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October 17, 2021
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6 Significant Aspects That Decide Business Loan Interest Rates

  • August 24, 2021
  • 4 min read
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6 Significant Aspects That Decide Business Loan Interest Rates

Before taking the loan, every business owner considers the interest rate of the loan. Most of these borrowers pick up the loan based on this single factor of interest rates. These interest rates primarily affect the future business need in the case of long-term loans. Therefore, it becomes imperative to determine the interest rate before getting a loan as it can provide a clear picture of the EMI amount. In every case, the interest rates vary from lender to lender. There may be certain factors that affect the business loan interest rates in India.

Credit score

It is one of the primary tools to determine the eligibility criteria of the borrower. Every lender uses the credit score to determine whether the business organization is eligible for a loan or not. Based on the credit score, one can calculate the interest rates. However, for getting the best interest rates on business loans in India, one must maintain a healthy credit score closer to 700. It can fetch the borrower a favorable rate of interest.

In addition, the lender can check the credit history of the business organization to estimate the repayment capability of the borrower. Therefore, a business needs to have a good credit history to make the loan process smoother. Moreover, the higher credit score signifies the lesser interest rates.

Type of business 

Sometimes the choice of business can also impact the interest rate of the business loans. It happens because there are businesses that come with higher risk. Hence, depending upon the lender’s perception of the amount of risk involved in the industry, the company’s loan interest rates can vary.

Age of the business

Age of the business matters when it comes to calculating the business loan interest rate in India. It is because various lenders in India provide credit to small businesses. These businesses have gained experience in the field that poses a positive factor.

Moreover, if one is involved with the same company for several years, it naturally provides a positive indication for any lending institution. These business organizations get better loan terms and low-interest rates with easy repayment options. At the same time, any startup business with minimum experience would need to pay a higher interest rate.

Financial health

The business must have sound financial health. It is what would determine the interest rate of the business loan. Moreover, a company that has an excellent financial background is a better candidate for a loan. Consequently, one can trust the borrower with timely repayment without any hassle. Every lender would access the various fundamentals of the business organization through the help of cash flow statements, profit loss account, and balance sheet. If you have a profitable business with lesser risk, you might get a loan at low interest.

Collaterals

It refers to the monetary value of an asset against which the loan is being taken. At the same time, most of the borrowers may not be able to offer any collateral. In those cases, they may face some variations in the interest rates. But nowadays, the scenarios have mainly changed. In the case of unsecured loans, one does not require any collateral. Moreover, the lending institutions offer business loans that come without collateral and have a lower interest rate.

Conclusion

A lender should understand every need of the customer. To accord them the best experience, the lender should simplify the loan-taking methods at every step. The technology of today’s era allows the customer to calculate the interest rates with the help of a business loan interest rate calculator. It helps everybody with an understanding of the fair interest rates on their loan amount. You may find various lenders who provide flexible repayment options to simplify the loan process for many unsecured small business loans.

Leading financial institutions like Bajaj Finserv offers high-value unsecured business loans with minimal documents and simple terms. This NBFC also offers additional features such as the Flexi facility that lets you pay up to 45% lower* EMIs. This NBFC also provides pre-approved loan offers on its multiple financial products such as business loans, personal loans, home loans, etc.