What Are the Factors That Decide Business Loan Interest Rate?

factors that decide business loan interest rates

Business loan interest rate is an important aspect that every borrower considers before opting for a loan. In fact, for most of the borrowers picking the right loan comes down to a single factor- interest rate. Interest rates largely hit your loan terms and future business needs. Thus, determining the rates and getting a clear picture about it is probably a crucial task.  Usually, the interest rates vary from lender to lender. However, there are certain factors that affect the rates of interest imposed on you. Business Loan Interest Rate in India is calculated based on these predetermined factors. Thus, if you don’t wish to be caught by unexpected surprises pay heed to these business loan interest rate deciding factors.

Credit Score

The credit score is one of the primary tools that lenders assess to determine your eligibility for a loan and hence your interest rates. Generally, for fetching the best business loan interest rates in India a credit score above 700 is considered to be a favorable one. Additionally, at the same time lenders also check for the credit history of your business. This aids them in gauging the repaying capability of the borrower. Therefore, having a sound credit history helps in making the loan process smoother. The higher would be your credit score lesser would be the interest rates charged.

Type of Business

Sometimes your choice of business can also affect the interest rates on your business loans. This is because some businesses carry a higher risk as compared to others. Depending upon the lender’s perception on the extent of risk involved the interest rates charged on your business loan may differ.

Age of business

A well-established business is likely to secure lesser interest rates as compared to newer ones. This is because several lenders in India prefer providing credit to small businesses that have gained the time tested experience in the field. Therefore, if you have been involved in the same business for years then it is a positive indication for the lending institution. You will be provided with better loans terms and easier repayment options. Contrary to this, a new stage startup or business with minimum experience would be charged higher interest rates. 

Business Plan

Not all lending institutions ask for a business plan but if you have a newly established venture then you might be required to present one. Your business plan should be concise and impactful. It should clearly present all the information about where the money is intended to be used and how. While, if your plan is not effective and does not show any growth prospects then the lending institution might approve your loan but may impose a higher interest rate.

The financial health of the business 

The good financial health of a business is significantly important in determining the business loan interest rate. A business with sound financials would be a more viable candidate for a loan as it can be trusted of repayment without any hassle. The lender would assess the fundamentals of your business through cash flow statement, balance sheet, and profit & loss account. If your business is profitable enough and involves lesser risk then you might be offered the loan at a lower interest rate.


Collateral refers to the monetary value holding asset owned by a business owner. While not all borrowers are capable to offer collateral thus there comes the variation in interest rates. However, nowadays a number of lending institutions offer collateral-free business loans at a low-interest rate. Though these unsecured loans do not require collateral but having sound business assets can help you avail higher loan amounts at subsidized interest rates.  

All of these factors collectively form the basis on which your business loan interest rate would be evaluated. Getting familiar with these factors will help you plan accordingly for your specific business needs. Moreover, it will help you opt for the best funding solution available. 

Fortunately, if all of these factors fall in your favor, you will assuredly be offered the loan at a low-interest rate by most of the lenders.

FlexiLoans Business Loan Interest Rates

We at FlexiLoans understand the needs of our customers. To accord them with the best lending experience our analytics-based smart systems work to simplify the loan process at every step. Our technology backed Business loan interest rate calculator allows us to provide customized interest rate to our customers, thus ensuring that every applicant is provided with fair interest rates without any biasing. Our annual interest rate charges starting from 12% stand out to be competitive in India. Moreover, our flexible repayment options make us the one-stop solution for unsecured small business loans.

So, if you are looking for a hassle-free business loan then visit us at to get a quick quote and apply for a business loan in a few simple steps.

No Comments

Leave a Comment

Your email address will not be published.