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5 Major Factors That Affect the Rate of
Interest on Your Business Loan

Need a way to fund your working capital requirements, as a business owner? A business loan is one of the best and easiest ways to do so. You can use the funds from such a loan to fund all of your day to day requirements, including purchase of raw materials to payments to creditors.

All said and done, did you know that the rate of interest on your business loan is dependent on a multitude of factors? And based on these factors, you’re likely to get either a lower or a higher rate of interest. Here’s a quick look at 5 of the major factors that influence the rate of interest on your business loan.

1. Your Credit Score

The credit score is simply the most influential factor that can affect the rate of interest that you’re likely to get on your business loan. If your credit score is high, something like 700 or above, you’re likely to get a very attractive business loan interest rate. This is primarily because of the fact that the higher the credit score, the lower the risk undertaken by the financial institution. Therefore, the institution is likely to pass this benefit over to you by way of lower interest rates.

2. Your Business

The nature of your business is another very important factor that can influence the business loan interest rates in a big way. The riskier the nature of your business is perceived to be, the higher the rate of interest that the bank is likely to charge you. Unfortunately, this is one of the factors that you have very little to no control over.

3. Your Revenue Generating Capacity

When you apply for a business loan, you would be asked to submit copies of your financial statements for the previous few years. This is done to ensure that your business has adequate capacity to generate revenue. If the financial institution feels that the revenue generated by your business is not adequate enough to warrant such a high loan amount, it would be more inclined to charge a higher rate of interest.

4. Your Business Experience

If you’re a seasoned business owner with lots of prior experience in the current business field, you’re likely to enjoy a much lower rate of interest on your business loan. This is simply because a financial institution views a business owner with loads of prior experience in a positive light, thereby giving you the benefit of lower interest rates.

5. Your Business Plan

This is something that newly founded businesses are required to provide to the financial institution at the time of availing a business loan. The plan needs to be elaborate and extensive, outlining the trajectory that you’re likely to take to build your business. If the plan is not comprehensive or if it doesn’t address your business objectives properly, the financial institution will be more inclined to charge you a higher rate of interest on your business loan.

Conclusion

Now that you’re aware of the 5 major factors that affect rates of interest on business loans, go ahead and apply for one on Finserv MARKETS. That said, before you do it, make sure to use a business loan calculator to determine just how much EMIs that you would have to pay each month. You can find a business loan calculator on the website of Finserv MARKETS itself. So, what’re you waiting for? Visit Finserv MARKETS right now and get your business going.


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