Business Loan Interest Rates

Comparison of Business Loan Interest Rates 2024

Note: Interest Rates as on June 2024

Business Loan EMI Calculator

Use the business loan EMI calculator to find out your EMI amount during the loan tenure against the different interest rates and repayment tenures for your business loan. The online business loan calculator also works as an interest calculator as it helps prospective applicants to know the total interest amount payable on their business loans. You can use the business loan EMI calculators provided by various lenders on their websites or available on online financial marketplaces to know the optimum EMI for different interest rates, loan amounts and repayment periods.

Factors Affecting Business Loan Interest Rates

The interest rate set by lenders offering business loans are primarily determined on the basis of their cost of funds, net interest margins and the credit risk assessment of their loan applicants. Here are the main factors that can influence your business loan interest rates:

• Business income: Lenders offering business loans consider their loan applicants’ business income while setting the interest rates. Some lenders require their loan applicants to have a minimum monthly/annual income or turnover to be eligible for availing business loans. Lenders usually consider loan applicants with higher incomes as having a higher capacity to repay their loan, thus posing a lower credit risk for their lenders. Therefore, lenders are more likely to offer lower business loan interest rates to loan applicants with higher business incomes.

• Nature of the collateral/security: Business loan lenders usually consider the nature and value of the asset pledged as security or collateral while assessing loan applicants of prospective borrowers. Those furnishing security of a higher value are more likely to get business loan approval at lower interest rates.
• Type of loan facility: Several lenders offer different business loan interest rates depending on the type of loan facility. Lenders offer different business loan facilities including working capital, invoice discounting, cash credit, term loan, overdraft (secured or unsecured), commercial property loan, etc.
• Credit Scores: Lenders usually consider the credit scores of their business loan applicants, especially those opting for unsecured business loans, while setting their interest rates. As lenders consider higher credit scores as a sign of creditworthiness, those having good credit scores are more likely to get lower interest rates on unsecured business loan schemes. Those having higher credit scores also pose lower credit risk to lenders. Lenders may deny business loan approval to loan applicants having lower credit scores or approve their loan applications but at higher rate of interest in order to compensate for undertaking higher credit risks. Therefore, prospective applicants should always aim to build and maintain high credit scores to improve their business loan eligibility and maximise their chances of availing business loans at lower interest rates.

Tips to Lower Interest Rates on Business Loans

• Maintain a healthy credit score
• Offer collateral/security to secure your loan
• Maintain healthy cash flows
• Compare business loan offers from as many lenders as possible
• Refinance your existing loans having higher interest rates
• Check your eligibility for availing interest subsidies through government schemes.

Also Read:- About Mudra Loan

FAQs

1. How do I get the lowest interest rate business loan?

Ans. You can check and compare all the leading Banks and NBFCs offering business loan deals under one online platform and choose the one, as per your business requirements, loan amount and repayment tenure.

2. What is the minimum and maximum loan amount can I avail through Business Loan?

Ans. The minimum loan amount has no limit to borrow whereas the maximum loan is up to Rs. 2 crores for unsecured business loans that are collateral free. Most of the financial institutions offers loans starting from Rs. 10,000.

3. Is the business loan interest rate fixed or floating?

Ans. It depends on the banks or lenders to offer fixed or floating interest rates. However, most banks prefer Fixed interest rates over Floating. Largely, the interest rates offered by Private sector banks is fixed.

4. Is there any need to submit collateral or security with the bank to avail Business Loan?

Ans: There is no need to submit any collateral/security or asset in order to apply for an unsecured business Loan, except few secured business loans like a Letter of Credit, Cash Credit, POS loan, Bill Discounting, Equipment Finance, and Machinery loan that are secured business loans.

5. What is the repayment period of a business loan?

Ans. The minimum repayment period is 12 months, whereas the maximum repayment period is of 5 years, however, in may exceed as per business requirements.

6. What are the pre-closure/foreclosure charges for business loans?

Ans. The pre-closure or foreclosure for business loans shall vary from lender to lender and ranges from Nil to 5% of the balance principal outstanding amount.