As an SME owner, you need to fully understand when you sign up for a legally binding contract. What is the interest rate of the business loans and how the lenders recover their investment with their margin of profit? You should know the governing factors of the above.
All About Business Loan Interest Rates-
Business Loan interest rates are nothing but a percentage applied on the principal amount or the amount sanctioned. That percentage is what you pay as interest besides the loan amount while repaying your debt. Many factors influence interest rates such as borrower’s creditworthiness, market rates and Government policies. The foremost prerequisite for getting a loan sanctioned is your credit score. A high Credit Score ensures that you may get entitled to a lower interest rate on your business loan.
What Is To Be Kept In Mind While Evaluating a Business Loan Interest Rate-
Whether it is fixed or variable interest. Business loans generally are offered in both fixed rate or variable rate interest. You may have already guessed that in fixed rate the interest that you pay is fixed throughout the tenure. Whereas in the case of variable rate interest the interest is not fixed and is dependent upon a number of factors such as dent leverage, market trends, etc.
- The APR calculations.
- Other charges levied.
- The processing fees.