Average Small Business Loan ― What is Your Neighbor Paying?

Average Small Business Loan

  • The average small business loan for those not classified as having low or moderate income was $37,500 in 2015 according to the official Federal Reserve site

The average loan amount varies wildly depending on whether or not an area is within the Federal Reserve’s classification of an assessment area or not.

Those classified as LMI, meaning low to moderate income, which is defined as 80% or under the median income for their geographic area, take an average much higher loan than those who are non-LMI classified.

Those classified as LMI took an average $42,300 loan versus the average $37,500 loan of those who are non-LMI, meaning those with 80% or more of the average income in their area took a lower average loan amount.

This is likely because they have more disposable income they can put toward their business, meaning they don’t need to take as high of a loan to start.

SBA 7a Loan Interest Rates 2019

If you’re looking to get an SBA 7a loan, here are the interest rates you can expect in 2019:

SBA loan size7(a) loan paid off in under 7 years *7(a) loan paid off in over 7 years *
$25,000 or less9.50%10.00%
$25,001 to $50,0008.50%9.00%
More than $50,0007.50%8.00%

The rates are better than what you’d get with a credit card, but still not ideal if you’re looking to build a business without paying a lot of interest.

If you’re considering a small business loan, try going to several local banks and looking online to see where you get the best deal.

Jumping on the first option you see is usually a mistake, and you’ll want to spend the time finding the lowest rate possible to save as much money as you can on interest payments.

Credit Card Average APR

Credit cards are often not the best option in terms of loans and financing.

A 2013 report found the average credit card APR was 14.93%, meaning you’re paying almost 15% in interest to a credit card company on top of the cost of what you actually bought each month.

This is far from ideal, and if you think about it, this means for every $100K you purchase on a credit card, you’re actually paying $115K for.

This would be like walking into a store and instead of seeing a sale for 15% off everything, you see a sign that says, “Buy whatever you want and we’ll add 15% to the total cost”.

Basically it’s a horrible deal and I wouldn’t recommend using a credit to finance anything unless you see absolutely no other way or think you’ll be able to pay off your balance before the 0% APR period ends.

Equipment Financing vs Loans

If you are already maxed out on the amount of loans you can take, you can always consider financing your equipment to make it fit into your budget.

This means you pay a lower monthly fee to use the equipment, and depending on your contract, after a certain amount of months you either give it back, renew the contract, or fully own the equipment.

Leasing or financing equipment is a great option for those looking to run a business even if their cash flow is not high enough to outright buy the equipment they need for their business to function.

Many of us already finance equipment on a personal level by paying a certain amount monthly for our cell phone that is included in our monthly cell phone payment plan.

It’s possible to finance all types of equipment including phones, laptops, hair salon chairs, machines, and pretty much anything you can physically pick up with your hand.

Even if you can’t physically pick it up, you can often finance it, as many software pieces and other non-physical items are also available for financing.

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