business loans in India

Tips To Save Interest On The Business Loan 

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Low interest rates on loans save time and money, and also help repay the debt quickly. Instant business loans help run businesses and firms to tide over financial crises. 

Taking business loan is easy these days as business loans have reduced interest rates. Check your business loan eligibility so that you can easily apply for it.

Here are some tips for a lower interest rate –

  • Improve your credit score

To reduce the interest rate, check your credit score. A good credit score defines the credit-worthiness and credibility of the company. It reduces the credit utilization score, and it helps to get a lower interest rate 

  • Pay your EMI on time

Paying EMI on time helps maintain a high credit score and improves the chances of getting a lower interest rate. 

  • Get MSME loans

MSME business loans are designed to help small and medium enterprises. These loans allow businesses to grow, as lenders offer low-interest rates and easy repayment of the loan.

  • Business credibility

A credible business history helps create high credibility for a business, which helps lower the interest rate.

  • Improve business financials

If you have a flourishing business, the lender will offer you low-interest rates as they depend on factors like financial position, project credibility, and turnover.

Follow the above tips and get the offer of a low-interest rate for your business loan. Get an instant business loan by analyzing your business loan eligibility.

Additional Read: Manage your business expenses this festive season with a Business Loan

Learn the Differences Between Fixed and Variable Rate Business Loans

If you want to apply for any form of a business-specific credit line, you need to understand the basics of chargeable interest rates. As a matter of fact, lenders usually levy either fixed or variable interest rates on the business loans (https://www.fullertonindia.com/business-loan-interest-rates.aspx), which eventually determines the cumulative sum that is to be paid at the end of the tenure.

In the subsequent sections, we shall take a closer look at the primary differences between fixed and variable rates associated with a business loan:

  1. Uniformity

Fixed business loans are the ones where a single rate of interest is used to calculate the interest payable during the entire term tenure. However, according to the name, variable rates depend on the Swap Rate, CDR, or any other index while changing multiple times throughout the loan tenure. 

  1. Financial Stability

Variable interest rates are better if financial stability at the onset is your primary concern. In case you choose business loans with floating rates from credible lenders, the initial rates are way lower than the market staple. Although the rates go up after a certain point of time, the initial support allows you to manage startup finances, better.

  1. Minimal Worries

If your venture is based on a steady model, a fixed business loan interest rate is expected to serve you better. Moreover, you need not take the changing market conditions into account as the interest rate remains the same throughout the tenure. 

Both variable and fixed business loans have their share of benefits and advantages, based on the existing financial stead and upcoming growth prospects. 

Additional Read: Follow these Easy Steps to Get A MSME Loan

Here’s Different Types of Business Loans Available in India

Business loans are required for starting a new business, expanding an existing business, upgrade plants and machines, maintain capitals or to manage the cash crunch. Several bank and NBFCs offer business loans in India for finance your business expanses for small and medium enterprises if the borrower meets the eligibility criteria and has a good credit score.

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Different types of business loans offered in India:

  • Professional Business Loans 

Professional business loans are sanctioned to professionals like doctors, chartered accountants, and lawyers who have a good credit history. It is at the discretion of the bank and NBFC how much loan it wants to extend to such borrowers and in many cases, some kind of collateral security is taken in the form of property, government bonds, life insurance policies, etc. The professional business loans usually have tenure of 5-7 years.

  • Overdraft loans

Overdraft loans are normally sanctioned by pledging fixed deposits of the bank and NBFC. Depending upon the credit history of the borrower, cash flows, tenure of bank and NBFCing relationship and the repayment history of the business or individual promoter, the bank and NBFC approves a certain fixed overdraft limit. Based on the limit, the overdraft amount can be utilized and interest is charged by the bank and NBFC only on the utilized amount. This loan can be utilized in any manner as long as the principal and the interest are being repaid on time.

  • Working capital loan 

In a working capital loan, the bank and NBFCs sets a limit for the business to take a loan and the amount can be utilized in a specific purpose only, i.e. the working of the business and cannot be utilized in any other manner. This type of loan is sanctioned against the defined purpose and the plan of the business.

There are multiple other options when it comes to business loans. These vary from one institution to another, it would be really helpful if you talk to a few of them before deciding upon a particular one to get the arrangement according to your parameters.  

Additional Read: What Are The Types Of SME Loans Available In India?