Yield: The Return on Lending from the Lender's Perspective
Understand what yield means in business lending and why it affects the financing options available to you.
What Is Yield in Business Lending?
Yield is the total return a lender earns on a loan, expressed as a percentage. While borrowers focus on interest rate and fees as costs, lenders view these same charges as yield—their return on the capital they deploy. Understanding yield helps explain why certain loans cost more than others.
Lenders need sufficient yield to cover their cost of funds, operating expenses, loan losses, and profit requirements.
Components of Lender Yield
Total yield to the lender includes:
- Interest rate charges
- Origination and processing fees
- Ongoing service fees
- Draw fees on lines of credit
- Prepayment penalties if triggered
- Late fees and other charges
Why Yield Varies by Loan Type
Different loan types require different yields:
| Loan Type | Typical Yield | Why |
|---|---|---|
| SBA Loans | 7-12% | Government guarantee reduces risk |
| Bank Loans | 8-15% | Thorough underwriting, lower risk |
| Online Loans | 15-40% | Faster funding, higher defaults |
| MCAs | 40-100%+ | Highest risk, fastest funding |
| Equipment | 8-20% | Collateral reduces risk |
How This Affects You
Understanding yield helps you:
- Recognize that risk drives pricing
- See why building creditworthiness lowers costs
- Understand trade-offs between speed and cost
- Appreciate why some financing is expensive
- Evaluate lender economics when negotiating
Lenders offering below-market yields may have hidden terms, or the pricing may seem low only because other costs are not apparent. Always calculate your total cost of financing, not just the stated rate.
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Read more →Important Disclosure
Not Financial Advice: The information provided in this article is for general informational purposes only and does not constitute financial, legal, or professional advice. You should consult with qualified professionals before making any financial decisions.
No Guarantee of Financing: Liminal Lending Co. is a business loan marketplace that connects borrowers with third-party lenders. We are not a lender and do not make credit decisions. Submitting an application does not guarantee approval or funding. Loan terms, rates, and availability vary by lender and are subject to borrower qualifications and lender criteria.
Third-Party Lenders: All loan products are offered by independent third-party lenders. Liminal Lending Co. is an Independent Sales Organization (ISO) and receives compensation from lenders for successful referrals. Terms and conditions of any loan are between you and the lender.
Rate Information: Rates, terms, and fees mentioned in this article are estimates based on publicly available information and may not reflect current market conditions or specific lender offers. Actual rates depend on creditworthiness, business financials, and lender policies.
Information May Change: Financial markets, lending regulations, and economic conditions are subject to rapid change. While we strive to keep our content accurate and up-to-date, information in this article may become outdated. Always verify current rates, terms, program availability, and regulatory requirements with lenders and official sources before making financial decisions.