Business loan interest rate is the first factor that comes to your mind when you first think about availing a loan for the business. While the interest rates differ from one lender to another, there are a few factors as well that can influence business loan interest rate.
So, there is a need that you consider all these factors before applying for a business loan. If all these factors are in your favor, you will surely be offered low interest rates by most lenders. Read on to know these factors that can help you lower down the interest rate.
Table of Contents
CIBIL Score
also read: how to improve cibil score for a business loan?
CIBIL or credit score represents the creditworthiness of the borrower. So, for borrowers who have a high credit score, they more credible as compared to the ones who have low CIBIL score. Obviously, no lender wants to risk their money. As a result, the loan lenders offer low-interest rates to borrowers with high credit score. And borrowers with low credit score are offered business loans at high interest rates.
Business Type
also read: different types of business loans in India
Every lender has different credit policies. They take certain industries and type of business a little riskier than the rest. The lender will consider the type of business you are doing and then determine the business loan interest rate for you.
Type of Lender
also read: why is choosing the right business loan lenders important?
The interest rate for business loan certainly depends on the type of the lender you are availing a loan from. And when we talk about the different lender, we mean the traditional lenders and modern lenders. You must choose the type of lender that offer loans at different interest rates, NBFCs, online lenders, banks, etc.
Collateral
also read: why collateral-free business loans are best?
Collateral is the security required by most lenders require to secure business loans. Collateral is the asset having some monetary value owned by the business owner. While some businessmen are willing to offer collateral, some are not in a position to offer it. It also affects the business loan interest rate.
However, there are lenders who offer collateral-free business loans at low interest rates. They take into consideration another point which we will discuss in the next point.
Financial Health
also read: why does the business loan application gets rejected?
Lenders also consider factors such as business vintage and its financial health. They determine financial health through the balance sheet, cash flow statement, profit & loss account, etc. All these factors together help in determining the business loan interest rate.
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