Overview of Interest Rates and Fees

When applying for financing through FundLocal, it’s important to understand the interest rates and fees associated with your loan or line of credit. These costs will affect the total amount you repay over the life of the loan, so knowing the terms upfront helps you plan your budget and manage your financing effectively.

This guide provides an overview of the typical interest rates and fees for FundLocal’s funding options, including Business Lines of Credit, Working Capital Loans, and Equipment Financing. We’ll also explain how these costs are calculated, factors that influence your rate, and what to expect in terms of fees.

FundLocal offers different types of interest rates depending on the type of financing you choose. Below are the key rate structures:

1. Fixed Interest Rates

Fixed interest rates remain the same throughout the life of the loan, ensuring that your monthly or weekly payments stay consistent. This type of rate is common for loans like Working Capital Loans and Equipment Financing.

• Predictability: Fixed rates give you stability, making it easier to budget for your loan payments since the amount you owe each period won’t change.

• Best For: Businesses that prefer predictable, steady payments and want to avoid rate fluctuations.

2. Variable Interest Rates

Variable interest rates can change over time, depending on market conditions. These rates are often used for Business Lines of Credit. The rate may fluctuate based on factors like the prime rate or another index.

• Flexibility: Variable rates are often lower initially than fixed rates, but they can increase or decrease over time.

• Best For: Businesses that want a revolving line of credit and are comfortable with potential fluctuations in their payment amounts.

The interest rate you receive depends on several factors related to your business’s financial health, loan type, and market conditions. Here are the primary factors that influence your rate:

1. Business Credit Profile

Your business credit score and, in some cases, your personal credit score (if a personal guarantee is required) will play a significant role in determining your interest rate. Businesses with stronger credit histories are often eligible for lower interest rates.

2. Time in Business

Businesses that have been operating for a longer period tend to qualify for better rates, as they have a proven track record of stability. FundLocal requires at least 6 months in business to apply, and companies with more established financial histories may receive lower rates.

3. Annual Revenue and Cash Flow

Lenders consider your business’s annual revenue and cash flow to assess your ability to repay the loan. Companies with consistent or growing revenue are more likely to receive favorable interest rates.

4. Loan Amount and Term

The amount you borrow and the length of your loan term can also affect the interest rate. Larger loans or shorter repayment periods may qualify for different rate structures compared to smaller, longer-term loans.

In addition to interest, there may be several fees associated with your loan or line of credit. It’s important to review the terms carefully to understand any additional costs. Here are the most common fees:

1. Origination Fee

The origination fee is a one-time fee charged when your loan is approved and funded. This fee helps cover the costs of processing the loan. It is typically a small percentage of the loan amount (usually between 1% and 5%).

• Example: If you take out a $50,000 loan with a 2% origination fee, you’ll pay $1,000 as part of the initial cost.

2. Late Payment Fee

If you miss a scheduled loan payment, a late payment fee may be applied. FundLocal requires automatic payments to help avoid this situation, but it’s still important to ensure sufficient funds are available in your account to avoid any potential late fees.

• Tip: Always monitor your business checking account to ensure that funds are available on payment dates.

3. Prepayment Penalty

FundLocal does not charge prepayment penalties, so if you decide to repay your loan early, you won’t incur any additional fees. In fact, paying off your loan early can help you save on interest costs.

4. Draw Fees (For Lines of Credit)

For a Business Line of Credit, there may be a draw fee charged each time you withdraw funds from your credit line. This fee is typically a small percentage of the amount you borrow with each draw.

• Example: If you withdraw $10,000 from your line of credit and there’s a 1% draw fee, you’ll pay $100 when you make the draw.

5. Maintenance Fees (For Lines of Credit)

Some lines of credit may come with a maintenance fee, charged on a monthly or annual basis, to keep your credit line open and available. This fee may apply even if you don’t draw funds during that period.

• Example: You may be charged a small fee each month for having access to your line of credit, even if you don’t borrow from it.

1. How are interest rates determined for my loan?

• Interest rates are based on factors such as your business credit score, annual revenue, loan amount, and time in business. A better financial profile typically leads to lower rates.

2. Are there any prepayment penalties?

• No. FundLocal does not charge prepayment penalties, meaning you can pay off your loan early without incurring any extra fees.

3. What is the origination fee?

• The origination fee is a one-time charge applied when your loan is funded. It usually ranges from 1% to 5% of the total loan amount.

4. Do all loans have a fixed interest rate?

• No. While Working Capital Loans and Equipment Financing usually have fixed rates, Business Lines of Credit may come with variable interest rates that fluctuate with market conditions.

5. Are there any hidden fees?

• FundLocal is transparent about fees, and all potential costs—such as origination fees, draw fees (for lines of credit), and late payment fees—will be clearly outlined in your loan agreement.

At FundLocal, we aim to offer competitive and transparent interest rates and fees that are tailored to your business’s financial needs. Whether you’re applying for a fixed-rate loan or a revolving line of credit, knowing the terms of your financing upfront ensures that you can manage your payments and make informed decisions about your business’s future.

If you have any questions about the interest rates or fees associated with your loan, FundLocal’s support team is here to help. We’re committed to providing the information and assistance you need to make confident financial decisions.

Get started with FundLocal’s simple and fast application process today. Apply now to receive a no-obligation funding quote and see what interest rates and terms are available for your business!