Small Business Loans: How the Economy Has Affected Interest Rates

Small Business Loans

Small businesses are often reliant upon loans to help provide funds to manage expenses until the company is able to bring in enough profits to become self-sufficient. Loans for small business offer a solution to financing problems that might arise because the banks are willing to provide funds as long as they are repaid with a set interest charge. When seeking a new loan, it is important to understand how the economy plays a role in interest charges.

Economy and Interest:

Small business loan rates are partially affected by the economy. While current economic conditions are not the only factor that determines the final interest rate, it does play a role in the calculations.

Economic conditions are often a major component to the average small business loan rates. Poor economic conditions that have occurred throughout the recession have resulted in record-lows for loans from the banks. This is primarily supplied to consumers, but it also applies to small businesses as well.

When the economy is struggling, new businesses and companies are needed to help improve cash flow throughout the country. Loans thus end up with a lower interest charge to help provide small businesses with the funding they otherwise could not afford.

Difficulty of Obtaining Loans:

Despite the lower small business loan rates resulting from a poor economy, the difficulty of obtaining new loans increases because lenders are required to ensure the credit worthiness of business owners and the company. Having more assets under the company’s name and having a well-established business that has been around for several years contributes to the availability of funds.

Newer companies who do not have a company-established credit history are less likely to obtain low interest rate loans because the business is not considered credit worthy and is a higher risk than other companies.

Despite the average numbers, loans for small business are variable based on the company and business owner. Numerous factors are involved in the process of determining the final interest rate the company will pay. Economic factors are only one part of the interest amount. The company’s credit worthiness, the history of the business and the business owner’s credit history also play a role in the process of determining interest fees.

For more information, go to Small Business Loan at

Small Business Loans: How the Economy Has Affected Interest Rates was last modified: January 14th, 2012 by Amit Kraidman
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