A small business loan can be a great way to get the capital you need to keep your business running. But when it comes to choosing the right loan, it's important to understand the difference between fixed and variable interest rates. With a fixed-rate loan, the interest rate and monthly payment don't change over the life of the loan, making it easier to budget for repayment. Fixed-term loans usually have fixed rates.
On the other hand, small business loans with variable rates are subject to change depending on the specified loan. This often results in a lower total cost of capital and lower interest rates overall than those offered by “fixed-rate loans”. Studies have shown that borrowers are likely to pay less interest on a variable-rate loan compared to a fixed-rate loan. When applying for a small business loan, lenders require you to submit a large number of documents and information sheets about your business to show that you qualify. Most business owners choose banks and credit unions, but keep in mind that they have strict requirements.
Business loans with varying repayment rates are great for ensuring that business owners can finance any challenges or growth opportunities that come their way, while ensuring that they only pay exactly the funds they need to spend. The truth is that choosing the right interest rate plan that fits the needs of your business, while paying the lowest possible interest amounts, is actually incredibly simple. After all, the longer the term of your loan, the greater the risk of interest rates rising at some point. For those who know exactly how much capital they need to fund their specific goals and how much they feel comfortable returning in each cycle, this is the loan for you. National Business Capital helps entrepreneurs obtain fast and fair funding to save time and cultivate sustainable growth. We hope this article has helped you decide if a variable or fixed rate loan is best for your small business.