Lowering Business Loan Costs

The business loan costs that a lender charges will vary, depending on the credit worthiness of the business and its credit risk. Business loan costs include the interest rate, fees and any other charges that may be assessed on the loan by the lender. Lowering business loan costs depends on a business's ability to manage its debt and credit rating.

Debt Leveraging

Debt leveraging is when a lender reviews the overall equity or net worth of a business, in relation to its total debt. Taking the total equity of the business, and dividing it by total debt will give a ratio. Any business should look to lower its debt and look to increase its equity in order to stave off any potential financial failure.

DUNS Rating

A business's credit rating is another measurement used by lenders to determine the cost of a loan. The credit worthiness of a business is rated according to its DUNS rating that is provided through Dunn and Bradstreet. This rating is similar to the rating that consumers receive on their credit report. A business with a good DUNS rating stands a better chance of receiving a better rate and lower fees than a business with a bad or no DUNS rating.

Collateralizing Debt to Lower Costs

A business may be able to lower its loan costs by collateralizing as much of its debt as it can. Collateralization is a form of debt security, which is accomplished by taking some asset or cash and pledging it against the loan. The securitization of a loan helps to lower a business loan's cost because it gives the lender assurance the loan amount is backed by something of value should the business be unable to pay the loan back.  

Lowering a loan's costs helps a business save money that can be used for other purposes. A business should look at their financial position when considering taking on debt and take the steps necessary to improve its credit position in order to qualify for a loan with a low rate of interest.