Introduction
You might need a business loan to expand your company.
You might need it to purchase new equipment to make your existing business run better.
This guide will tell you what you need to know about low-interest business loans, including what they are, when they might be required and the different types of business loans.
What’s in this guide?
Let’s take a closer look!
Top 9 low-interest business loan providers
1. Boost Capital
Type: Alternative Finance Provider
Loan amount: £3,000 – £500,000
Typical APR:1.5% – 2.5% monthly APR
Loan term: 4 to 18 months
Boost Capital is a highly recommended alternative finance provider in the UK, with many customers giving this lender five stars on trusted websites such as Trustpilot.
They offer fast funding, with minimal paperwork, approval in 24 hours and access to your funds in around two days.
Representative: Borrow £10,000 for 12 months at 47.9% representative APR. Interest rate of 36.74% p.a. (fixed). Total amount payable is £12,100.
Company rating on Trustpilot: 5 / 5
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2. ABC Finance
Type: Alternative Finance Provider
Loan amount: £5,000 – £500,000
Typical APR: 3%
Loan term: 6 to 5 years
ABC Finance is a company which was founded in the year 2000 and claim to specialise in business loans, commercial mortgages and invoice finance amongst others.
With a high rating on Trustpilot, ABC Finance want to become the first point of contact for companies looking for finances.
Company rating on Trustpilot: 5 / 5
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3. Funding Circle
Type: Peer-to-Peer Lender
Loan amount: £5,000 – £500,000
Typical APR: Rates start from 4.5% AER
Loan term: 6 months to 5 years
Funding Circle is one of the peer-to-peer lenders that have been sprouting up around the UK in the last few years.
With a peer-to-peer platform, the lenders are regular citizens that want to help their savings grow by investing in UK businesses.
For businesses, this means low AER and only a couple of extra fees.
Representative: Borrow £20,000 for 12 months with fixed monthly payments of £1,752 a month, with a completion fee of 2.5% and interest of around £526. Total amount payable is £21,026.
Company rating on Trustpilot: 5 / 5
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4. Shawbrook Bank
Type: Bank
Loan amount: £250,000 to £25 million
Typical APR:0% to 19.9%
Loan term: Bespoke repayments
Shawbrook Bank offers their business customers a range of services tailored to their companies, like asset finance, working capital solutions, the point of sale finance and structured finance, as well as commercial mortgages too.
This means that for startup businesses you could finance for the road ahead with equipment and salaries, or even established companies can benefit from more substantial amounts to help you fund expansions.
Company rating on Trustpilot: 5 / 5
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5. Government Startup Loan
Type: Government Loan
Loan amount: £500 – £25,000
Interest:Fixed 6% interest p.a.
Loan term: 1 year to 5 years
Government loans are loans that are funded by government-backed organisations, who usually offer either regional or national businesses different loans depending on their location.
With this loan, in particular, it is aimed at startups less than 24 months old who could benefit from not only finance but mentoring, to help your business grow and thrive.
Representative: Borrow £20,000 for 12 months with fixed monthly payments of £1,721.33 a month, with interest of around £655.94. Total amount payable is £20,655.94.
Company rating on Trustpilot: 5 / 5
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6. NatWest small business loan
NatWest is one of the most well-known banks in the UK and has roots that go back centuries from the merging of two different banks called 1968 National Provincial Bank (est.1833) and Westminster Bank (est.1836), which ended up as National Westminster Bank.
They have around 33,000 employees and their parent company RBS had an operating profit of £2,239 million (2.239 billion) in 2017.
The amount you can loan:£1,000 – £50,000
The rate of your interest: Check out the NatWest website.
Loan length: One to 10 years.
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7. HSBC small business loans
HSBC originally acquired the Midlands Bank in 1992, which was one of the most significant banking mergers at the time.
According to data from 2017, HSBC has around 229,000 employees globally and has a revenue of approximately $51.445 billion.
This makes HSBC one of the most successful banks in the world, being a goliath in the market with 38 million customers.
The amount you can loan:£1,000 – £25,000
The rate of your interest: APR of 7.4%.
Loan length:One to 10 years.
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8. Santander small business loan
Santander bought a bank named Abbey National in 2004, who had roots that went all the way back to 1849 when they used the savings of members to provide mortgages for people building their own homes.
