Are personal loan rates lower rates than business loan interest rates?

They can be, though it depends on your personal financial situation. If you have poor credit, a personal loan might come with a higher rate than a business loan—especially if you have other business partners who can qualify for the loan.

What is the average term for a small business loan?

It depends on the type of loan you're applying for. Term loans tend to come with terms ranging from one to five years, but can sometimes extend up to seven or 10 years. Short-term loans can come with terms ranging from three to 24 months.

Why is the APR so important?

The Annual Percentage Rate (APR) of your business loan is how you can see the true cost of the loan. It reflects the yearly cost of having a loan and takes into account the principal amount of the loan plus accrued interest and fees. Because of this, the APR allows you to analyze multiple loans and find one that balances cost and usefulness for your business.

What is the prime rate and how do lenders use it?

The prime rate is based on the overnight lending rate set by the Bank of Canada, which is the rate banks use to lend to other banks over a 24-hour period. Lenders use this rate to determine the interest rate attached to your loan. The better your credit and the larger your business, the more likely you'll be offered interest closer to the prime rate. Some loans with variable interest rates will calculate changes based off the prime rate. This may be done monthly, quarterly or annually depending on your lender and the terms of your loan.

How do lenders set interest rate?

Lenders set their base rates by the market rate, which may be offered with little markup to established businesses with low risk of default. If your business is still developing, you may have to sign a personal guarantee or provide collateral to secure your loan. This will lower your risk, which will then lower your interest rate.