Business loans can help small as well as large-scale ventures to fulfil their financing needs conveniently without having to look for different sources of funding. These loans are available in a wide range of funding amount to enable fulfilment of diverse business expenses. However, unsecured business loans have been one of the most common funding options for their easy availability and zero chances of asset risk.
Simultaneously, the borrower must bear the interest charge as per the set business loan interest rate in India. As business loans are usually high-value advances, the interest addition can result in significantly loan liability, unless you adopt ways that can help reduce this liability. Let’s check out some of the smart ways you can adopt to keep the interest rate as well as the interest liability in check.
How to Reduce Your Business Loan Interest Rate in India?
1.Run a market research and comparison
When beginning to seek out the available loan options, you must have a fair understanding of the business loan interest rates in India across lenders. Doing so shall help you be well-informed about the maximum and minimum interest rates on business loans. Accordingly, you can approach the lender offering the most competitive loan option.
You can use an EMI calculator as well to compute the total interest outgo as well as EMIs payable and compare lenders accordingly before determining.
2.Create a financial strategy before applying
Lenders often associate the risk involved in lending to an individual or entity with the financial discipline and health that they possess. Low business loan interest rates in India are almost always a result of businesses holding a reliable financial backing and income stability. It is thus only prudent to create a suitable financial strategy that identifies the future cash flows, sets the revenue sources directed towards loan repayment and keeps all other financial aspects in place before applying to secure the best rates.
You should also be well-prepared with all financial statements of the business to document your past income stability and prove eligibility for the advance.
3.Maintain a high credit score
Credit score is an acute indicator of your financial habits and other important financial parameters. It is thus essential that a business as well as the business owner hold a high credit score of not less than 700.
As both individual and business credit scores are considered for the purpose, you must take measures that help improve both scores in the long run. A high score indicates reduced risk of repayment default or delay, thus enabling better chance at interest rate negotiation.
You can save on your business loan interest even after having availed the advance. One of the smart ways to do so is through early repayment of the loan amount. You can thus either part-prepay or foreclose the loan account at any time before the tenure ends for interest savings.
Other ways to keep the interest payable in check despite the same business loan interest rate in India include opting for balance transfer and increasing EMIs payable. Remember, thoughtful management of the advance not only leads to early repayment and savings but also improves your creditworthiness as a borrower, improving future financing prospects.
Check website for more loan and finance products