Average Business Loan Interest Rates — February 2026
Current business loan interest rates across all loan types including SBA, term loans, lines of credit, equipment financing, and merchant cash advances. Updated February 2026.
Business loan interest rates in February 2026 reflect a stabilizing rate environment following the Federal Reserve's decision to hold the federal funds rate at 3.50%-3.75% in January 2026. After three consecutive rate cuts in late 2025, borrowing costs have settled at their lowest levels since 2022.
The current prime rate stands at 6.75%, which serves as the benchmark for most variable-rate business loans. This represents a meaningful decrease from the 8.50% peak seen in mid-2024, making business financing more affordable across most product categories.
Current Prime Rate and Federal Funds Rate
The prime rate is the foundation for most business loan pricing. Banks typically set prime at 3% above the federal funds rate.
| Rate Type | Current Rate | Previous (6 Months Ago) |
|---|---|---|
| Federal Funds Target | 3.50%-3.75% | 4.75%-5.00% |
| Prime Rate | 6.75% | 7.75% |
| 5-Year Treasury | 3.83% | 4.15% |
| 10-Year Treasury | 4.29% | 4.55% |
Rate Outlook
Markets currently price in approximately two additional quarter-point cuts later in 2026, though Federal Reserve Chair Jerome Powell has emphasized that decisions will depend on incoming economic data. Inflation remains elevated, which may delay further cuts.
Business Loan Rates by Product Type
Interest rates vary significantly based on loan type, lender category, and borrower qualifications. Here is what you can expect across the major business financing products as of February 2026:
| Loan Type | Rate Range | Typical Term | Best For |
|---|---|---|---|
| SBA 7(a) Loans | 10.00%-13.50% | 10-25 years | Established businesses, real estate, expansion |
| SBA 504 Loans | 6.00%-7.00% (CDC portion) | 10-25 years | Commercial real estate, heavy equipment |
| SBA Microloans | 8.00%-13.00% | Up to 6 years | Startups, small capital needs under $50K |
| Bank Term Loans | 6.70%-11.50% | 1-10 years | Strong credit, established businesses |
| Online Term Loans | 14.00%-45.00% | 3 months-5 years | Fast funding, flexible qualifications |
| Bank Lines of Credit | 8.00%-15.00% | Revolving | Ongoing working capital, seasonal needs |
| Online Lines of Credit | 15.00%-35.00% | Revolving | Quick access, lower credit scores |
| Equipment Financing | 5.99%-25.00% | 2-7 years | Purchasing machinery, vehicles, technology |
| Invoice Factoring | 1.00%-5.00% (factor rate) | Per invoice | Immediate cash from receivables |
| Merchant Cash Advance | 1.20-1.50 (factor rate) | 3-18 months | Fast cash, daily repayment from sales |
Bank vs. Online Lender Rates
The rate differential between traditional banks and online lenders reflects fundamentally different business models and risk appetites.
| Factor | Banks | Online Lenders |
|---|---|---|
| Typical APR Range | 6.70%-15.00% | 14.00%-99.00% |
| Minimum Credit Score | 680+ | 500-600 |
| Time in Business | 2+ years | 6 months-1 year |
| Approval Time | 2-6 weeks | 24-72 hours |
| Documentation | Extensive | Minimal |
| Collateral | Often required | Often unsecured |
Banks offer substantially lower rates because they select lower-risk borrowers and can access cheap deposit funding. Online lenders charge more because they approve riskier borrowers, fund faster, and have higher cost of capital.
The right choice depends on your situation. If you have strong credit, financials, and can wait several weeks, pursue bank financing. If you need capital quickly or have credit challenges, online lenders provide access you would not otherwise have — at a price.
How Your Credit Score Affects Rates
Your personal FICO score remains the single most important factor in business loan pricing, especially for businesses under $5 million in annual revenue.
| FICO Score | Expected Rate Impact | Loan Access |
|---|---|---|
| 750+ | Best available rates | All loan products, most competitive terms |
| 700-749 | +1-2% above best rates | Bank loans, SBA, most products available |
| 650-699 | +2-4% above best rates | Some banks, SBA possible, online lenders |
| 600-649 | +4-8% above best rates | Limited bank options, primarily online |
| Below 600 | Highest rates or factor pricing | Online lenders, MCAs, invoice factoring |
Improving Your Rate
Before applying for financing, check your credit reports for errors at AnnualCreditReport.com. Paying down credit card balances below 30% utilization can boost your score quickly. Even a 20-point improvement can meaningfully reduce your interest rate.
