Starting your own business has several benefits, you can earn more than your monthly salary, you can follow your passion, and potentially create an empire one day. To start and scale your business, making an investment is necessary. At times, the funds required to start or expand your business could be a lot more than what your savings can provide. That is when you should apply for a Business Loan. It is an ideal source of formal funds.

Business Loans have a simple eligibility criteria and application process. You can apply for the Loan online or offline. You can repay the obtained amount in equated monthly instalments. This allows you to work towards your dream without burdening yourself. Business Loan interest rates have an integral part to play in Loan repayment. The following are the various factors that influence Business Loan interest rates:

Business nature

Since the Loan is offered to meet a business financial requirement, it is obvious that the bank will consider the business nature. The bank enquires about your business’s current positioning, location, and years of operation. You should be running a profit-making business. The location of your business matters as it makes a significant difference to the revenue you make. A business typically generates a higher revenue in a metropolitan city, as it has a wider customer base.

Years of operation matter to grasp the stable position your business has held over the years. Several years of operation indicates you have an established business and proved to be a profit-making company. When your business profile makes a strong case before the bank, you can attain attractive Business Loan interest rates.

Creditworthiness

Business Loans are generally of significantly large value. Given this, the bank’s credit risk is likely to be higher. Your credibility as a borrower is the key decider for Loan approval that the subsequent interest rates offered. A good credit score assures a seamless Loan approval. It puts you in a favourable position to negotiate for a lower interest rate and flexible repayment terms.

Repayment capacity

Your repayment capacity influences your Loan eligibility and the interest rates. A higher repayment capacity makes you eligible to avail a higher Loan amount. This adds to your credibility and helps you attain a lower interest rate. The rates also depend on the bank you choose for the Loan application. Opt for MSME Loan apply with a bank whom you already have a good, long-standing relationship with. This lets you negotiate and get better interest rates.