4 Factors that Affect Your Business Loan Interest Rate

When you apply for a Business Loan, the interest rate offered to you isn’t random. There are several factors that lenders use to assess risk and determine your repayment terms. Even a small difference in interest rate can significantly impact your cash flow. Read more in this blog, to understand the factors that influence your Business Loan interest rate .

Top 4 Factors That Influence Your Interest Rate

You might wonder why your friend’s business secured a better interest rate than yours. This is primarily because interest rates vary based on several factors:

1. Credit Score

Credit score is one of the first things lenders check before making a lending decision. It reflects your financial discipline and past repayment behavior. A higher credit score indicates a lower default risk, which means you’re more likely to get approved for a loan with a low interest rate.

On the other hand, a low credit score may result in a high interest rate, as lenders may consider you as a risky borrower. To improve your creditworthiness, make sure you regularly review your credit report, pay off existing dues on time and avoid applying multiple loans or credits at once.

2. Business Age & Financial History

A well-established company with consistent revenue and stable cash flow signal’s reliability. If you have maintained your books, filled in taxes on time, and demonstrated profitability then you’re in a stronger position to negotiate your interest rate.

3. Loan Amount & Tenure

The amount and the duration of the loan play a crucial role in determining your interest rate. For instance, a high loan amount and a long repayment tenure carries a high risk for lenders, leading to higher interest rates. On the other hand, if you opt for a shorter loan amount and tenure, you may get a more relaxed and affordable interest rate.

4. Market Conditions & Economic Factors

Some factors influencing your interest rate are beyond your control. Macroeconomic trends like inflation, repo rate changes or economic downturns can all impact your rates. Even if you’re a strong applicant, a change in policy rates can affect the interest rate you’re offered.

If you’re looking for a loan with attractive interest rates, Poonawalla Fincorp offers Business Loan up to ₹75 lakh with minimal documentation and flexible EMIs up to 48 months. Apply now and enjoy the benefits today!

How to Apply for Poonawalla Fincorp’s Business Loan

Follow the 3 simple steps below:

Step 1: Click on “Apply Now”

Tap on the ‘ Apply Now’ button to initiate your application.

Step 2: Enter Your Details

Enter your DOB, PAN card number, monthly income, and residential details.

Step 3: Upload Your Documents

Upload the necessary or required documents for quicker approval.

Once your verification is successful, the loan amount will be disbursed into your bank account instantly.

To Conclude

Getting the best Business Loan rate isn’t just about applying, it’s about making informed choices. When you understand the factors that affect your interest rate like your credit score, business age and financial history, loan amount and tenure, and market conditions and economic factors, you take control of the process.

Poonawalla Fincorp offers Business Loan at attractive interest rate starting at 15%* p.a., instant approval and 100% paperless application process. Apply today and let your business move forward on your terms.

Frequently Asked Questions

1. What is the significance of a credit score in determining Business Loan Interest Rates?

A credit score reflects your financial discipline and past repayment behavior. Lenders use it to assess the risk of lending it to you. A higher credit score usually results in a lower interest rate.

2. Can I get a Business Loan without providing collateral?

Yes, Poonawalla Fincorp offer unsecured business loans at attractive interest rates.

3. What are the key factors to consider when choosing a lender for a Business Loan?

Consider the interest rates, loan terms, collateral requirements, lender's reputation, and the ease of the application process.

4. What financial documents should I maintain to demonstrate my business's reliability?

Maintain accurate books related to your business, file taxes on time, and demonstrate profitability through financial statements and tax returns.

5. How can I improve my credit score to get a better interest rate on a Business Loan?

Regularly review your credit report, pay off existing dues on time, and avoid applying for multiple loans or credits simultaneously.