More than a year and a half into the pandemic, many small businesses are unsure if they will be able to recover after fighting to stay above water and accruing crippling debt. Small business owners of color, women and immigrants have been disproportionately impacted by the pandemic as they’ve faced barriers to accessing federal relief programs and traditional lending.
Annual Percentage Rate (APR)
The annual percentage rate (or APR) is the amount of interest on your total loan amount. You pay the full APR annually (averaged out over the term of the loan). A lower APR translates to lower monthly payments. When calculating your monthly payments on a loan, be sure to include the interest amount.
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Small business owners seeking funding to start, operate, or expand their businesses often fall prey to banks and lenders who are deceiving about the costs associated with borrowing. Monthly interest rates alone are not an indicator of the overall cost of a loan. Predatory lenders may hide additional costs, such as the annual percentage rate (APR), closings costs, service fees, and other fees or penalties. If you are a small business owner looking for financing, it is essential that you do your research not only to calculate cost accurately, but also to become aware of all lending options available to you.