Ways to lower your interest rates on business loans

When it comes to getting a loan for your business, one thing that is inevitable is paying interest. You can hope to get a low-interest business loan up front, but that is not always the case.

The following are some ways you can lower your interest rates on business loans.

Get a SBA loan.
If you want a lower interest rate on business loans, consider a loan from the SBA. This type of loan is called a Guaranty loan because the money is provided by banks. They can set up the loans however they wish, provided they follow SBA requirements. This is a good option because the interest rates are typically lower because the lender shares the risk with the SBA. The bank receives a guaranty on a portion of the loan from the SBA. This means that should the person receiving the loan default on it, the SBA will pay a portion of it back, similar to a co-signer. Because of this, they can afford to offer lower interest rates.

Shop around.
Lenders are a business, and if you have a competitive credit score, chances are you will have lenders will are willing to negotiate the interest rate a little bit to get your business. But it's important not to apply at too many different lenders. Because each one will pull your credit, it can lower your score if you apply for too many loans. Instead, start first with banks you already have a relationship with, especially if you have a business checking account opened already. Do your research as well, and look for lenders that specialize in your type of business or that fund a lot of business loans.

Have excellent credit.
The best way to ensure you get a lower interest rate on your loan is by having excellent credit. Check your credit to see if there are any blemishes on your report, and work on getting them fixed before you apply for a lower interest loan. (Typically, lenders want to see at least 2 years of no missed or late payments if extending a business loan.) If you notice any mistakes on your credit report (they can and do happen, so check to make sure all negative marks are legitimate), start the appeal process to get them removed.

Pay your bills on time.
If you already have a business loan but want to try and lower your interest rate, you can do so by making sure all of your bills are paid on time. If you have a proven track record of never being delinquent with your payments, you have more negotiating power when it comes to asking the bank to lower your interest rates.

Get a rate lock.
If your rate is not locked in, you could experience a fluctuation when it comes to interest rates. Request a rate lock as well if you are applying for a loan. Fluctuations in rates occur on a daily basis, so if it's low, request that it be locked in to save money on interest in the long run.

When it comes to a business loan, or any loan for that matter, the lower your interest rate, the better. That means more of the money you pay towards your loan each month goes towards the principal and it also means lower monthly payments. These are a few tips for getting a lower interest rate on your business loans.