders have one-page digital applications on their websites. Some allow you to easily connect your bank account to eliminate the need for paper statements.

The lender may also perform a credit check if the loan you’re applying for has a minimum FICO score requirement, but only after you’re already pre-approved.

Depending on the type of loan and the technology used in the underwriting process, you could be approved in less than 24 hours. Funding typically arrives in your business bank account within a few days of approval.

However, 24-hour funding is also available from some fintech companies. Certain loan types may take as long as a few weeks to be approved and funded.

While bank loans require numerous documents, online loans have a much simpler qualification process. Beyond bank statements and tax returns, fintech lenders will only request additional documents under unique circumstances.

When Higher Rates Mean a Better ROI

When it comes to the time you could be spending improving your business, opportunity cost is a valid concern. The time you spend jumping through hoops for the bank could translate to a profit loss for your company.

To find the most practical funding solution for your business, multiply the number of hours you expect to spend on the loan process by the amount of profit you typically generate per hour. Also, consider the risk of missing out on lucrative business opportunities while waiting for approval. 

It’s very possible the combined result is the equivalent of thousands or hundreds of thousands of dollars’ worth of time. This means you may actually lose money in the attempt to qualify for a lower rate. 

Instead, it’s best to take your opportunity head-on by getting quick access to funding through a fintech lender.

Save Time and Money with Faster Business Loan Approval

Finding a lender with the best small business loan rates isn’t just about how much interest you pay. When your own time is at stake, you should consider how easy the process is.

Through fintech lenders’ simplified application and approval process, you can get funding in days, not weeks or months. You can put the funds to use right away!

Financing options from National Business Capital and Services include small business loans that deliver funding in as little as 24 hours. Many require minimal time in business and have few or no FICO score restrictions. Let National work with your business to find the best rates and terms – no complicated paperwork required.

National Business Capital & Services is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.

Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.

We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!


About the Author, Matt Carrigan

Matt Carrigan is the Content Writer at National Business Capital & Services. He loves spending every day creating content to educate business owners across every industry about business growth strategies, and how they can access the funding they need!

Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advise from National Business Capital & Services and the author. Do no rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely in this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there maybe errors, omissions, or mistakes.