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6 Factors that Influence Your Business Loan Interest Rate

Various factors may affect the rate of interest on your business loan. You must be aware of the following factors and how they affect a business loan:

1. Credit score – The credit score plays an essential role in determining your business loan eligibility. Hence, it is recommended to have a credit score of 700 or above for being eligible for a business loan. With a poor credit score, you won’t be able to get a loan at a low-interest rate or some financial institutes may even reject your loan application.

2. Business experience – Many lenders in India offer business loan to start-ups but the interest charged on that is generally higher. If a business has been running for several years, it is easier for them to get a business loan at much lower interest rates.

3. Type of business – Not only the business experience but the business type also influences the business loan interest rate because some businesses are considered risky compared to others. If you are involved in any risk business, you will be charged higher interest rates. But if you run a secure business, the interest rates will be lower.

4. Revenue – The lender will also consider your monthly revenue when offering you a business loan. If you are new in business, your revenue won’t be as impressive as that of an older business and hence, you have to pay a higher interest rate.

5. Collateral – Many business loans are secured. So, higher the collateral value, lower will be the risk for the lenders. This means you will get a business loan at a lower interest rate.

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