The interest rate is one of the most important components of a small business loan. If you are looking for a loan for your small business, you should know the factors that can impact small business loan rates.
Four such factors are as follows-
1. Type of BusinessThe credit policies of every lender in India are different. Most of the lenders consider certain types of business and industries riskier than others.
If you are applying for an SME loan, the lender will definitely consider the type of business you are involved in before approving your loan. If your business type or industry is considered risky by the lender, the business loan rates can be higher.
2. Type of LoanEven the type of loan you select impacts the interest rate of business loan. For instance, unsecured business loans have a higher interest rate as compared to secured business loans.
This is because, in case of secured loans, the lender has your collateral against the loan amount, which adds a certain level of repayment safety.
3. Business VintageIf you have been running your small business for a long time, lenders consider it to be stable. The chances of stable businesses repaying the loan on time are high.
As a result, the lender can offer a better business loan interest rate to older businesses as compared to a new business.
4. Annual TurnoverSteady turnover is helpful too. If your business can generate decent profits in most years, the lenders will consider it as a positive sign as it improves your repayment capacity.
However, if your annual turnover is not steady or your business has been running into losses for quite some time, your loan application might also get rejected. Even if the loan is approved, the lender will mostly ask for a higher interest rate.
How to Know Your Business Loan EMI?You can visit the official website of the lender to know the interest rate at which it offers business loans. Once you know the interest rate, you can use an online small business loan calculator to know the exact EMIs. This will allow you to pick the best lender and take an informed borrowing decision.
Click here to know more and apply for a business loan
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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