Unsecured Business Loan Rates: Fully Explained


Since the start of the pandemic, most business owners have paid attention to the monetary policy of the Reserve Bank of India (RBI). Even during this difficult time, RBI did not disappoint business owners and other borrowers by offering them a range of restructuring and default options; they also kept interest rates unchanged for a long time.

Factors affecting Unsecured Business Loan Rates

Let’s take a closer look at the rates on business loans and the factors that affect them: 

Decrease in interest rates:

Sometimes called a decrease or equalization of interest rates, declining interest rates are calculated monthly on the balance of the loan. The outstanding balance decreases with each EMI payment. 

Fixed-rate of interest:

Also known as fixed rate, a fixed interest rate is charged on the total amount of the loan over the maturity of the loan. 

To calculate interest, use the Business Loan Interest Calculator, which allows you to calculate how much you will have to pay at the end of each month and plan your monthly budget accordingly.

Change in rate of interest:

Sometimes financial institutions borrow funds from RBI to meet customer needs. In turn, RBI charges the financial institution an interest rate known as the redemption rate. If RBI raises the redemption rate, financial institutions restrict themselves. Therefore, to maintain a balance between supply and demand, financial institutions raise interest rates on commercial loans and other types of loans. 

Business profile:

Do you need an unsecured loan for your business? Do you have a strong business reputation? When granting a small business loan, financial institutions take into account the reputation of the company, the number of years it has been in existence, the details of the business owner, and other similar factors. 

Payment History:

Have you ever taken out a business loan, such as a working capital loan, equipment loan, or any other similar loan for your business? If so, how is the repayment done? Did you pay EMI on time? Here are some of the issues that your lender takes into account when considering your loan application. Keeping your EMI up to date and avoiding default on any of your old or existing loans increases your chances of getting a low-interest business loan.

The nature of the business:

Are you in a business with seasonal market requirements or in a business with tax cycles that change based on market conditions? 

When applying for a business loan, all of these considerations come into play. In general, financial institutions avoid lending to high-risk companies. They may reject your application or charge a higher interest rate. 

Lender Relationship:

In some cases, the interest rate on a business loan depends on the relationship between the lender and the borrower. You can get the best loan terms and interest rates if you are an existing customer who has proven loyalty to the lender by paying off your debt promptly. 

In conclusion: The pandemic-hit economy has affected all sectors of society, including business owners. To recover from the impact of COVID, business owners are looking for low unsecured business loan rates. However, before applying for this loan, you must understand various things that affect the interest rate on an unsecured business loan.

Leave a Reply

Your email address will not be published. Required fields are marked *