A conventional bank term loan is the cheapest widely available business debt outside government guaranteed programs. The price of that is time, paperwork and underwriting standards many small businesses cannot meet.
Approximate 2026 cost
About 6 to 11 percent effective APR
Approximate 2026 market range for qualifying borrowers. Individual offers vary.
Typical terms of two to ten years, longer when real estate secures the loan.
Educational estimates only. This page is general information, not financial advice. Cost of Financing does not offer, broker or arrange loans, and we accept no lender sponsorships, referral fees or lead payments.
How bank term loans are priced
Banks price from a base, usually prime or a treasury index, plus a credit spread that reflects the risk of the borrower and the quality of the collateral. Payments amortise, so interest falls over the life of the loan and the quoted rate is close to the effective APR.
Fees are modest by small business standards: an origination or documentation fee, appraisal and legal costs when property is pledged, and occasionally a prepayment charge in the first years. Because the base rate is low, a one percent fee has a visible effect on the effective APR, especially on short terms.
Typical 2026 cost range
For 2026 the approximate range is 6 to 11 percent effective APR. Strong borrowers with real estate collateral and years of clean financials sit at the low end. Unsecured or thinner files that still clear bank underwriting sit at the top.
If a bank quotes materially above that band, the deal is usually being priced as an exception and it is worth comparing against an SBA program before signing.
What moves you within the range
Debt service coverage ratio is the number underwriters care about most, followed by collateral coverage and the length of the banking relationship. Two or more years of profitable tax returns move pricing more than almost anything else.
Loan size matters too. Fixed underwriting costs are spread over the balance, so smaller loans carry a higher effective rate for the same credit quality.
When a bank term loan makes sense
It fits planned, sizeable investments where you can wait weeks for a decision: an acquisition, a build out, a refinance of costlier debt. If you qualify, nothing in the private market beats it on price.
It fits poorly for urgent gaps and for businesses under two years old, where the application usually fails and the wasted weeks have a real cost.
Before you sign
Ask for the annual percentage rate including fees, not just the note rate
Check prepayment terms before you plan an early payoff
Compare against SBA 7(a) and SBA 504 pricing on the same request
Educational estimates only. This page is general information, not financial advice. Cost of Financing does not offer, broker or arrange loans, and we accept no lender sponsorships, referral fees or lead payments.