Since then, they have grown to 14 million customers, £154.9 billion in mortgages and £1.8 million profit before tax.
The amount you can loan: £2,000 – £25,000
The rate of your interest: 4.9% APR.
Loan length:One to five years.
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9. Yorkshire bank online business loan
Yorkshire Bank was first created in Halifax, in 1856.
Since then, they have merged with several banks such as National Australia Bank, and in future, they may very well become Virgin Money, after news of an acquisition in 2018.
Businesses can typically borrow from £10,000 to £50,000, with business banking that they say works for you.
The amount you can loan: £10,000 – £50,000
The rate of your interest: 8.75%
Loan length:Six months to five years.
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The top 9 business loan providers take into consideration their customer reputation, the amount you can borrow and the typical APR or interest rates, to ensure that you’ll be getting the best deals for you and your company.
FAQ
What is a low-interest business loan?
A low-interest business loan is merely a business loan, but with a lower rate of interest, so you have less you need to repay.
These types of loans are very appealing to businesses of all sizes for understandable reasons, but first, what exactly is a business loan?
It’s when you ask a lender like a bank to loan you some money so you can pay for things like more employees – in return, you will pay back this money often over a set period.
Interest is when you have to pay back a little extra, as a sort of payment for being able to borrow that amount of money. Low interest means less that you have to pay back.
A business loan can come from many different places, so as a business owner you should always try and consider as many possible solutions as possible to find the best deal.
What are secured and unsecured loans?
First, what are secured loans?
This is when you can borrow funding as long as you provide your lender with security.
So they will lend you money as long as you can offer one of your assets like your house or a car.
Securing loans allow you to borrow more money than with an unsecured loan, as your lender will be satisfied that you are guaranteed to pay off your loan one way or another.
Repossessing your car or vehicle is the last resort for lenders, but you should still consider the risk.
Unsecured loans, on the other hand, don’t have any security so your lender will regard them as being much riskier.
With that in mind, banks usually only lend borrowers a small amount when it comes to unsecured loans, vs secured loans.
What are fixed and variable rates?
These types of loans show the contrast in loan interest rates.
Having a fixed rate loan means that your interest rates are set, or remain unchanged which is excellent when it comes to low-interest rates.
This makes it easier to predict how much your loan will cost, and your monthly repayments.
Variable rate loans, on the other hand, will change according to those set by the MPC (Monetary Policy Committee), which is an independent body.
What are the term lengths?
When it comes to the length of a loan, this can affect your interest rates a great deal because it will state the overall total that you pay back.
For instance, a short-term loan will usually have interest rates which are high, making financial sense for your lender.
However, longer-term loans often have the lowest interest rates as it will be stretched over a longer length or time, although you will end up paying more back as you’re incurring more interest over say ten years than you would with a 1-year loan.
What is the average interest rate of a low-interest loan?
According to many reports from different sources, the average interest rate it typically between 4% and 5%.
Of course, this can vary depending on the type of lender that you choose to get your loan from, but for a handy guide see the table below in the interest rate comparison section where you can find out more.
For instance, Shawbrook Bank can offer APR between 0% and 19.9%, whereas Funding Circle which is a peer-to-peer lending platform can usually offer their customers 4.5%.
Which interest rate loan would be best for me?
It is hard to say which interest rate loan would be best for you, as it depends on so many different circumstances and your personal preferences.
However, it is important to remember that opting for a variable rate loan is usually riskier than a fixed rate loan.
This is because you will run the risk of having to pay more interest depending on which way the market sways, and benefitting from a decreased interest rate is rarer.
Fixed interest rates can protect you from rising interest rates, so this is usually better for businesses that need a lower risk loan.
It could also depend on the funder themselves, as with many government loans, for instance, you can also benefit from getting free advice and mentorship.
Conclusion
In conclusion, there are many realistic options for customers to explore when it comes to low-interest loans.
However, you should always remember to compare all of your options to make sure that you are getting the best deal.
Take a look at the ExpertSure guides to find out more about the different choices available for both startup and established businesses.
Now Read:
- Top 10 Unsecured Business Loan Providers 2023
- Top 10 Business Loans 2023
- Top 5 Self Employed Business Loans 2023
FAQs
Best 9 Low Interest Business Loans 2023: Compare Rates & Lenders? ›
Both estimates are largely in line with fresh projections from officials in March. The Fed penciled in a 5-5.25 percent peak interest rate for 2023, after which officials see rates falling to 4.25-4.5 percent by the end of 2024.
