If you choose to own a business, you may be paying out a hefty amount in interest payments each year. Business loans are a good source of capital investment for entrepreneurs and companies. These funds enable entrepreneurs and companies to undertake operations and projects that they would otherwise not be able to afford. But business loan interest rates also depend on many factors, such as:
- The business owners' creditworthiness.
- Business plan.
- And the type of business loan.
Small Business Loan Interest Rates
A low business loan interest rate is the average rate charged by various lenders on a given loan package. The range of banks and financial institutions that provide small business loan rates may vary greatly, depending on their terms and conditions. Generally, the higher your business's creditworthiness, the better rates you can expect to get. On the other hand, this being said, there are varying ranges of small business loan interest rate packages offered by various banks and financial institutions.
The following table details the range of fees that are included in small business loan rates:
- The annual percentage interest rates are considered the best and most accurate means of determining a particular business loan's interest rate.
- These rates take into account the risk-adjusted nature of the financing.
- There are also two other factors, namely the amount of business loan and the business loan duration, that are used in determining business loan interest rate.
- But even then, business borrowers must keep in mind to look at more than the annual percentage rates when choosing a business loan.
- It is also important to shop around for business funding deals from various Banks and NBFCs to ensure that they offer the best rates available in the market.
Business Loan Criterion Fulfillment
If you're looking to avail of a business loan, then you have to fulfill certain eligibility criteria for the same first. The lenders have carefully chalked out these business loan eligibility criteria to evaluate your future repayments and your creditworthiness.
It consists of:
- Personal and professional assets
- Business assets
- Revenue flow
- Business worth
- Credit history
- Net worth and many more.
These are nothing but the fundamental requirements that lenders look for while approving business loans. If you fulfill these criteria, you can be pretty sure of getting a business loan. Every bank can verify business loan eligibility criteria. Every bank would have a different set of criteria that they consider for every applicant. Sometimes, this eligibility criterion can be altered according to the economic conditions prevailing at a particular time. Therefore, it's advisable to contact the bank representative to know about the bank's exact requirements. After knowing the eligibility criteria, the applicant should compare every bank's rates and select the one that fits his requirements. If you intend to save your time throughout this process, you can contact us anytime and make the process of applying for a business loan super-easy.
Purpose of Opting for Business Loans
The purpose of business loans is to raise money for business purposes. The loan can be collateralized with assets , shares, etc. Therefore, people prefer business loans to other sources of funds. They are easier to qualify for, carry less interest rate, have flexible terms and repayment options, and be refinanced when the borrower's situation changes.
- The most common purposes of business loans are meeting seasonal businesses' expenses, establishing new businesses, and covering operational expenses.
- The other purposes of business loans are to cover business start-up costs( when expending existing business) and make payments to employees during payroll preparation time.
- However, all business loans are geared toward short term needs, seasonal businesses, and employee needs
- To serve all these purposes, there are different kinds of business loans available in the market. These loans include:
- Term Loan
- A business line of credit
- Machine /Equipment Loan
- CC/OD Limit
- Inventory Funding
- Merchant installment loans
- Loan Against Property(LAP)
- Merchant installment agreement loans
- A commercial mortgage is another purpose of business loans that make them so popular. As this loan aims to provide funds to purchase commercial real estate property, then a commercial mortgage is one amongst the easiest ways to obtain funds and repay them.
- Another purpose of business loans is to use them to meet urgent business needs. Business owners may borrow money to satisfy emergencies such as payment of salaries or purchasing new equipment for daily business operations.