Understanding APR vs. Factor Rates
Different financing products quote rates differently, which can make comparisons confusing.
- APR (Annual Percentage Rate) — Standard interest rate including fees, annualized. Used by banks, SBA lenders, and most term loan providers. A 12% APR on a 5-year loan means you pay roughly 12% of the balance each year in interest.
- Factor Rate — A multiplier applied to your loan amount. Used by merchant cash advances and some short-term lenders. A 1.35 factor rate on $100,000 means you repay $135,000 total, regardless of how quickly you pay.
- Simple Interest Rate — Interest calculated only on the principal, not compounding. Some equipment financing uses this method.
Critical point: A factor rate of 1.35 on a 12-month loan translates to roughly 50-70% APR. Always convert factor rates to APR for accurate comparison with traditional loans.
What Drives Business Loan Rates
Lenders price loans based on several risk factors:
- Federal Reserve policy — The prime rate follows the federal funds rate, affecting all variable-rate loans
- Your credit profile — Personal and business credit scores, payment history
- Time in business — Longer operating history typically means lower rates
- Annual revenue — Higher revenue demonstrates repayment capacity
- Industry risk — Some industries face higher default rates and pay more
- Collateral — Secured loans carry lower rates than unsecured
- Loan amount and term — Larger, longer loans may have different pricing
- Lender competition — Shop multiple lenders; rates vary significantly
Rate Trends and Outlook
Business loan rates have decreased meaningfully from their 2023-2024 peaks. The Federal Reserve's three rate cuts in late 2025 brought the prime rate down from 8.50% to 6.75%, translating directly to lower costs for variable-rate business loans.
Looking ahead, market expectations suggest possible additional cuts in late 2026, which would further reduce borrowing costs. However, the Fed has signaled patience due to persistent inflation, so rates may stay at current levels for an extended period.
For businesses considering financing, current rates represent a significant improvement from 18 months ago. If you have been waiting for lower rates, now may be a reasonable time to move forward — especially for fixed-rate products that lock in today's rates.
Use our loan calculators to estimate your monthly payments at current rates. Even small rate differences can significantly impact total cost over a multi-year loan term.
Ready to explore your options?
See what financing you qualify for in minutes — no impact to your credit score.
Related Articles
Current SBA Loan Rates — February 2026
Comprehensive guide to SBA 7(a), 504, and Microloan interest rates for February 2026. Includes rate formulas, current prime rate, and comparison tables.
Read more →Equipment Financing Rates — February 2026
Current interest rates for equipment loans and leases across all equipment types. Includes rates by credit tier, new vs. used equipment, and financing options comparison.
Read more →Business Line of Credit Rates — February 2026
Current business line of credit rates from banks, credit unions, and online lenders. Includes rate comparisons, draw fees, and qualification requirements by credit tier.
Read more →Important Disclosure
Not Financial Advice: The information provided in this article is for general informational purposes only and does not constitute financial, legal, or professional advice. You should consult with qualified professionals before making any financial decisions.
No Guarantee of Financing: Liminal Lending Co. is a business loan marketplace that connects borrowers with third-party lenders. We are not a lender and do not make credit decisions. Submitting an application does not guarantee approval or funding. Loan terms, rates, and availability vary by lender and are subject to borrower qualifications and lender criteria.
Third-Party Lenders: All loan products are offered by independent third-party lenders. Liminal Lending Co. is an Independent Sales Organization (ISO) and receives compensation from lenders for successful referrals. Terms and conditions of any loan are between you and the lender.
Rate Information: Rates, terms, and fees mentioned in this article are estimates based on publicly available information and may not reflect current market conditions or specific lender offers. Actual rates depend on creditworthiness, business financials, and lender policies.
Information May Change: Financial markets, lending regulations, and economic conditions are subject to rapid change. While we strive to keep our content accurate and up-to-date, information in this article may become outdated. Always verify current rates, terms, program availability, and regulatory requirements with lenders and official sources before making financial decisions.