How to Score a Low Interest Rate on a Short-term Business Loan

Running a small business takes money and a lot of it. At some point or another, profit does not cut- to grow; you have to tap into outside funding. That is the reason why many small business owners look around for the best low interest rate small business loans and more so short term business loans. Naturally, the lower the interest rate on your business loan, the better. Besides, the interest rate you pay plays a significant part in determining your total payback amount. For most business owners, this makes the interest rate one of the essential factors; however, finding the cheapest option around is not always as simple as it sounds. Nevertheless, looking in the right places and knowing steps to take to get a low interest rate can help you find the lowest-cost loan.

Maximizing your chances of getting a low interest rate short term business loan

If you are new to the market of small business lending, then it is simple to jump into a search for a short term business loan, presuming you will find the lowest interest rates on the market. In actuality, it is not always so easy. The terms and rates of a short-term business loan come down to two things: details of the loan itself and the business’s details applying for the loan. Here is how to score a low interest rate on a short term business loan:

Look for the loan elsewhere

Government and bank options tend to be the cheapest low interest short term business loans available. For many business owners, though, the tough requirements mean they are simply not an option. Nonetheless, online lenders have become a readily accessible and viable option for business owners searching for low-interest short-term business loans. Most online lenders do not have strict credit requirements and can assist small businesses in all credit profiles. Having a credit score on the higher end puts you in a better chance to score low rates; however, a lower score will not disqualify you. Higher profits also improve your possibility of qualifying. Since online lenders have an advanced process, you will typically learn if you qualify in minutes, and sometimes you can acquire funding on the same day. This can be a game-changer when you have an immediate opportunity on your hands. Brokers such as National also help you entertain several lenders’ options, meaning you can access the lowest rates across various lenders. Besides, you can estimate your interest rate using a short term business loan calculator.

Build your personal credit

If your credit score hinders you from qualifying for a short term business loan with low interest, then establish it. It does not happen overnight; however, as you keep paying your debts on time and in full, your credit score will eventually reflect the work you are putting in. Payment history makes up the majority of what goes into your credit score, so centering on mastering the art of an on-time, the full balance payment can go a long way.

In the meantime, you can ensure you do not take too much debt on each account. This indicates that you should not have your credit utilization across your credit accounts higher than thirty-percent. A higher credit utilization correlates with riskier borrowers, thus taking on too much debt comparative to your combined credit limits will destroy your credit score.

Here is a sum-up of steps that can help you build your credit score:

  • Use bookkeeping software to create a better budget
  • Dispute any inaccuracies on your credit record
  • Make sure you pay off small business loans (which also assists you to build lender relationships)
  • Make credit card payments on time
  • Pay your bills on time, the inclusion of rent and utilities
  • Know your personal and business credit score, and make financial decisions accordingly

Increase time in business

Staying in business is an easy recommendation, yes. However, simply keeping your business up and running and becoming more developed will do wonders toward opening up the chance of better, lower-interest business loans in the future. Keep managing your business with the utmost care, and after you have hit the two-year threshold, you will be stunned at how much low interest short term business loans will be available to you. Combine that with the steps you are taking to build your credit score, and you are well on your way to acquiring the most affordable short term business loan option for your business.

Do not wait for an emergency

Lastly, one surefire method of avoiding high-interest short-term business loans is making sure that you never wait to seek financing until it is an emergency. Fast business loans are rarely low interest business loans. If you wait till you absolutely require funding to begin your search, your only options will be costly ones. To prevent this case, we suggest accessing a business line of credit at as low of a rate as possible and keeping these funds in your back pocket for emergency purposes. Then you will not be forced to take a short term loan with a high-interest rate.

Shop around

Finding a lending institution can feel daunting that you might be tempted to sign up with the first one that comes along. However, blindly pursuing one loan provider without exploring your other options to compare interest rates is a mistake. Take the time to research various traditional and alternative lenders to get the best fit for your company. While at it, sort advice from an expert.

Low interest short term business loan requirements

Here are the factors that determine if a lender will give you a low interest short term business loan:

Personal credit score

Your personal credit score plays an important role in your loan application, and as a result, in whether you are eligible for low-interest small business loans. Your personal credit score shows how reliable you have been with your personal debts in the past. It is tough to separate you as the business owner from a business’s financials- if you have personally been a responsible borrower, then you will possibly exhibit the same habit of paying back your business’s debt. A personal credit history that indicates a different thing, though, will not instill confidence in the lender. Low-interest business loans are, in part, affordable since the eligible borrowers have stronger credit scores. High credit scores show the lenders you will possibly get their money back; thus, they do not have to offset the potential loss with higher interest.


Another aspect of your business that lending institutions will look at is your business’s industry. This factor is pretty easy: some industries are just riskier than others. Thus the affordability of the interest rates you qualify for can depend on the industry you are in. For example, restaurant entrepreneurs tend to have a challenging time finding restaurant loans because of that field’s risk level. Nonetheless, if you are in an industry that lenders perceive to be safer, you may have a better shot at qualifying for low interest short term loans for your small business.

Time in business

An organization’s time in the business also has a great impact on what interest rates it can qualify for. It is an easy but important credential. A new startup business is a lot riskier for lending institutions to work with- only about half of all businesses make it to the five-year mark. This indicates that it is risky to lend money to a young company because of the chance that they may not be around to repay their funding. On the contrary, a more established business is more likely to qualify for low interest business loans, because they have already managed their finances for some time. Being around for two or more years shows that you can weather the regular ups and downs of running a business. Since this is a much less risky deal for the lender, more established companies will pay less interest. Thus, if your business has just hit an anniversary, it may be a great time to apply for a short term business loan.

Accessibility of the short term business loan

Most low-interest short-term business loans, such as bank loans or SBA loans, have a longer timeline for loan application and approvals than other short term loans. Whereas this is an inconvenience for business owners who need funding really fast, the wait means that you will probably get a lower interest rate- the lender is spending time assessing your full business credentials and becoming fully confident in your reliability. Thus, if they spend the time vetting your business, you will possibly qualify for a low-interest short term business loan.

Cash flow

Cash flow is a measure of how much cash you have on hand to pay back a loan- It is often the first thing lending institutions look at when gauging your business’s health. Inadequate cash flow is a flaw that most creditors can not afford to overlook. Thus, it is the first thing you should consider to determine if you can afford a short term business loan. Try to calculate your cash flow at least quarterly. If you take this step, you might be able to optimize your cash flow before you approach the lenders.

About Author