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Small Businesses are known for searching for the best interest rate while trying to receive a loan. Business owners forget to ask whether they choose a fixed or variable-rate loan for their business.

Many people forget to ask are small business loans fixed or variable. It entirely depends on what the lender offers. Lenders decide whether they want to offer a variable or fixed interest rate loan based on the current economic climate.

As we all know, every business has unique needs, and the loan amount depends on the requirements of your business. So, let’s get into it and deeply explore how it works.

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Small Business Loans

Small Business Loans are the money that a borrower takes from the bank or an online lender. He can use that money to buy equipment, expand, and advertise his brand.

Several small business loans are available in the market, but the major thing is the interest you want. For instance, you must decide on one of them, fixed or variable.

So, let’s discuss both one by one.

Fixed Interest Rate Loans

Fixed-interest rate loans come with interest that doesn’t change. Once you approve the loan and it is processed, your monthly installment will be the same for the rest of your life.

The benefit of this is that the borrower can fix the amount of money they can pay each month according to their budget. They also know how much they will pay for the loan overall.

The downside of the fixed-rate loan is that if the market changes and the banks or online lenders start lending at lower interest rates, borrowers won’t see any significant changes.

So, when their mates borrow at lower rates, they will continue with the same interest rate. But if you see the opposite side, if the interest rates go higher, the borrowers with the fixed rate will be protected against any other market swing.


For example, if you borrow $50,000 to purchase any equipment for your business, the repayment period will be five years. But the interest rate will be 6%.

Your monthly installment will be $966.64, and you will pay $7,998.40 in interest. It means that the total cost of your loan will be $57,998.40.

Pros of Fixed Rate Loan

  • It is easy to budget.
  • It is not affected by market changes.
  • The borrower knows the exact cost of their loan.

Cons of Fixed Rate Loan

  • These have higher interest rates as compared to other loans.
  • If the rates go down, the borrower must face some problems.

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Variable Rate Loan

Variable interest rate loans fluctuate due to market changes. A loan with this type of interest has different monthly payments. Although, the payment amounts are not that different from one to another.

But there are some downsides to choosing a variable interest rate loan. The main is that when the rates go up, the number of your payments increases. And, if your cash flow is tight, it will be challenging to manage your budget.

In addition to this, with a variable-interest loan, you never know the total cost of your loan until you have completely paid your amount.


If we see the previous example of a fixed interest rate loan, he has taken a loan of $50,000 with a repayment year of five years. And in which the borrower knows the total amount of the loan.

But, in the same condition, if the borrower must decide on a variable interest rate, he will get a 5% interest rate. This can go up or down throughout the repayment period.

Types of Variable Interest Rate Loans

As mentioned above, a small business loan comes with variable interest rates. A few of them are as follows.

Borrowers can choose any of them that suits them well.

Pros of Variable Interest Rate Loan

  • When the total rate goes down, the people who take variable interest rate loans will experience lower rates.
  • The rates are usually lower than the fixed interest rates.

Cons of Variable Interest Rate Loan

  • When rates go up, then the monthly payments also go up.
  • It can make managing the budget difficult.
  • Borrowers don’t know the total cost of the loan.

A Quick Wrap-Up!

To summarize the discussion, we can say that it entirely depends on the borrower’s type of loan suitable for their business. If you are looking for a company that offers these loans, you should contact BitX Funding. We have financial experts who will thoroughly overview your business and suggest the best loan you can pay quickly. You can talk to our experts, who will tell you about every fluctuation and change in the market.


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