A business loan can help you to start a new business or to expand an existing one. It is a medium of enhancing your existing firms or industries. But before opting for the loan you must have to check the business loan interest rate provided by the different financial platform.

You need to know the factors that decide the interest rate of a business loan. So, let’s have a look at them: 

• Rate of Inflation: A rise in inflation results in an increase in the interest rate on any loan.
• Policies of RBI: RBI often announces change in economic policies to check the inflation rate.
• Relaxation in monetary policies also lowers the interest rate on a business loan.
• Type of business loan: Secured business loans have a lower rate of interest while unsecured business loan comes with a higher interest rate. SME business loan is a popular type of business loan.
• Credit Score: A credit score of 750+ is ideal for the lender to offer you a business loan.
• Business experience: Business which shows a recent history of profit-making can avail a business loan at reduced interest rates.
• Yearly turnover of business: A profitable business will experience a hassle-free loan approval process and flexible repayment options.

Knowledge of the factors that affect a business loan interest rate helps you to select the right type of loan.

Additional Read: Top 6 Business Loan Myths That You Should Ignore