Fixed Rate Business Loans

Business loans are amounts of money temporarily given from a lender to a borrower that are used during all stages of enterprise in order to allow companies to be created, become successful, and remain in business. Like most other types of loans, business loans can come with adjustable interest rates, variable interest rates, or fixed interest rates.     

A fixed rate loan is a loan that charges the borrower the same amount of interest per month (or per another established time period) for the entire term of the loan. The business loan interest rate, whether fixed or otherwise, depends on the lender and the borrower's specific circumstances. A business lender determines if a borrower is eligible for loan payment and what interest rate to charge based on the borrower's credit history and the amount of risk that the borrower presents. A riskier borrower is one that is more likely to default on a loan and therefore cause the lender to lose money. As a borrower's level of risk increases, so does the interest rate that the borrower will be charged.   

A fixed rate business loan is advantageous for borrowers because it allows them to have completely predictable payments for the life of a loan. Fixed interest rates allow borrowers to prepare to pay a specific amount each month without having to face the fear of randomly increasing payments. Fixed interest rates are usually advantageous to the borrower during times when the market rate is not expected to go down in the near future. If the market rate goes down during the term of the loan, fixed rate borrowers must still pay the higher rate that was established at the time of closing.