BUSINESS LOAN INTEREST RATE

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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

Minimum Business Vintage 1 year
Monthly Business Sales Minimum 2,00,000

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

Personal KYC PAN card
Residential Address Proof (Any One) Rent Agreement | Driving License | Voter's ID | Ration Card | Passport | Aadhar Card
Banking Last 6 months current account bank statements
Business KYC (Any One) GST Registration Certificate | Shops & Establishment Certificate | Business PAN Card

Frequently asked questions

What are the purposes for which I can get a loan via FlexiLoans?

FlexiLoans is here to provide you financial access for your business funding needs. You have to undergo simple and transparent Credit Evaluation, basic documentation before we disburse the loan. You may get loans via FlexiLoans for:
  • Expanding your business
  • Servicing regular working capital needs
  • Managing seasonal working capital requirements
  • Manage short term cash flow gaps

Why should I avail loan via FlexiLoans?

Quick credit assessment ensures fast disbursal of loan at best rates and flexible terms, thus providing financial access at a click! Our business is to help you grow your business.

How is the interest rate calculated on a business loan?

  • Business Loan interest rate is calculated basis- E = P * r * (1+r)^n / ((1+r)^n-1).
  • Here, P signifies principal loan amount, r signifies the interest rate, n stands for tenor in months and E signifies the EMI amount.
  • You can use the FlexiLoans EMI Calculator to check the interest payable, EMI amount and more.

What documents are required to apply for a loan?

KYC document

  • - Pan card

Proof of residential address (any one)

  • - Rent Agreement
  • - Driving License
  • - Voter's ID
  • - Ration Card
  • - Passport

Banking

  • - Last 6 months of bank statement of current account

Business KYC (any one)

  • - GST Registration Certificate
  • - Shop Establishment Certificate

Financial documents (For loans greater than 20 Lakhs)

  • - 2 years Audited financials
  • - Last 2yrs ITR
  • - GST Returns of 6 months

Are there any charges other than interest rate that I have to pay to avail the loan?

We may charge processing fee to facilitate the loan towards legal and documentation charges. You may be charged penal charges for late or irregular payment behavior.

Where to apply for a business loan?

To apply for a business loan click on the link here.

Quick credit assessment ensures fast disbursal of loan at best rates and flexible terms, thus providing financial access at a click! Our business is to help you grow your business.

We may charge processing fee to facilitate the loan towards legal and documentation charges.

Interest rates start at as low as 1% per month. However, it may depend on various factors like your loan amount, tenure, eligibility, etc.