Raising funds for your business might be a tedious task if you are not clear on the various possibilities available on the market. As a business owner, you may arrange funds from private equity, public, or through a financial institution. Though among various alternatives, the easiest way to secure funds is to apply for a business loan. However, you must have a clear answer to a few of the queries before applying for this loan.
Q.1. What factors do you take into consideration when calculating the Business Loan Interest Rate?
This is the most important question you should ask your lender. The interest rate is usually determined by taking into account your credit history and income. But these aren’t the only factors. They also take into account your company’s age, financials, type of business, and debt-to-revenue ratio. The previous criteria provide financial institutions with information about your company’s finances. It also helps them comprehend how you can pay back your debts.
Q.2. Can I get a Business Loan online?
As a business owner, you might not have enough time to visit the lender for your every small or large business needs. Moreover, you can’t also don’t wait for days to get your application processed or know whether you qualify for a loan or not. So, the only alternative you have here is the option to apply for an online business loan. Before settling on any lender, don’t forget to ask this question. Remember that the need for finances in a firm isn’t one-time; it’s recurring. Choosing a lender that allows you to apply for a loan via a website or app puts money at your fingertips.
Q.3. Are there any other costs related to business loans?
Yes, when approving a loan, the lender not just charges the interest rate but also many other fees. The following are some of the most common fees associated with business loans.
- Processing fees: Financial institutions charge this fee to cover the costs of administration associated with your loan processing. With most financial institutions, the processing fee is non-refundable.
- Foreclosure charges: Financial institutions charge this fee if you want to prepay the entire outstanding business loan amount before the stipulated due date. The lender allows you to close the loan after you have successfully paid the EMIs for the first twelve months post disbursement. Most financial institutions charge 4% of the outstanding debt as foreclosure fees.
- Loan rescheduling charges:
Business is an ever-changing environment. There is no guarantee that your profitability will remain the same as it was when the loan application was filed. As such, financial institutions will allow you to rearrange your payback term to fit your budget better. However, such rescheduling is subject to a fee of Rs 5,000 plus GST for each rescheduling.
Some other charges include late fees, loan document charges, and standard stamp charges. Therefore, you must consider the Annual Percentage Rate (APR) instead of the business loan interest rate before settling on your ideal lender.
Q.4. What are the various sorts of loan products available within the business financing category?
Business loans are available from financial institutions in a variety of forms. You may easily locate a variety of products to meet your various business needs. Each of these products differs from the others in terms of repayment tenure, eligibility requirements, loan amount, and other loan-related terms and conditions. Some of the key business financing products are detailed below.
- Term loans:
Term business loans are short-term loans with a maximum repayment period of 36 months. You can obtain up to Rs. 25 lakhs in funding. Furthermore, the lender does not require any type of collateral to sanction funds.
- Medical equipment financing: This type of financing is tailored to fulfil the needs of doctors who run a clinic or hospital. The loan enables you to purchase advanced healthcare machinery. You can use this loan to buy a CT scan machine, an ultrasound machine, an MRI machine, and other medical equipment. The medical equipment business loan interest rate is available at just 11%. The maximum repayment term of this loan is seven years.
- Working capital loans:
This type of loan enables businesses to address their short-term needs or operational expenses. The funds are offered for the LTV of up to 80% of your business’s underlying assets and inventories. This loan can be taken out for a maximum of three years, with an interest rate ranging from 11% to 14%.
Q.5. Do I need to provide any collateral for availing of an unsecured business loan?
You don’t need to provide any collateral for securing unsecured term loans. However, if you fail to meet the lender’s qualifying conditions, you may put up security to secure funds on favourable terms.
If you have any further questions about business loans or business loan interest rates, please post them in the comments section.