What are SBA interest rates for 2023? ›...
Current SBA Loan Rates 2023.
| Loan Program | Rates |
|---|---|
| CDC portion of CDC/504 | 4.922% - 5.20% |
| SBA Microloan | 6% - 9% |
| SBA Economic Injury Disaster Loan (EIDL) | 2.75% - 3.75% |
...
- Wells Fargo: Easiest Bank For Business Loans.
- Chase Bank: Best Bank For Startups.
- U.S. Bank: Overall Best Bank For Small Business Loans.
- Bank Of America: Best Bank For SBA Loans.
- TD Bank: Best Big 4 Alternative.
| S.No. | Best Business Loans in India List |
|---|---|
| 1. | HDFC Bank Business Loan |
| 2. | Axis Bank Business Loan |
| 3. | ICICI Bank Business Loan |
| 4. | Kotak Mahindra Bank Business Loan |
| Loan Type | Approximate APR | |
|---|---|---|
| Bank small-business loan | 5.11% – 10.46% | Learn More |
| Online term loan | 6% – 99% | Compare Rates |
| SBA loan | 10.25 % – 12.75 %* | Learn More |
| Business line of credit | 10% – 99% | Compare Rates |
Both estimates are largely in line with fresh projections from officials in March. The Fed penciled in a 5-5.25 percent peak interest rate for 2023, after which officials see rates falling to 4.25-4.5 percent by the end of 2024.
Will loan interest rates go down in 2023? ›While it expects the Fed to continue increasing rates to tame inflation, it believes that long-term rates have already peaked. “We expect that 30-year mortgage rates will end 2023 at 5.2%,” the organization noted in its forecast commentary. It reiterated the fourth-quarter 5.2% rate prediction in a Jan. 19 forecast.
What credit score is needed for SBA business loan? ›SBA loan: Lenders offering SBA loans require credit scores between 620 and 680.
What is the easiest SBA loan to get? ›SBA Express
This term loan or line of credit offers fixed or variable SBA loan rates as well as the easiest SBA application process, quick approval times, flexible terms, and lower down payment requirements than conventional loans.
- Payday Loan. ...
- No Credit Check Loans. ...
- Unsecured Personal Loans. ...
- Secured Personal Loan. ...
- Loan From a Friend or Family Member. ...
- Emergency Loans. ...
- Hardship Loans from Local Government. ...
- Hardship Distribution from Your 401(k)
Which bank is lowest business loan interest? ›
| Name | Loan Amount(Min-Max) in Rs. | Interest Rate(p.a) |
|---|---|---|
| Central Bank | 0 | 8.45% onwards |
| Citibank | 10000 | 9.99% onwards |
| Early Salary | 8000 | 24% onwards |
| Federal Bank | 0 | 11.49% onwards |
Look into the lender, and see if they've got any accolades that they can boast. The Better Business Bureau (BBB) offers ratings on various companies, including financing firms. If you see an 'A' rating, then you know you're dealing with a reputable company. Anything less than that should be considered with caution.
Do banks give loans to small businesses? ›Commonly offered by banks, business loans offer a much-needed infusion of cash to help cover most costs, though many small business owners find it hard to be approved.
Is it hard to get a small business loan? ›It can be difficult to get a small-business loan if you don't have good credit and strong finances. It may also be difficult to get a loan if you are a new business. Although there are funding options available for startups and businesses with bad credit, these products typically have higher interest rates.
What is the minimum amount for a SBA loan? ›Your business can get an SBA 7(a) loan for any amount of up to $5 million. The loan has no minimum, which is good news for small businesses.
What is the prime rate for SBA 7 A? ›Stay on top of SBA 7(a) loan interest rates to take advantage of affordable financing for your small business. As of January 2023, the interest rate for loans with a maturity of less than 7 years is Prime rate + 4.25%. The interest rate for loans with a maturity of more than 7 years is Prime rate + 4.75%.
Where are interest rates headed in 2023? ›Freddie Mac also forecasts that the 30-year fixed-rate mortgage will average 6.4% in 2023, with an average of 6.2% in the fourth quarter.
