A good small business loan rate is found in the many options available for entrepreneurs. Should a business be minority or women owned then that improves the options available. Commercial lending rates vary but typically not by much when compared to home or private lending. Because commercial loans are reviewed heavily before approval and secured very well, the rates stay close to the prime lending rate.
The Small Business Administration has a number of loan products available to assist small business. Starting with the SBA Microloan which are loans given through SBA intermediaries with lending amounts under $35,000. The small business loan rate is around 8% and is tied to the Treasury lending rate plus 7.5% or 8.5% (depending if the loan is above or under $10,000). The SBA’s primary lending instrument is a loan guarantee product called the SBA 7(a) loan with a maximum guaranteed amount of $1.5 million. Lending is done through an approved bank, the SBA guarantees the loan and the rate is tied to the prime lending rate. 7 (a) loans over $50,000 have a rate maximum of prime plus 2.75% (2.25% if the term is under seven years).
There are community development organizations that lend to small businesses. They exist to create and grow small businesses as small business brings revenue to a community and creates jobs. Their credit standards are not as rigid as formal banking institutions and they are very open to women and minority owned businesses. Typically their small business loan rate is around 4.25%-8.75% interest. Their maximum lending amounts are relatively low being around $50,000-$100,000, but they will have lending arrangements with banks to help with larger loans. These community organizations are distributed throughout the US and serve both urban and rural areas.
Examples of community organization low interest rates include Accion in Albuquerque, New Mexico. Accion offers rates of 2% to 7% depending on risk and has a maximum loan of $150,000. In Tulsa, Oklahoma the Tulsa Economic Development Corporation (TEDC) utilizes SBA products and likes to tout the SBA 504 where they can offer a fixed 4.7% for a ten-year term. The SBA 504 is used for mortgage financing for acquisition and/or renovation of capital assets (land, building, equipment) and it has loan maximum of $4 million. In Harrisburg, Pennsylvania the Harrisburg Regional Chamber has the Capital Region Economic Development Corporation (CREDC). The CREDC has a small business loan below market rate at 4.25% and a maximum amount of $200,000.
These are just a few quick examples of community organizations throughout the country lending to small businesses. As seen sometimes they can beat conventional commercial lending and even the SBA small business loan rate.