Small business loans always charge some form of interest, which can be either a fixed or fluctuating rate depending on your agreement. Many alternative lenders set a fixed payback amount at the beginning of the loan. This means you make weekly or monthly fixed payments to your small business lender toward both the interest and the principal of your loan. Sometimes, rates are adjustable, meaning they can fluctuate over the time of the loan.
Depending on your agreement, lenders charge either simple or annual percentage rates. While a simple interest rate would be the percentage of interest paid off on the total loan, an APR is an annualized interest rate that accounts for fees as well. The total cost to you is based on your agreement and the type of interest rate or repayment term you have, so it's important to analyze how much the loan will cost you in total (not just per month) before you sign.
In addition to a few different kinds of interest rates, loan companies may charge a returned-item or origination fee. As with any business agreement, make sure you read the fine print and understand the fees you'll be charged.
Some lenders also require collateral, which can take many forms. Banks and alternative lenders often require business or personal assets to back a loan. These assets can be liquidated in the event of a default. When you provide collateral, you enter into a secured loan. Unsecured business loans don't require collateral, but they sometimes require a personal guarantee. The personal guarantee is a legally binding statement that says you personally will pay back the loan if your business defaults on its payments.