Business loan rates in 2026 are lower than their 2023–2024 peaks — but "lower" is relative. The Federal Reserve cut rates three times in the second half of 2025, bringing the federal funds rate to 3.5%–3.75%. That's passed through to borrowers, but not uniformly, and the range of rates across lender types is enormous.
Here's what the data actually shows, broken down by loan type.
The Rate Landscape at a Glance
| Loan Type | Typical Rate Range (2026) |
|---|---|
| Conventional bank term loan | 7.0% – 11.0% |
| SBA 7(a) loan | 9.75% – 14.75% |
| SBA 504 loan | 6.0% – 7.5% (fixed, 10/20-yr debenture) |
| Credit union business loan | 6.5% – 10.5% |
| Business line of credit (bank) | 7.5% – 12.0% |
| Online lender term loan | 15% – 45% APR |
| Merchant cash advance | 40% – 150%+ effective APR |
| Equipment financing | 6.0% – 25.0% |
| SBA Microloan | 8.0% – 13.0% |
| CDFI loan | 7.0% – 15.0% |
Sources: Federal Reserve Bank of Kansas City Small Business Lending Survey Q4 2025; SBA.gov rate maximums; NerdWallet rate survey June 2026
Bank Loan Rates: The Federal Reserve's Data
The most reliable benchmark for bank loan rates comes from the Federal Reserve Bank of Kansas City's quarterly Small Business Lending Survey. In Q4 2025:
- Fixed rates at urban banks: averaging 7.0%
- Fixed rates at rural banks: averaging 7.3%
- Variable rates at urban banks: averaging 7.9%
- Variable rates at rural banks: averaging 7.6%
The overall range across conventional bank products runs from roughly 6.8% to 11%, with the spread driven almost entirely by borrower risk profile — credit score, DSCR, collateral, and time in business.
SBA Loan Rates: How the Caps Work
SBA 7(a) rates are set as a spread over the prime rate (currently approximately 6.75%). The SBA caps the maximum spread lenders can charge:
| Loan Size | Maturity < 7 years | Maturity ≥ 7 years |
|---|---|---|
| $50,000 or less | Prime + 4.5% | Prime + 4.5% |
| $50,001 – $250,000 | Prime + 3.25% | Prime + 3.75% |
| $250,001 – $350,000 | Prime + 2.25% | Prime + 2.75% |
| Over $350,000 | Prime + 2.25% | Prime + 2.75% |
Source: SBA.gov, current as of 2026
At a prime rate of 6.75%, the current range on SBA 7(a) loans is approximately 9.75% to 14.75% depending on loan size and term. Lenders can price below the cap — competitive SBA lenders often do — but can't exceed it.
SBA 504 loans are different: the 10-year and 20-year debenture portions are priced off Treasury yields and are often well below conventional bank rates — historically in the 6%–7.5% range. For commercial real estate and major equipment purchases, this makes the 504 one of the most cost-effective options available.
Online Lenders: Understand What You're Paying
Online lenders advertise rates that can look competitive until you read the fine print. The difference between "factor rate" and "APR" is significant:
- A 1.3 factor rate on a 12-month $100,000 advance means you repay $130,000. That sounds like 30% — but because payments come out daily or weekly starting immediately, the effective APR is closer to 60%+.
- Online lenders that disclose APR directly are easier to compare. Look for the TILA-required APR disclosure, not just the factor rate.
Online lending is appropriate for bridge financing, working capital gaps, and businesses that don't qualify for bank products. It is not a substitute for a bank loan when you have time to pursue one.
What Actually Determines Your Rate
Lenders price credit risk individually. The factors that move your rate:
Credit Score The biggest single factor. At most banks, the difference between a 680 and a 740 FICO can be 1.5–2 percentage points on a term loan.
DSCR (Debt Service Coverage Ratio) A DSCR above 1.35x qualifies for better pricing at most community banks. Below 1.20x, expect a higher rate — if you're approved at all.
Use our DSCR Calculator to see exactly what number lenders will use.
Time in Business Under 2 years: expect a risk premium of 1–3 points over what an established business would pay for the same loan.
Collateral Unsecured loans carry higher rates. Commercial real estate as collateral typically earns the lowest pricing.
Loan Term Shorter terms generally come with lower rates. A 5-year term loan will usually price better than a 10-year.
Fixed vs. Variable Fixed rates are running slightly below variable at most banks right now, which is unusual. That relationship typically reverses when the market expects rates to fall.
A Note on Rate Comparisons
When you compare offers, always compare on APR (Annual Percentage Rate), not stated interest rate. The APR includes origination fees, packaging fees, and other costs folded into the effective rate. An SBA loan with a 10.5% rate and a 2% origination fee has a higher effective cost than a bank loan at 10.75% with no fees — but the stated rate comparison makes it look cheaper.
Use our Loan Payment Calculator to compare total cost of financing across different rate scenarios, not just monthly payment.
The 2026 Rate Outlook
The Federal Reserve's cuts in late 2025 have flowed through to variable-rate products, and fixed rates have followed to a lesser degree. Most economists anticipate 1–2 additional modest cuts through 2026, which would push bank rates somewhat lower.
For borrowers: if you're looking at a variable-rate SBA 7(a) loan, rates may improve modestly over your loan term. If you want certainty, SBA 504 fixed-rate debentures offer the most predictable pricing in the current environment.
Summary: What to Benchmark Against
If you're a qualified borrower (680+ credit, 1.25x+ DSCR, 2+ years in business, collateral available):
- Expect 7.0%–9.5% at a community bank
- Expect 9.75%–11.5% on an SBA 7(a)
- Expect 6.0%–7.5% on an SBA 504 (real estate/major equipment)
If you have credit or income challenges:
- Budget for 10%–15% at a CDFI
- Budget for 15%–40% APR at an online lender
- Avoid MCAs unless it's truly a last resort — model the effective APR before signing
Rates matter. But rate is only one variable. A higher-rate loan with 10-year amortization often has a lower monthly payment than a lower-rate loan with a 3-year balloon. Always compare on total cost and cash flow impact together.
Our Loan Payment Calculator models exact monthly payments, total interest paid, and full amortization — so you can see the real difference between competing offers.