Interest rate on a business loan 2025

The interest rate on a business loan consists of two components: the base rate and the interest margin agreed with the bank. The final price is made up of interest and loan servicing costs. External financing may be required at different stages of business operations, and a business loan can finance, for example, tools, new premises or expansion of operations. In particular, it is suitable for long-term investments, and the loan term is usually 3-7 years. The terms of the loan are always agreed on a company-by-company basis, and the price is influenced by the financial situation, prospects and collateral of the company.

Euribor and fixed rate

Business loan the interest rate may be tied to euribor or it may be fixed. Euribor is the benchmark interbank rate in the euro area, which can change, for example, every 3, 6 or 12 months. The interest rate on the Euribor-linked corporate loan remains the same throughout the interest rate setting period. For example, the interest rate on a 12-month Euribor-linked loan remains unchanged for 12 months, after which the reference rate is revised. The new rate will again be in effect for the next 12 months.

The fixed rate stays the same for an agreed period, such as 3 or 5 years, reducing the risk associated with rising interest rates. The fixed rate is usually slightly higher than the Euribor rate, but it offers predictability and protection against rising interest rates.

Margin

The margin on a business loan is the bank's share of the interest rate on the loan. The margin varies from customer to customer and its size is influenced by the company's age, ability to pay, possible payment defaults, other customer relationships and the company's future prospects. In addition to the margin, the total cost of the loan is also affected by other costs, such as the cost of withdrawing the loan and any service charges.

Submission of a loan application

You can apply for a business loan in Qred Bank's online service. By submitting an application, you will receive personalized service from our expert who will help you find the best financing solution for your business. For the application, you will need, for example, the latest financial statements, a possible audit report, as well as an accounting run or interim financial statements if the financial statements are more than 6 months since the financial statements. For a new business, a business plan and three years of budgeting are required.

Interest rate risk and hedging

Interest rate risk arises from fluctuations in interest rates. A higher proportion of variable-rate debt increases the risk that interest rates will rise and loan servicing costs will increase. Interest rate hedging allows you to manage this risk. For example, with an interest rate swap, you can change the interest rate binding of a business loan from variable to fixed or vice versa. The interest rate cap, on the other hand, limits the rate increase to a certain maximum level, and the interest rate pipeline sets a range for the interest rate.

Repayment

The repayment of the loan will be adjusted to suit your business so that it does not burden your business too much. The most common method of repayment is flat-rate tranches, where the amortization is always the same amount, but the interest rate decreases as the loan capital decreases. If there are changes in the ability to pay, you can negotiate with the bank to change the repayment schedule. If necessary, you can apply for grace leave, in which case you only pay interest for a certain period of time. It is important to calculate the cost or use business loan calculator.

If your company's ability to pay improves, you can negotiate an accelerated repayment of the loan or repayment of the entire loan at once. Modifications to a loan are often subject to a fee, so it's a good idea to find out what costs you will incur from the changes.