BUSINESS LOAN INTEREST RATE

Business Loan Interest Rate

Understanding Everything about Business Loan Interest Rates

If you are the owner of a small business and if you want to apply for a business loan online, then chances are you are well aware of the significance of these loans. Business loans come as lifesavers for different types of businesses including MNCs, SMEs and startups. Such loans help business owners in managing cash flow, payment cycles and inventory. But one of the most important factors to consider when going for these loans is the interest rate. The interest rate for such loans will ultimately depend on the loan amount and tenure. Specifically speaking, there are generally two forms of the rate of interest models in regards to business loans. They are a flat rate of interest and diminishing interest rate.

Flat Rate of Interest

The flat rate of interest is the process of calculating business loan interest rates on the initial loan amount. In this calculation, the reduced principal amount of the loan after the payment of instalments is not considered. Take for example, if you are the owner of a small business and you have borrowed Rs. 10,000 for a time of two years at a 10% interest rate. Even if you pay off the first instalment of your loan which is, for example, Rs. 2000, you will be charged the flat rate of interest on the initial loan amount, which is Rs. 10, 000. The rate of interest will not be charged on Rs. 8, 000, which is your reduced loan amount through the payment of instalment.

Diminishing Interest Rate

In this method of calculating the rate of interest on a business loan, the interest rate is calculated on the reduced principal amount of the loan and not the initial loan amount. From the above illustration, you might feel that the diminishing rate of interest model is more beneficial in comparison to the flat rate of interest model. But the reality is, the interest rate charged on a diminishing rate model is higher in comparison to the flat rate of interest model. Additionally, the lenders levy various other charges such as processing fee, stamp duty, foreclosure charges, bank guarantee and other credit and statutory charges. Therefore, the borrowers must make sure they are duly educated about business loan payment options, rate of interest, applicable charges and tenure before submitting their loan applications.

Factors Determining the Rate of Interest on a Business Loan

It is a great idea to calculate the rate of interest and EMI of a business loan by using a business loan EMI calculator. The most significant factors determining the rate of interest on a business loan are business loan eligibility and documents submitted by the interested borrower. Apart from this, NBFCs like FlexiLoans consider various other parameters before deciding on the interest rate of these loans. The parameters are as follows:

Company History
The period of activity plays a vital role in determining the approval of the company for a business loan and the rate of interest. The longer a company has remained in business, the higher are its scopes of getting business loans at the most competitive rates of interest.

Credit Score
As is known to every individual and organization, a good credit score improved an entity’s chances of getting loans at the best rates of interest. And the vice versa is applicable.

Sufficient Flow of Cash
Apart from the profitability or revenue of the company, the lenders even look for proper turnovers every month. The performance and predictable profits of a company have a significant role to play in determining the rate of interest on a business loan.

Basic Eligibility Criteria

How to apply for a business loan?

Whilst, the process to apply for a business loan in the earlier days was a tedious one, the process has now become completely hassle-free and online. You do not have to visit different banks to find the best rate of interest and there is no need to stand in long queues for approval or submission of documents.

Now with FinTech into the picture and multiple platforms providing this service, all you require for the application of a business loan without collateral is soft copies of your documents, a fast internet connection, and a good credit score. The entire process can be completed within a few working days and you will see the reflection of the funds credited into your account.

How to apply for collateral free business loans?

1. Complete application - It is fast and takes only 5 minutes
2. Upload documents - Easily upload your documents online
3. Credit analysis - We will check your documents & evaluate your application
4. Loan disbursement - Once approved funds will be credited to your account

Documents Required for Business Loan

Frequently asked questions