What Determines Rates on Lines of Credit?

What Determines Rates on Lines of Credit?

You can limit usage to only what you need. However, predicting borrowing costs is difficult. The usual interest rates lie between 5% and 20%. Below is a discussion on the determining factors of rates in a line of credit.

Your Credit History

Lenders ask to view your history of borrowing and repaying. In the case of most small business owners and new businesses, lenders look into the personal credit scores and need a personal guarantee.

Features of Your Small Business Loans

Loans with low risk carry lower interests. The level of risk is calculated by the amount of loan and the collateral pledged.

Characteristics of Your Business

Startups are considered as risky borrowers. However, if you have been in the business for a considerable amount of time and if you have good revenue, you will have no difficulty in ensuring the line of credit is repaid in full and on time.

Interest Rates in the Broader Economy

Interest rates are viewed in general throughout the market. This means fluctuations in the international markets will affect the rates available to you.

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