As most small businesses owners are not experts in finance, loan rates can be intimidating and often confusing. Yet, businesses will require loans for a variety of reasons, and you’ll need to choose between a fixed rate loan and a variable rate loan. Both could have advantages for you, depending on your circumstances. Here are a few considerations about loans rates that will help make the choice a bit easier.
When you take out a loan with a fixed rate, the interest rate throughout the life of the loan will remain the same. There are several advantages to these types of loan rates. As your loan payment will never change, it will make it easier for your business to plan and budget. Also, if market interest rates increase, your loan payment won’t be affected as you will remain locked into your loan’s original rate.
When you take out a variable rate loan, the interest rate can change during the life of the loan according to an index that is tied to the market. There are both advantages and disadvantages to choosing financing with these loan rates. The advantage is that your rate, and payment, can go down. The disadvantage is that there is the risk involved in your rate potentially increasing in response to market conditions.
A blended rate loan is a unique financing agreement provided by some lenders as an incentive to keep current customers. The loan rates offered are higher than an existing loan but lower than what a customer would pay if they went out into the market to try to secure a new loan.
While financing decisions can be difficult for business owners, they don’t need to be confusing. Choosing between a fixed or variable rate loan largely depends on the current market conditions and the business’ attitudes towards risk. Many institutions offer business owners choices in programs and loan rates.
We offer a variety of business financing solutions at different loan rates to help you leverage your business. No matter your particular circumstances or request, contact us with any questions or for a no obligation analysis.