Best Low-Interest Business Loans of August 2025

Why interest rate matters for business loans

As with any debt, the interest rate you pay makes a big difference in the total cost you pay to borrow money. Online lenders offer short-term loans and lines of credit, as well as revenue-based financing based on your company’s income and sales. However, many business loans—especially online alternative lenders—are difficult to compare because they come with a factor rate instead of an interest rate.

A factor rate is represented as a decimal number and your total loan amount is usually multiplied by your factor rate to determine how much you repay. For example, if you borrow $15,000 with a factor rate of 1.10, your total repayment will be $16,500. You subtract your original loan amount from the factor total to determine the total cost of the loan. In this case, the loan cost is $1,500.

When converting a factor rate to APR, you take into account your repayment term. Daily, weekly and monthly payments might be possible. Daily repayment is often used for revenue-based financing because the lender claims a percentage of your daily sales until your loan is paid off. As a result of this approach to financing, it’s not uncommon for business loans to have an estimated effective APR of between 40% and 90%.

SBA loans: low‑cost borrowing backed by government

One way to get around the potentially high APRs associated with short-term business loans is to look for a lender that offers SBA loans.

Not every online lender offers access to SBA loan programs. Often, online alternative loan providers offer low rate SBA loans as a separate product from their term loans or lines of credit.

For example, to qualify for a business line of credit for Kapitus, you need to be in business for at least two years, have a credit score of at least 650 and annual revenue of at least $180,000. On the other hand, if you want a business loan through Kapitus, you must have a personal credit score of at least 680 and establish a business credit history. There are also revenue thresholds and employee limits.

It’s important to note that the SBA sets basic requirements for loans, and lenders use those guidelines to set their own criteria for SBA loans. Once issued, the SBA guarantees up to 85% of the amount you borrow, reducing the risk for the lender.

However, you’re likely to see stricter requirements with SBA loans. For example, you often need to make a down payment when you borrow using an SBA loan. Additionally, there are sometimes limits placed on how you can use the funds. You might also have ongoing compliance obligations.

Before deciding to get an SBA loan, review your options and determine whether it’s truly the right choice for you.

Bank and credit union business loans with competitive rates

It can be difficult to find credit union and bank business loan rates because, like many alternative lenders, they don’t always list their rates on their websites. You might have to get several quotes and compare rates and terms to decide which is the right choice for you.

Many small business loan lenders can provide you with a quote after a soft inquiry. However, if you need to submit an application with a hard inquiry to compare rates, credit scoring models usually consider all inquiries within a short period of time as one inquiry instead of multiple credit pulls. This can limit the negative impact to your credit score if you’re shopping around for a rate.

You might be able to find competitive rates with banks and credit unions, but you often need a higher personal credit score to qualify. There might be other requirements and funding times could be slower. If you need fast funding, it might be worth it to pay a higher cost instead of waiting for a credit union or bank business loan.

How a borrower’s credit and financial profile affect loan terms

Most loan interest rates are influenced by your personal credit history and other financial factors. When you’re getting a business loan, a lender also considers how long you’ve been in business and your annual revenue. However, you might not have to worry about whether your business has built up a separate profile—especially if you borrow using alternative online lenders.

It’s important to note that, in some cases, you might need to establish business credit to qualify for some programs. For example, if you’re applying for an SBA loan, you might need a higher personal credit score than you would to apply for a short-term loan or line of credit. Additionally, some lenders require that you have a business credit profile on top of your personal credit history to qualify for an SBA loan.

If you want the lowest rates with the best loan terms, working to boost your credit can improve your chances.

How to compare small business loans

When making your small business loan comparison, pay attention to the following factors:

• Rate: When comparing small business loans, your rate might be expressed as a factor rate or an interest rate. For many short-term loans and credit lines, as well as revenue-based financing, the factor rate is used. Longer-term loans often come with an APR, which includes fees and interest. Some lenders use a simple interest calculation. When possible try to convert your rate to an APR for easier comparison of total annual cost.
• Repayment term: Compare available repayment terms. Often, small business loans and lines of credit require repayment within one or two years. If you want a more manageable payment, look for a lender that offers five-year loans. You might pay more overall, but the payments might better fit your budget.
• Payment frequency: Small business lenders might have daily, weekly or monthly payment frequency. It’s relatively common for revenue-based financing to require daily payments, usually a percentage of that day’s sales. Compare payment frequency to determine what best fits your business budget and revenue trends.
• Business requirements: Check to see what criteria your business must meet to qualify for a small business loan. Lenders set their own requirements, which usually include a specific time in business, annual revenue thresholds and your personal credit score. Review requirements before beginning your comparison so you know you meet the basic criteria.

Compare three to five small business loan lenders to determine which is likely to offer you the best deal.

Alternatives for businesses unable to access low‑rate loans

If you don’t meet the basic requirements for the best SBA loan interest rates, you might need to consider other funding options.

• Higher-cost loans: If you need access to funding but don’t qualify for lower rates, consider higher-cost loans. They are more expensive, but you can get the money you need in a relatively short period of time.
• Small business credit card: A credit card might be easier to get than a loan, especially if you’re a relatively new business. You can use the credit card for smaller purchases and recurring bills, freeing up your other capital for larger expenses and payroll.
• Crowdfunding: Offer non-monetary incentives, such as a product, to people in your network to try to raise enough money to take your small business to the next level. With crowdfunding you don’t have to repay the money you bring in.
• Friends and family: Consider whether you can borrow what you need from a friend or family member, or if they’re willing to provide the capital for your business idea or expansion.
• Personal loan: Depending on the situation, you might access a lower interest rate and better terms with a personal loan. Costs might be lower, and you could potentially have a longer repayment period with smaller monthly obligations, especially if you have good credit. A personal loan might also offer the option of a cosigner.

Methodology

We evaluated 13 online small business lenders, focusing on key areas such as affordability, loan options, underwriting requirements and customer experience. Advertisers and partners don’t influence our ratings, as our research and editorial team maintains independence in using data-driven methodologies.

Learn more about how Buy Side rates the best small business loans.

FAQ

What rate range qualifies as low‑interest in 2025?

For small business financing in 2025, finding a loan with rates below 8% is considered low-interest. If you’re comparing factor rates, consider looking for loans with factors of 1.10.

Which SBA loans typically offer the best rates?

SBA loan rates vary by lender, based on a variety of factors. Rates are sometimes expressed as “Prime +.” One of the lower rates right now is “Prime + 2.75%,” offered by iBusiness Funding.

Are small businesses more likely to qualify for low‑interest loans?

Not necessarily. Like other loans, small business loans often require a personal credit check. It’s possible to qualify for a business loan with a credit score in the 500s or low 600s, but you will likely pay a higher cost if you don’t have good credit.

Do online lenders always carry higher costs?

While online lenders don’t always carry higher costs, their factor rates sometimes translate to higher APRs. Compare online, credit union and bank business loan rates to see which has lower costs.

Is it better to choose a bank or SBA loan for low costs?

SBA loans are offered through banks and other lenders and backed by the government. Because they come with government backing, they are often considered less risky by lenders and might have a lower cost.