Many factors affect an enterprise’s survival rate, but lack of funding is one of the most common. Fortunately, business owners have several ways to boost their capital, with business loans topping the list.  

Taking this route is a big step for any company. The business could stay in debt for long periods, and the interest rates can eat up a huge portion of the profit. Worse, borrowers may lose their assets to the lender in secured loans.     

All these can be avoided by being smart about lending. By understanding what impacts loan pricing and where to search, you can compare rates wisely. This guide covers key strategies to land the best rates for your next business financing.

1. Know Your Credit Score

Your credit score plays a major role in the interest rates and terms lenders will offer, so start by checking your business and personal credit reports. Some free services provide reports from major bureaus. Review them for errors that could unjustly lower your scores. If needed, dispute inaccurate items. 

With a good credit score of over 700, you’ll access cheaper rates. Aim to establish positive payment histories, low credit utilization, and long average account ages. Check current interest rates on business loans from multiple lenders to see where your credit stands. Those with excellent scores can qualify for the lowest rates.

2. Match Needs To Loan Types

Rather than getting swept up in enticing rate advertisements, ensure a lender's products suit your borrowing needs first. The loan type, like Australian Business Loan (ABN) and so on, itself significantly impacts pricing, with shorter-term loans and lines of credit having higher rates than long-term instalment loans. 

Factor in how much access you need to funds, when repayment should happen, and what purposes they will serve. Then, narrow options to loan products matching those use cases to avoid paying higher interest costs better suited to different situations. 

Get an ABN loan for any business need and access a product with your preferred term length, payment structure, limits, and uses. Doing so ensures ideal rate eligibility off the bat before other qualifying factors come into play.

3. Evaluate Lender Types  

Rates vary significantly between different lender types. Weigh the pros and cons of these common options:

• Banks offer some of the lowest rates but can have strict eligibility requirements and lengthy application processes.

• Credit unions are member-owned institutions that return profits to customers through better rates. You must meet membership criteria to access funding. 

• Alternative lenders are more willing to finance riskier businesses than traditional banks. They often have higher rates but faster approvals. 

• State and federal programs promote economic growth by lending to target demographics. They tend to offer lower rates with specific use requirements. Additionally, you can check if you qualify for business grants from the government.

Evaluate multiple lender websites to compare their average interest rates and eligibility criteria. An online loan marketplace can also give rate comparisons across many companies. Apply with lenders most likely to approve at competitive pricing.  

4. Know The Impacts On Your Rate

Business loan interest rates vary wildly from lender to lender. It typically ranges from seven to 20 per cent, depending on the financing type and your business profile, among other factors.   Consider how these elements affect the rate you could achieve:

• Loan Type: The lowest rates go to term loan borrowers who repay over three to five years. Short-term loans and lines of credit typically carry higher rates. 

• Requested Amount: Lending large amounts reduces rates due to lower relative origination costs.

• Usage Purpose: General working capital loans allow flexibility but have higher rates than those tying funds to specific uses like real estate or equipment.  

• Business Financials: Older, profitable companies with strong revenue and collateral qualify for lower rates more easily.   

Check if lenders offer rate discounts for borrowing history or automatic payments from linked accounts. Such perks allow qualified borrowers access to even cheaper funding.

5. Compare And Negotiate Rates 

Simply grabbing a few rates online or from bank branches fails to reflect what your business truly qualifies for. Instead, make sure you evaluate rates the right way.

Avoid unnecessary credit checks by getting rate ranges before formally applying anywhere. Many lenders and brokers provide rate quotes quickly through online tools or over the phone. Compare ranges across multiple companies as if shopping for your best deal. 

While getting a loan pre-approval does require a credit check, this also yields highly accurate rate quotes worth the inquiry. Pre-approvals reflect your true risk profile versus general rate ranges.

Submit several full applications with lenders, then negotiate final rates and terms. Allow each company to assess your financials to make their best offer. Strategically time applications so lenders compete during underwriting. Don't hesitate to leverage better offers from one company with the others when bargaining. 

Which Lender Is Right For You

With many lending options available, business owners can feel overwhelmed when finding the most competitive interest rates. Before applying: 

• Pick the ideal product;

• Understand what impacts your interest rates;

• Research multiple lenders to determine your eligibility; and others.

These save time from unlikely approvals. When comparing rates, calculate the annual percentage rate, which includes the interest rate and additional charges for the loan. With these savvy tips, you can secure financing with maximum savings.