How high could interest rates rise in 2023? ›Although consumer price increases have softened since then, a “core” measure that strips out volatile food and energy items has climbed more than expected this year. That prompted futures markets to predict the Fed would lift rates as high as 5.6% in 2023.
Will interest rates improve in 2023? ›Savings rates expected to peak in 2023
Bankrate (opens in new tab) predicts the federal funds rate will increase to around 5.25% in 2023. As a result, savings rates are expected to rise as well, with more high-yield savings accounts predicted to peak at 5.25 APY in the middle of this year, and many already surpass 4%.
| FOMC Meeting Date | Rate Change (bps) | Federal Funds Rate |
|---|---|---|
| May 3, 2023 | +25 | 5.00% to 5.25% |
| March 2, 2023 | +25 | 4.75% to 5.00% |
| Feb 1, 2023 | +25 | 4.50% to 4.75% |
| Dec 14, 2022 | +50 | 4.25% to 4.50% |
Do business loans look at personal credit? ›
Are you applying for a business loan? Commercial lenders may look at both your business and personal credit scores before they approve your application. If you have poor personal credit and you're wondering if it will affect your approval or the terms of your commercial loan, the answer is yes, it can.
What is the typical max amount the SBA will loan a small business? ›The SBA partners with participating SBA-approved banks, credit unions, community development organizations, nonprofits, and other lenders to provide long-term, low-cost, government-backed loans ranging from $500 to $5.5 million to small businesses.
What does SBA qualify as a small business? ›The SBA assigns a size standard to each NAICS code. Most manufacturing companies with 500 employees or fewer, and most non-manufacturing businesses with average annual receipts under $7.5 million, will qualify as a small business.
What disqualifies you from getting an SBA loan? ›Ineligible businesses include those engaged in illegal activities, loan packaging, speculation, multi-sales distribution, gambling, investment or lending, or where the owner is on parole.
Can you get an SBA loan with no money down? ›The SBA Microloan is one of the few SBA loan programs backed by the Small Business Administration (SBA) that doesn't have a down payment requirement. However, the SBA will still require loan applicants to submit a personal guarantee.
Do people get denied for SBA loans? ›Understand Your Business Credit Score
According to the NSBA Small Business Access to Capital Study, 20 percent of small business loans are denied due to weak or nonexistent business credit.
Unsecured loans are harder to obtain and interest rates can be higher, as lenders rely heavily on your credit and other financial information to determine your loan eligibility. The better your credit score, the better the interest rate you're likely to get.
How can I get money right now? ›- Emergency savings. If you need cash for an unexpected expense, the ideal way to get it is from savings. ...
- Personal loans. ...
- Credit card cash advance. ...
- Home equity loan or HELOC. ...
- Gig economy/freelancing. ...
- 401(k) loans. ...
- Crowdfunding.
The type of loan that has the lowest interest rate is a mortgage, which usually charges 3% to 8%, depending on the overall economic climate and the borrower's creditworthiness. Some other factors that influence your mortgage rate include your home's location, your home's price, your down payment and your loan term.
What is the most likely preferred collateral for a small business loan? ›What can I use as collateral for a business loan? Cash is the most liquid form of collateral, while securities like treasury bonds, stocks, certificates of deposit (CDs) and corporate bonds can also be used. Tangible assets, such as real estate, equipment, inventory and vehicles, are another popular form of collateral.
What is the most common type of small business loan? ›
1. Term loans. Term loans are one of the most common types of small business loans and are a lump sum of cash that you repay over a fixed term. The monthly payments will typically be fixed and include interest on top of the principal balance.
How can I increase my chances of getting a business loan? ›- 1 – Get your credit score in check. ...
- 2 – Don't get multiple quotes from multiple lenders. ...
- 3 – Reduce negative balance days. ...
- 4 – Choose the right lender. ...
- 5 – Create a perfectly written business plan. ...
- 6 – Be open to alternative funding options.
Advantages of Forming an LLC
It's much easier to obtain equity and debt financing if you have a separate business entity as well as an established business credit score. Instead of personal loans, you can get small business loans, including leases, factoring, trade credit and more.
- Calculate how big a loan you need. ...
- Choose the items for use as collateral. ...
- Write a business plan. ...
- Research banks you intend to approach. ...
- Put your personal affairs in order.
