When borrowing $5,000 to purchase a new piece of equipment, the owner of a successful small business should expect the interest rate to be higher than the prime rate.

Question

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The prime rate is the interest rate that commercial banks charge their most creditworthy customers, usually large corporations. Small businesses, especially when borrowing smaller amounts like $5,000 for new equipment, are typically considered higher risk than these prime borrowers and thus are often charged a higher interest rate.

When Borrowing $5,000 to Purchase a New Piece of Equipment