Why Choose a Variable Rate SBA Loan

One of the most important decisions that you can make for your small business is what type of loan to use for your financing. 

While there is a multitude of options available to you, many business owners choose the variable SBA loan as their financing of choice. Here is why a variable SBA loan may be the best choice for your business needs.


About Variable Rate SBA Loans

A variable rate SBA loan means that you can borrow money at an interest rate that fluctuates over time. According to Lantern Credit, “With a variable rate loan, you’ll pay a base rate (also called a reference rate) plus whatever rate you qualify for.” 

This compares to a fixed rate loan that does not deviate from the initial interest rate over the life of the loan. Because this rate is not tied to the interest rates set by the federal government, the payment will be consistent throughout the life of the loan.


Reasons to Choose a Variable Rate SBA Loan

There is no shortage of reasons that point to why a variable SBA loan is a good choice for your business needs. As a general rule, variable rate SBA loans translate to more competitive interest rates compared to conventional loans.

If the base interest rate goes down, you will see the advantages of this by a reduction in the rate for your small business loan. This means that you will be paying less each month, freeing up more of your cash flow to grow your business.

Many small business owners are drawn to these types of loans because it is easier for this type of business venture to afford a slightly bigger payment if the base interest rate increases. Because an increase in the base interest rate usually means the economy is firing on all cylinders, it stands to reason that the small business is also enjoying economic success in the current environment. 

Likewise, a downturn in the economy that may hurt a small business will likely result in lower interest rates overall, helping the business owner to be able to withstand a tougher climate.

Additionally, this type of loan is often a good choice for small business owners who need to borrow money with a lower down payment. A variable-rate SBA loan is known for its lower down payment requirements when compared to conventional bank financing. This makes it easier for those without much venture capital to jump into the market.


Navigating Fluctuating Interest Rates

Although you may think it is confusing to follow the fluctuating interest rates, a professional agency such as Lantern Credit is there to help you to understand the SBA loans interest rates

This will give you the confidence of knowing that you are harnessing the power of this type of loan to save money on your business costs.

Understanding how to choose the best business loan for your organization can have a profound effect on your bottom line. Be sure to consider how a variable rate SBA loan can boost your odds of success.

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