Why blended rate matters to a first-time founder
A blended rate folds the rate already on the debt and the rate on new borrowing into one rate on the combined balance. Lenders offer it when you refinance, or when you borrow more, without putting the whole debt onto the new rate. The mix is usually weighted by the size of each balance. A small top-up barely moves a large, cheaper loan.
Examples of blended rate
A workshop in Melbourne still owes AUD 200,000 at 4% and borrows another AUD 50,000 at 7%, rather than breaking the whole loan. Weighted by those balances, the blended rate is 4.6% on AUD 250,000. Treating 7% as the rate on the entire debt would overstate the interest. The offer should also show any fee and how long 4.6% lasts.
Common misunderstanding
A blended rate is not a plain average unless the two balances are equal, and it is not the monthly payment that mixes principal and interest. That payment is a blended payment. It is also not a firm’s cost of capital across shares and loans. The loan offer should say which balances the rate covers, and for which period.
When to use it
Use it when a lender offers to combine an existing loan with extra borrowing, or to refinance during a fixed-rate period. Compare the blended rate, any break cost, and a separate new loan. A brand-new loan with a single rate does not need the term.