Interest Rate
The percentage charged for borrowing money.
An interest rate is the cost of borrowing money expressed as a percentage of the principal, typically quoted on an annual basis. Rates can be fixed (unchanging for the loan term) or variable (fluctuating with market conditions). Key factors affecting rates include creditworthiness, loan term, collateral, and prevailing economic conditions set by the Federal Reserve.
Example
A business secures a five-year term loan at a fixed 7.25% interest rate, meaning it pays $7,250 in interest annually per $100,000 borrowed.
Why It Matters for Your Business
Even a 1% difference in interest rate translates to significant savings or costs over a loan's life, making rate comparison essential when borrowing.
Related Terms
More Banking Terms
ACH
Automated Clearing House - an electronic network for financial transactions.
APR
Annual Percentage Rate - the yearly cost of borrowing including fees.
APY
Annual Percentage Yield - the real rate of return on savings including compound interest.
Bank Reconciliation
Matching bank statements with internal records to identify discrepancies.
Business Checking
A bank account designed for business transactions.
Related Financial Guides & Resources
Automate Your Finances with AI
FiscalInsights uses AI to automate bookkeeping, track expenses, and forecast cash flow — so you can focus on your business.
Start Free Trial