Factors within your control and the value of working with a local lender.

Business loans make many things possible, including opening a new location, purchasing equipment or managing cash flow. Interest rates, which make up the bulk of financing costs, are determined by both factors that are within your control and market conditions. Here’s what lenders consider when determining how much your business will pay to borrow.

Creditworthiness and ability to repay the loan

When evaluating a business loan application, lenders focus on several key factors: the business’s creditworthiness, collateral available for the loan and its ability to repay the loan.

Creditworthiness is used to determine whether a loan will be approved and, if so, the loan terms, including the interest rate. In particular, lenders look for a history of on-time payments. They also look at how much debt the business carries and if there have been any bankruptcies. To a large extent, these factors are within the business’s control.

Lenders also look at the owners’ personal credit scores and personal financial position. (Find out more about what to expect when applying for a business loan here.)

To assess a business’s ability to repay the loan, lenders look for sufficient cash flow and financial stability. Most business loans require collateral. If so, the lender will assess the value of assets pledged to secure it.

Strength in creditworthiness and the ability to repay the loan indicates lower risk, which translates to lower interest rates.

Market factors that influence interest rates

Business loan interest rates are influenced by several market factors. In addition to the benchmark prime and Treasury rates, economic conditions such as inflation, demand for loans and competition among lenders can drive rates up or down. These are factors outside of business owners’ control.

Why local lending matters

Many small business owners find that big banks are less likely to make smaller loans because they may not be as profitable. Consumers believes we thrive when our local communities thrive, so our commercial loan officers take the time to get to know you and your business. Whether you want a business line of credit, commercial real estate loan, equipment or vehicle loan or SBA loan, we work with you to understand your needs and explore options to help your business grow.

 

All loans subject to approval. Rates, terms, and conditions are subject to change may vary based on credit worthiness, qualifications, and collateral conditions.