To Receive Low-Interest Business Loan, Here are Some of the Factors that You Should Keep in Mind

If you are an entrepreneur who owns an SME or a big corporate company, business financing is the ideal way to deal with all major or small business expenses. If you are looking for a low-interest business loan, we have compiled a list of key points to consider so that you may easily obtain an affordable online business loan.

Credit Score: 

In order to get a low-interest business loan, make sure you have a solid credit score. The three-digit number in your credit score represents your potential to repay your online business loan. When you apply for business financing, the lending institution evaluates your credit score. A higher credit score gives the impression to the lender that you won’t default on your loan. In case of discrepancies in credit numbers, immediately inform your previous lender. The lender will then send a loan closure report or credit score upgrade request to the credit bureau. 

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Nature of your Business

Another vital factor that allows you to receive a low-interest business loan is the nature of your business. If you are running a seasonal business, illegal business, or business with some enemy country, the chances of getting an online business loan approval are very slim. When conducting risk profiling, the lending institution goes through your business model, vintage, size, and so on. They also check if the business you are involved in generates sufficient revenue and is profitable or not. The type of businesses that can apply for this loan is HUF, sole proprietor, retailers, manufacturers, service providers, trusts, and a few more. 

Business Vintage:

Another factor that allows you to receive a low-interest business loan is business vintage. When evaluating your online business loan application, the lending institution checks the number of years of experience you possess in your existing business. Most of the lenders accept an application from entrepreneurs if they are in their existing business for at least two continuous years. In addition to the business vintage, make sure the business you own shows positive profit numbers on the financial reports. In other words, we can say that the more the business experience (existing business), the higher is the loan approval chances at a low-interest rate. This is because the chances of loan default are much lower with experienced or reputed business owners. 

Annual Turnover

If you want to receive a low-interest business loan, make sure you have a solid annual turnover. When evaluating your online business loan application, the lender assesses your annual turnover. They may sometimes also ask you to present your annual sales forecasts for upcoming years. In simple words, the higher your annual turnover and the stronger your future sales projection, the chances of getting a low-interest business loan is much higher. 

Business Revenue and Profit

This is one of the major factors that play a role in your low-interest business loan approval. When evaluating your online business loan application, the lending institution looks at your financial figures to see whether you are earning enough revenue, if your cash inflow is greater than your cash outflow, and if you are in a profitable business. To evaluate these financial numbers, lenders will ask you to furnish a copy of the following documents.

  • Company or firm’s PAN card
  • Individual PAN card
  • GST registration certificate
  • Last six months current account statement 
  • Recent Income Tax returns
  • Income computation 
  • Audited P&L statement and Balance Sheet for the recent years
  • Business continuity proof

Apart from the above-given documents, the lending institution also checks documents such as address proof, business ownership proof, and identity proof. If all the furnished documents are in proper order, the lending institution will grant you a low-interest business loan. 

Repayment History

Another factor that allows you to receive a low-interest business loan is your repayment history. When evaluating your online business loan application, the lending institution checks your previous payment records, such as previous debt EMI payment patterns, credit card dues payment, and so on. If you believe that by merely having a high credit score, you can obtain a business loan interest rate, you are wrong. As such, before you apply for this loan, make sure not to skip your existing loan monthly obligations.

Lender-Borrower Relationship 

When you ask a friend or a financial expert how to get a low-interest business loan, the most popular response is to apply with your current lender. If you have never skipped on your previous EMIs and have paid all your previous debts, the lender will try to retain you by providing better offers. 

To Conclude:

To receive a low-interest business loan, keep all the above factors in mind. Apart from that, you must also keep control over your unnecessary business expenses and should also try to retain your old current account. Old accounts provide lenders with information about your business transactions dating back to the day you established your business.



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