Numerous factors contribute to the growth of a business, but perhaps one of the most crucial ones is the steady cash flow. Both existing organisations and start-ups require substantial funds to meet a range of business operations. One of the most reliable options to resort to is a business loan in such a scenario.
However, it is also essential to determine that choosing a credit option like this can add up more debt, which gets difficult to repay later. Therefore, assessment of borrowing cost and affordability becomes imperative for the borrowers to ensure a hassle-free EMI payment. In this regard, one can take the help of a business loan EMI calculator beforehand to determine the EMIs and the overall interest outgo throughout the tenor.
Factors affecting business loan EMI
Before availing of credit, interest rates and EMI are essential aspects for every borrower to consider. Every individual seeks to avail of a substantial amount at affordable interest rates, thereby leading to reasonable EMIs. However, there are certain factors that impact the business loan interest rate and EMIs as well.
Apart from using a business loan EMI calculator and knowing the overall EMI and interest outgo, borrowers need to know the deciding factors that can significantly change the EMIs.
- Nature of business
One of the primary factors that affect business loan EMIs is the type of business. The nature of your business will state what kind of business you are involved in. Businesses can be of several types, and depending on the category of business, lenders levy interest rates; accordingly, the EMI is evaluated. Here are some of the types of businesses that are eligible to apply for a loan.
- Self-employed professionals- doctors, architectures, CAs, etc. fall under this category
- Non-professionals- retailers, suppliers, traders, etc. come under this category
- Entities- partnership firms, proprietors, private limited companies, etc. belong to this segment
Besides, business vintage also plays a pivotal role in deciding the interest rates. Moreover, if the business establishment is of at least 3 years or above, the applicant can negotiate for better interest rates.
- Credit score
The importance of credit scores can’t be denied when it comes to EMIs. A good credit score and a reputable credit history are the most effective means to evaluate borrowers’ creditworthiness. If an individual possesses a credit score of 685 and above, he/she is eligible to avail of substantial loan amounts at competitive interest rates.Â
However, individuals with a lower CIBIL score are imposed with a higher interest rate or might face loan application rejection. Now when borrowers know how credit report matters when applying for a business loan, they must improve theirs to negotiate with the lender for competitive interest rates and lower their business loan EMIs.
In this regard, borrowers must know what to do if their business credit score is low and adopt certain financial strategies to improve it and ensure a hassle-free loan approval.
- Loan amount and repayment term
Ideally, the loan amount and tenor also play a part in determining the business loan EMIs. Usually, lenders levy a higher interest rate if a borrower applies for a higher loan amount, especially due to the associated risk factor or the possibility of default repayment.
On the other hand, if a borrower wants to ensure affordable EMIs throughout the repayment period, he/she can settle for an extended tenor. However, doing this will increase the interest component of the credit. In this regard, individuals can take the help of a business loan EMI calculator to determine an affordable instalment.
- Annual business turnover
Each lender decides the business loan interest rate based on a business’s yearly turnover or revenue. If the annual business turnover is on the higher side, the interest rate will be lower, and the EMI will be reduced. However, if a business’s turnover does not satisfy the lender, that applicant will be charged with a higher interest rate, thereby leading to higher EMIs.
This is because firms with a higher turnover can repay their credit effortlessly compared to others.
- Meeting the eligibility parameters and submitting necessary documents
Meeting the business loan eligibility can help individuals to negotiate a better loan deal. Hence, they can opt for favourable EMIs that will help them to repay the credit without any hassle.
Additionally, potential borrowers need to submit a few documents to complete this process. In this regard, they can refer to the checklist before applying for a business loan.
Business owners who are planning to get funding can apply for a business loan from Bajaj Finserv. Moreover, the availability of pre-approved offers streamlines the loan application process and saves time. These offers are applicable to other financial products like personal loans, credit cards, etc. Borrowers can check their pre-approved offers by submitting their names and contact details.Â
To conclude, business credit is one of the easiest ways of securing necessary funding for any venture. However, before going forward with a financial commitment like this, it is ideal to use a business loan EMI calculator to check the instalments in advance and make an informed decision.
Also Read:- How to choose a Health Insurance plan in India?
