business loan interest rate

Where Can You Use Short-Term Loans for Your Business?

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Businesses require proper funding to grow at their optimum pace. Short-term loans are the perfect solution to financial crunches or lack of funds in businesses. Short-term loans can be used for the following purposes:

  • It is always important to stay prepared, but some situations arise out of the blue and can cause severe damage to your business’ finances. Availing of a loan with a competitive business loan interest rate can help your business stay afloat through such trying times. 
  • You can use borrowed funds to expand your business. Business loans assist you in covering the costs of renovations, hiring more employees, marketing, etc., which eventually enables the expansion of your business.

  • One of the main aspects of being the best in your niche is to have up to date equipment. But they are quite expensive, and many businesses do not have the funds to finance them. In such instances, a short-term loan is the best option to explore.

  • Some businesses are seasonal, and it can be challenging to bring in substantial revenue during off-season times. A short-term loan can help keep your company running during this time by helping pay for salaries, inventory, power bills, rent, etc. 

Instead of compromising on expanding your business or risking its shut down, it is advisable to undertake a short-term business loan. Once the funds are used to their optimum potential and a return on investment is received, you can pay off the debt. Get started now and find a lender that offers competitive interest rates and flexible tenures!

Must Read: 7 Reasons Why Unsecured Business Loans Are Financially Beneficial for Small Business

Some Things You Need to Know Before Applying For a Business Loan

Innumerable people nowadays have their own businesses. Some of these are successful, some are not. Multiple things can go wrong while setting up a business, particularly in the financial aspect, and it will do well to know a little about business loans while financing your company. 

Start-ups versus businesses

You must understand that for business loans in India, generally, businesses should have been operational for 2-3 years before applying for a loan. If you have a startup, consider taking a personal loan instead. Business loans for startups rarely get approved. Several criteria for getting a business loan depend on certain outcomes of a particular business, which a startup would be unable to provide. Startups can also look at the option from borrowing from friends or family, or selling assets. 

Loan amount 

Estimate the amount of money you’ll need before applying for a loan. Even otherwise, you mustn’t borrow more than you will be able to repay. Doing so might land you in a risky situation, even with the risk of losing your business. The interest rate on your business loan must be payable for you. 

Eligibility criteria and required documents 

The specifics of this point vary according to different lenders, but you must research to make sure that you meet the eligibility criteria of the organization you are borrowing from. It will also do well to keep all the required documents ready to avoid any complications down the line. 

Business loans are certainly an effective and easy solution while dealing with difficulties in your business. It is also important to keep in mind the above before applying for a business loan in India.

Must Read: Here Is How You Can Maintain An Excellent Credit Score For Your SME

Common Factors Which Affects on Business Loan Interest Rate?

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.

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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