Guide
Practical Ways to Lower What Your Business Pays for Financing
Short answer
The biggest levers are timing (borrow before you're desperate), comparison shopping on APR and total dollars, matching the term to the use, offering collateral or a stronger guarantee structure where it buys a better rate, cutting fees, and refinancing expensive short-term debt once you qualify for cheaper credit.
Key points
- Urgency is expensive. Arrange a line of credit while things are good.
- Always compare APR and total dollars, not the headline rate.
- Fees deducted from proceeds raise the real cost; negotiate them.
- Supplier terms and early-payment discounts are part of your cost of capital too.
Financing costs are partly about the market and partly about choices. The market you can't control. These choices you can.
1. Borrow before you need it
Lenders price risk, and a business that needs money by Friday has fewer options than one with a line already in place. Set up a line of credit when financials are strong, even if you don't draw on it.
2. Compare on APR and total dollars
Ask every provider for the amount you'll actually receive, every payment and every fee. Convert to APR with our APR calculator. A factor rate of 1.30 collected over six months is roughly 109% APR; a term loan at 11.5% over three years with a modest fee is in the low-to-mid teens.
3. Match the term to the use
Short-term money for long-term assets means refinancing again and again, often at worse terms. Long-term money for short needs means paying interest after the need passes.
4. Use what you have as collateral
Equipment, real estate and receivables can secure credit and usually lower its price. An equipment loan secured by the machine typically costs less than unsecured working capital.
5. Negotiate fees
Origination, underwriting, packaging and broker fees can be negotiated or avoided. Fees taken out of the loan amount have an outsized effect on short loans' APR.
6. Look at SBA programs
SBA caps the rates lenders can charge on 7(a) loans and 504 rates are tied to Treasury yields, which can make them some of the cheapest long-term credit available to small businesses, at the cost of paperwork and time.
7. Refinance when you qualify
Expensive debt taken when the business was young or in a pinch can often be replaced once the business has history and stronger numbers. Check prepayment terms on the old debt first.
8. Improve what's priced
Lenders price time in business, cash flow, credit and collateral. Each year of clean financials and on-time payments tends to widen your options.
9. Use supplier credit well
Paying suppliers within terms is free financing. Taking early-payment discounts can be worth more than it looks: 2/10 net 30 is roughly 37% annualized if you skip it.
10. Keep the relationship
Lenders often price better for customers they know, who report on time and communicate. See building a lender relationship.
Sources
- SBA: Types of 7(a) loans (maximum interest rates)
- SBA: 504 loans (fixed rates pegged to 10-year Treasuries; fees about 3%)
- California DFPI: commercial financing disclosures (APR)
Checked November 9, 2026. Program rules and scoring models change; the source is the authority.