Business loan interest rate - What is the interest rate on business loans?

Different types of interest

Fixed interest rate

Fixed interest, or tied rate, on business loans remains unchanged over the life of the loan - regardless of market fluctuations, you maintain the same interest rate, making your financial planning more predictable.

Benefits: It offers a sense of security and simplicity in budgeting, because you know exactly how much to pay each month.

Cons: When market interest rates fall, you miss the opportunity to pay less. In addition, the fixed interest rate can sometimes be higher from the start compared to variable interest rates.

Variable interest rate

Variable interest rates on business loans change with the market, which can lead to both lower and higher payments over the life of the loan, depending on market fluctuations.

Impact on payments: This means that your monthly costs may vary, which can be an advantage when interest rates fall. On the other hand, when interest rates rise, so do your costs, which can of course affect your company's cash flow.

Amortization and interest

Amortization is about how you repay the loan - either with equal amortization (equal amounts each time) or annuity (same total amount including interest with each payment).

Equal amortization or annuity - which one is right for you? Equal amortization may suit companies that prefer a reduction in debt over time, while annuity may suit those who want an equal total cost. The choice between these depends on your company's cash flow and how you want to manage your payments.

Loan with interest ceiling

Looking for an option that mixes a bit fixed and variable? Then it may be advantageous for your company to consider a loan with an interest ceiling - this means that you, together with the bank or lender, set a maximum interest rate for your variable interest rate. In other words, your interest rate will never exceed a certain limit, which can make it easier for you to plan floating-rate expenses more effectively.

Effective and nominal interest rates - what's the difference?

When it comes to understanding what interest on business loans is, it's equally important to understand the difference between effective and nominal interest rates, as they offer different perspectives on the costs of your business loan.

Nominal interest rate is the base rate for your loan, without taking into account any additional costs or fees. It represents the basic cost of the loan and is expressed as an annual percentage.

Effective interest rates, on the other hand, provide a more complete picture. It includes not only the nominal interest rate, but also all additional costs associated with the loan - such as start-up costs, AVI costs and other administrative costs. Effective interest is calculated on an annual basis and provides a more accurate picture of the total cost of the loan.

For small entrepreneurs, it's important to look at both nominal and effective interest rates when considering a business loan. While nominal interest can give a first impression of loan costs, it's the effective interest rate that actually shows what you'll actually pay.

Average interest rate on business loans

Overall, the average annual interest rate is between 4-8.85%. Larger banks can offer lower interest rates, thanks to lower capital costs, for example between 4-6%. Digital banks and new lenders tend to have interest rates that start around 6-8% per annum.

In addition, as a small entrepreneur, you should consider the monthly costs associated with a business loan. These can range between 1-4% per month, which corresponds to an annual interest rate of between 12-48%. It's important to remember that these numbers may be lower in practice, as many business loans are repaid early. Comparing interest rates is crucial to get an overview of the best options on the market, as interest rates can vary considerably. So remember to carefully evaluate all your options before deciding which loan is best for your business.

What factors influence your interest rate on the business loan?

Creditworthiness

Your creditworthiness acts as an assessment of your financial reliability. What are your company's income and turnover? Are there any arrears or debts with the bailiff? A higher credit rating can lead to lower interest rates because it means lower risk for the lender.

Improvement tips: To improve your credit rating, make sure you pay bills on time, reduce debt and avoid frequent credit checks.

Loan amount and term

Larger loans and longer maturities can often mean higher interest rates, due to the increased risk for the lender.

Find the right balance: Choose a loan amount and duration that suits your company's needs and payment capacity. A well-balanced strategy minimizes your costs while meeting your capital needs.

Security and personal deposit

Offering securities, such as real estate or inventory, can lower your interest rate because it reduces the risk for the lender. A personal deposit also increases your chances of getting lower interest rates.

Limited Assurance Options: If your company does not have sufficient security, consider improving other factors such as creditworthiness, or find alternative forms of financing that do not require traditional collateral.

Tips for getting an advantageous interest rate on business loans

Securing an attractive interest rate on your business loan can be crucial to the success of your business. Here are some tips to make this work to your advantage:

Compare your deals

Use online tools and comparison sites to compare interest rates. These platforms provide an overview of the various options on the market and help you make an informed decision.

Build a strong business plan

A compelling business plan can be your best friend at the negotiating table. It shows lenders that you have a solid plan to grow and manage the loan effectively. Lenders often look for clarity, realism, and potential in your business plan - they want to see a well-thought-out strategy, realistic financial forecasts, and a clear understanding of the market.

Apply for the loan from Qeld

For a business loan with lower costs, choose Qeld! The only costs for your Qeld loan are a fixed monthly amount, determined based on the size of the loan and your company's creditworthiness. Qeld offers business loans between €5,000 and €500,000 that can help you invest in new equipment, increase your marketing or expand your business. We have no hidden costs or a binding term on your loan - with a smooth one-minute application process, you can get quick and easy access to capital. If everything looks good, you can even have the money in your account the same day!

Make sure you get the right interest rate for your business loan

With practical tips and the right info, you're ready to find the best loan for your business. By creating a strong business plan, navigating between fixed or variable interest rates, and improving your company's creditworthiness, you can now make more informed decisions that promote your company's financial well-being and growth. Ahead, with this knowledge in your baggage, you'll be better equipped to navigate the business lending world and offer your company the best chances of success. Good luck with your business!

Business loan interest questions and answers

Which bank is best for business loans?

The best bank for business loans varies depending on your company's needs and financial situation. That's why it's important to compare different banks and their offers to find the most cost-effective solution for your business.

How much does a business loan cost?

The costs of a business loan depend on factors such as the loan amount, the interest rate, the term and any additional costs. Average interest rates usually range between 4-8.85% per annum, depending on the lender.

Which bank offers the best interest rate on loans?

The bank with the best loan interest rate may vary depending on market conditions and your company's specific situation. It is therefore important to make a thorough comparison of the interest rates and conditions of different banks.

How does a business loan work?

A business loan works by borrowing a sum of money from a bank or lender, which must then be repaid with interest over an agreed period. The loan can be used for various business-related purposes, such as expansion, investments or to improve cash flow during a difficult period.

How much interest is there on a business loan?

The interest rate on a business loan with Qeld, part of Qred Bank, varies depending on various factors, such as the term, the loan amount and the financial situation of your company. Instead of a fixed interest rate, we at Qeld work with a transparent monthly fee structure that you can see in advance, so you know exactly what you're paying each month with no surprises.

By making a free request, you can get an overview of the total costs, including the interest and monthly costs that apply to your situation, within a few minutes. Once approved, the requested amount of €5,000 to €500,000 will be in your account within 24 hours, giving you the opportunity to invest quickly and securely in your business.