Variable interest, also known as “floating interest” is a type of interest on a loan that fluctuates over time, due to its nature of being based on an underlying benchmark interest rate or index. Loans with a variable rate are like a double edged sword—they benefit from lower payments when the underlying interest rate market is in decline, but when rates rise the monthly payments spike.For early-stage companies, when funds are tight, fixed interest loans or revenue based financing options are much more appropriate, because they limit the risk of defaulting.