Heightened regulation standards. In the wake of the recession, increased federal regulations have resulted in banks being more conservative about the amount of risk in their investment portfolio. Small businesses inherently represent more risk than large corporations, making banks hesitant to lend to them.
Can I get a business loan with a 500 credit score? ›Yes, it is possible to get a small business loan even if you have bad credit. This is because your credit score doesn't matter as much as the overall financial health of your business. Many lenders require a minimum credit score of 500, at least six months in business, and more than $30,000 in annual revenue.
How long does it take a bank to approve a small business loan? ›The SBA promises a turnaround time of 36 hours for their express loans. But, that doesn't include the time it takes for the lender to approve the loan, which could tack on another few weeks. So, instead of 60-90 days, you're looking at 30-60 days for the SBA loan processing time when all is said and done.
How many months is a small business loan? ›| Loan type | Repayment terms | Loan amounts |
|---|---|---|
| Term loans | Three months to 10 years | $5,000 to $1 million+ |
| SBA loans | Up to 25 years | Up to $5 million |
| Traditional bank loans | Three to 10 years | $250,000 to $1 million |
| Business lines of credit | Six months to five years | $1,000 to $250,000 |
Maturity - Up to 25 years for real estate acquisition or construction. Most other SBA loans are limited to 10 years. Working capital loans are generally limited to seven years.
Does everyone qualify for SBA loan? ›In general, eligibility is based on what a business does to receive its income, the character of its ownership, and where the business operates. Normally, businesses must meet SBA size standards, be able to repay, and have a sound business purpose. Even those with bad credit may qualify for startup funding.
Do you have to be profitable to get an SBA loan? ›
Lenders also set certain qualifications for SBA loans. Many lenders require a minimum of $100,000 in profits each year. Some also require a credit score of 620 or higher.
How much of a down payment do I need for an SBA 7a loan? ›Do SBA loans require a downpayment? Yes, the minimum SBA loan down payment requirement is 10% on 7(a) and 504 loans and is based on a business's cash flow and collateral. Weak cash flow or low-value collateral can increase the down payment requirement to up to 30% of the loan amount.
How much revenue do you need for SBA 7a loan? ›- Your business must have fewer than 500 employees, and less than $7.5 million revenue on average each year for the past three years.
- Your net income must be under $5 million (after taxes and not counting carry-over losses), and your tangible net worth must be less than $15 million.
| SBA loan size | 7(a) loan paid off in under 7 years * | 7(a) loan paid off in over 7 years * |
|---|---|---|
| $25,000 or less | 12.25%. | 12.75%. |
| $25,001 to $50,000 | 11.25%. | 11.75%. |
| More than $50,000 | 10.25%. | 10.75%. |
| *Rates calculated with the current prime rate of 8%. Updated March 2023. | ||
The Board of Governors of the Federal Reserve System voted unanimously to raise the interest rate paid on reserve balances to 5.15 percent, effective May 4, 2023.
Are SBA interest rates going up? ›As of June 15, 2022 the Federal Reserve has raised its target interest rate by 75 basis points resulting in rise in the prime rate to 4.75%. SBA 7(a) loan rates will not be affected by this increase until July 2022.
Are interest rates going up more in 2023? ›May 3, 2023, at 9:06 a.m. The Federal Reserve raised interest rates seven times in 2022 and twice – so far – in 2023, with the most recent increase of 0.25% occurring in March 2023. Its aim is to cool inflation, which is near its highest levels since the '80s.
What is the date of the next Federal Reserve meeting 2023? ›The Fed - May 2-3, 2023 FOMC Meeting.
What is the lowest interest rate for SBA loan? ›What is the current SBA 7(a) loan interest rate? The current SBA 7(a) loan interest rate is WSJ Prime + 2.75% for loans of $50,001 and up, WSJ Prime + 3.75% for loans of $25,001 to $50,000, and WSJ Prime + 4.75% for loans of $25,000 or less. The Current prime rate is 8% as of May 2023.
What is the maximum SBA interest rate? ›| 7(a) loan amount | Maximum fixed rate |
|---|---|
| $25,000 or less | 16% |
| $25,000 to $50,000 | 15% |
| $50,000 to $250,000 | 14% |
| Over $250,000 | 13% |
Is getting an SBA loan a good idea? ›
SBA loans are generally attractive to small business owners because of their guaranties and interest rate caps. However, drawbacks include long loan closing processes and collateral requirements.