Do you have a start-up idea? Can you double your company’s revenue by adding a manufacturing unit? You should have a clear plan ready before getting the desired finances. Before, you would face several challenges to get the desired funding for your business. However, today you can get them hassle-free, thanks to Business Loans.
Business Loans offer significant Loan amount at a competitive interest rate. You can get such Loans from the bank or other financial institutes. You can get the Loan through a government scheme. Pradhan Mantri MUDRA Yojana is an initiative by the government to provide affordable financing to small and micro enterprises.
The PM MUDRA Loan has simple eligibility criteria is collateral-free, and offers a reasonable line of credit. Following are a few factors that influence Business Loan interest rates:
- Credit score
Banks primarily consider your credit score for Loan approval. A credit score shows your credibility as a borrower. Hence, your credit score can make or break your Loan approval case. You should have a decent credit score to ensure a seamless Loan approval. Furthermore, a better credit score lets you negotiate interest rates. Hence, it is best if you work towards improving your credit score.
- Business age and financial history
The bank checks your business age and financial history to determine whether your business is stable. The bank may offer you better Business Loan interest rates if you own a stable business. This is because the bank is confident of your repayment capacity. If your business is unstable, it makes your repayment capacity questionable. They may offer you a Loan at a higher interest rate or reject your application altogether.
- Industry and market competition
The bank checks the industry and market you operate in. For instance, if you wish to apply for the Loan to boost your production. However, considering the market competition, your product’s demand may not be incredible. The bank may find it more of a liability in such a situation. They may also offer Loans at higher interest rates or make no offer.
- Loan amount and tenure
Loan amount and tenure are two major factors influencing Business Loan interest rates. Typically, a significant Loan amount is offered at a higher interest rate. Such a high Loan amount involves higher risk. You are charged a higher interest rate to compensate for the higher risk. Also, a longer tenure attracts a lower interest rate than a shorter tenure. However, do not let the interest rate misguide you. You should opt for a tenure you are comfortable with.