← Guides · November 8, 2026
The True Cost of a Business Loan: Rate vs Fees vs Term
A lender quotes you a rate. What you need to know is how much the loan costs in total. Here are three offers for the same $100,000:
| Offer | Rate | Term | Fee | Monthly payment | Total cost | Effective APR |
|---|---|---|---|---|---|---|
| Bank term loan | 8.5% | 5 years | 1% | $2,052 | ≈ $24,100 | 8.9% |
| SBA 7(a) | 11.5% | 10 years | 3% | $1,406 | ≈ $71,700 | 12.3% |
| Online lender | 16% | 3 years | 4% | $3,516 | ≈ $30,600 | 18.9% |
What the table shows
- The SBA loan has the lowest payment but costs almost three times the bank loan, because the term is twice as long.
- The online lender’s quoted 16% becomes 18.9% effective once the 4% fee is counted.
- The cheapest loan is not always the one you can afford each month. A 5-year payment of $2,052 may strain cash flow, which is why a longer term is sometimes the right trade-off.
How to compare offers
- Use total cost, interest plus fees, not the rate alone.
- Use the effective APR to see the real price of the money you receive.
- Check the payment against your cash flow. A cheap loan that you cannot service is the most expensive loan.
- Ask about prepayment penalties. If you can pay early, a longer term with no penalty keeps you flexible.
Enter your own offers in the comparison calculator to see all of this for your numbers.