Prime rate on loan

It can happen, but frankly, it's not the norm.

Most small businesses live in the world of "prime-plus." This is the bank's prime interest rate, plus some percentage, such as prime-plus-one percent, etc. The reason for the "plus" is because small business loans are among the most risky for a bank, and the "plus" compensates the bank for taking the risk.

Several factors determine whether your rate is prime or prime-plus. Those include your credit record, history and relationship with the bank, personal and corporate financial stength, and the bank's loan practices.