Know about the Finance and Investments Terms

Most businesses today require loans and while it may be easy to get one, the interest rate you are offered is an important factor to consider to avail the loan. You should know that the rates you are offered may differ from what others are given. 

Below are the important factors which will determine the rates of interest you are offered on your business loan:

Credit score- Banks will take into consideration the credit score of your enterprise as well as your personal credit score to check your ability to repay the business loan interest rate. 

Nature of your business – Those businesses which are riskier than others attract higher interest rate. The prevailing market conditions of the industry your business belongs to, is also considered.

Age of your business- Younger businesses often attract higher interest rates as lenders consider them to be less safe. This, of course, does not mean that new businesses will automatically attract lower interest rates as other factors mentioned here are also important.

Profits of your business- If your business is making more profits, you will attract lower interest rates as good profits increase your capacity to repay the loan.

Cash flow in the business- Having a good cash flow on a daily basis means that you have adequate cash in hand and you have lesser expenses. It also implies that you will be able to pay your EMIs on time. Inconsistent cash flow, on the other hand, points to financial mismanagement and will lead to higher interest rates on your business loan.

Read Also: What is Working Capital Management and Why Should Companies Pay Attention to It?