Down payment is a statutory requirement for most loans. Down payment assures the lender about the borrower’s intent to repay the loan. It proves that the borrower is serious since their financial stakes are involved in the loan. The down payment figure differs from lender to lender; some charge more and others charge less.
However, quick business loans are probably the only loans for which you do not need to make any down payment. Besides low-interest rates, business loans offer many convenient features. Moreover, you can use the loan amount for various purposes, including business set-up, buying or replenishing inventory, equipment purchase, factory construction, business marketing, office expansion, or even debt consolidation.
These loans can be of two types – secured and unsecured. Although the interest rate of a secured business loan is usually a bit lower than unsecured ones, you will need to pledge a personal or office asset to avail of such a loan. In case you do not want to pledge any asset, opting for an unsecured loan will be the best choice.
Unsecured business loans are quickly approved since there is no need for physical verification or fact-finding of the asset to be mortgaged. Since unsecured business loans are approved quickly, you can also apply for these loans when you need money urgently.
Factors Affecting Interest Rate and Approval of Business Loans
- Credit Score
The credit score is undoubtedly the most important parameter determining your eligibility for business loans. It also affects the interest rate significantly. Credit score refers to a score credit bureaus assign to people with a credit history.
The score depends on the time of loan repayments, total loan amount vis-a-vis the borrower’s monthly income, late payment penalties, loan inquiries, etc.
If you want to expedite business loan approval and get the best interest rate on an unsecured business loan, keep your credit score above 750. Although credit scores range between 300 and 900, 750 is considered the benchmark for getting approvals on business loan applications.
Timely loan repayments, reducing loan applications, and checking your credit score for errors are ways to increase your credit score.
- Income from and Cash Flow of Business
Business loan interest rates and approvals depend on the borrower’s repayment capability. The lender may check your business’s balance sheet and profit & loss statements to evaluate your repayment capability.
If you already have accumulated debt, the lender may feel wary of approving the loan. Similarly, if your business assets have already been mortgaged, the lender may increase the rates to reduce their risks.
Hence, if you want to increase the odds of quick business loan approval, it is wise to refrain from availing of too many loans. Also, show all income sources to assure the lender that your loan will not become a non-performing asset.
Once the lender feels satisfied with your cash flow and profitability, they will offer you the best rates and attractive terms.
- Business Plan
The business plan is linked directly to your business’s viability. Lenders analyze the plan, goals, strategies, and financial forecast to gauge a business’s future potential.
Moreover, if some big investors invest in your company, you can leverage the same to get lower business loan interest rates.
So, before applying for a quick business loan, prepare a solid business plan and explain to the lender how you plan to grow your business.
- Monthly Income
A stable income is vital for securing a business loan. While the balance sheet and profit & loss statements speak volumes about your business’s prospects, your income must also be above the minimum income threshold.
When you have a stable income, you can repay the loan conveniently. It prompts the lender to offer you the best Business loan interest rates.
So, before applying for a business loan, you must inquire about the minimum income criteria and keep the supporting documents handy.
- Business Type
Every business carries some risks, but some businesses are riskier than others.
For instance, a coaching institute is generally considered less risky than a hospitality business. Since coaching institutes do not require as much investment as hotels, lenders may consider it less risky and offer good interest rates.
To reduce the risks of default, lenders usually evaluate the history of the business, its current debt, area of expertise, nature of the business, competitors, and a few more parameters.
https://www.thepostingking.com/category/travel/
Conclusion
Quick business loans are a viable alternative to costly borrowing options. Business loan interest rates range between 17% and 21% per annum, and you can repay conveniently over sixty (60) months. Go through the terms and fees associated with a business loan application before applying for one.
