Business loan interest rate is the first factor that every businessman considers before availing a loan for business. If you are wondering what is the business loan interest rate then it is an expense incurred on the loan. It is the fees charged by the lender on the money lent to the business owner. Business loan rate of interest is dependent and affected by many factors that the business owner must know before applying for a loan in order to grab the best loan deal.

If you are looking forward to availing a business loan in Lucknow, then read on to know about the top 4 factors that affect business loan interest rate.


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CIBIL or credit score is the numerical representation of the creditworthiness of the borrower. It is taken into consideration by every lender before approving or disapproving the loan application. It falls between 300 and 900. The score nearest to 900 is considered the best CIBIL score for a loan. However, the credit score required by most lenders in India is said to be between 650 and 900.

If your score is high and falls between the aforementioned brackets, then you are most likely to get your loan application approved at a low-interest rate. A high score represents your financial credibility which means there is a low risk for the lender to lend you money. So, he is willing to offer you the loan at low business loan interest rates.

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Business Vintage

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ITR, sales, and profit and loss sheet are among the few documents that are required by the lender to process your application. These documents represent how much the business can earn and thus, will be able to repay the loan. However, if you are new in business, you wouldn’t be able to present them.

So, irrespective of what type of business in Indore, you are operating, your business must have a vintage of at least 2 years. With vintage of 2 years, you can provide the required documents that would represent your business sales, profit, and turnover. And if you are doing well in business, the lenders will again consider you less risky.

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Monthly Business Revenue

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All lenders offer the payment of the business loan in easy monthly installments called EMIs. These EMIs are inclusive of loan principal amount, the interest cost, and other charges. So, to be able to pay monthly installments, the business must have good monthly revenue. With good monthly earnings only you would be able to pay an EMI on time.

Consistency is important for monthly revenue. All businesses may generate different revenue at a different time period. But consistency is very crucial. The lenders analyze the average monthly bank balance to determine the loan amount, repayment capability, and business loan interest rate.

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also read: Secured loans vs unsecured business loans: difference & how it matters

When availing a business loan, you have to choose between a collateral loan and collateral-free loan. For a collateral loan, you are not required to pledge an asset. And for a collateral-free loan, you have to pledge an asset. If you pledge an asset, there is less risk for the lenders and they are ready to offer loans at low-interest rates.

Having said that, there are many NBFCs and online loan lenders who also offer unsecured business loans at low-interest rates. These lenders are more concerned about the CIBIL score, ITR, business turnover, and business vintage. So, the small business owners who cannot avail secured loans can avail an unsecured loan at a low-interest rate.

Now that you know 4 factors that affect the business loan interest rates in Lucknow, you can consider them first to avail a business loan in Lucknow. So, instead of searching for which bank or NBFC gives the lowest interest rate for a business loan, you can take these factors into consideration.

In addition to the business loan interest rate in India, we would suggest considering other factors of business loan as well. Such as the EMI bouncing charges, prepayment penalty, processing fees, etc. All these fees are also charged on the loan for business. And they all together make the APR- annual percentage rate. So, you can ask the lender APR as well which is the overall annual cost you will incur on the loan amount.

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If you are operating a business in Indore, you can register it on the Connect App by ZipLoan for free. The e-marketplace will allow you to directly buy and sell products online, connect with other traders, manufacturers, and wholesalers, and also increase your business network. In addition, you can also product, discover business opportunities, and build connections.

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