A loan is an integral part of whether you want to start or maintain a small, medium or large business. The business loan can be a secured or unsecured loan depending on the lender’s conditions. If it is an unsecured loan, you do not have to keep any collateral with the lender. Lenders will not issue loans based on your assets but your credit score. A business loan interest would be high if lenders do not ask for collateral. If you had taken loans in the past and repaid it on time, then you would have a good credit score. Any default during repayment results in bad credit scores and you would have difficulty in getting loans. Know more about business loans in the following: Your business loan can have varying interest rates. The rates will depend on certain factors like:

Business credit score
This score would decide whether your business is eligible for receiving a loan. If the credit score is high, lenders may charge a lower interest rate.

Personal credit score
Your credit score as an individual depends on your earlier loan history, whether you repay back the loans taken, any missed installment, etc. Lenders can charge high-interest rates if you have a bad credit score.

Time in business
Lenders consider new businesses as having more risks while issuing loans than businesses that are already operating for a few years. This can lead to higher interest rates.

Business type
Certain businesses like restaurants, bars, food chains, travel agencies, etc. are considered by lenders to be riskier than others. So, the interest rate may go up.

Loan term
The loan duration or term also influences the interest rate. You will find that for a longer loan term, the interest rate may be low.

Collateral
If you keep collateral or security with your loan, you will find that the lender may agree on a lower interest on the loan. In case you fail to pay back, he can claim ownership of the collateral.

Type of loan
Some types of loans, particularly for small businesses, charge low-interest rates.

A low-interest rate on loans will help you to save your funds for the business and you may be able to close the loan sooner. Follow the below tips to get a lower interest rate.

Raise the credit score
The credit score is an important factor. You can have a good score by reducing your credit utilization ratio which is the ratio of available credit limit and the credit limit that you have used. This can help in getting a lower interest rate.

No Default on EMI
EMI or Equated Monthly installment is the amount that you have to pay every month for your loan repayment. Pay your EMIs on time and do not miss any installments. This would improve your chances of obtaining lower interest rates from the lender.

Improve your business financials
A profitable business can help you obtain lower interest rates as the lenders consider the financial position of a company or business while issuing loans.

Research
While applying for loans, compare between different lenders or banks and go for loans with low-interest rates and favorable conditions. You can do this online on individual lending sites or quotes comparison sites.

Refinancing
You may find that a lender is ready to offer loans at a lower interest rate after you have already taken some amount of loans from another lender. You may apply for the balance amount of the loan at lower rates.

MSME business loan
MSME or Micro, Small, and Medium Enterprises aim at promoting businesses. This government sector may offer lower interest rates and easy repayment terms. But there are certain criteria that your business has to fulfill to avail of this loan.

Vintage business or established business
If your business has been operating for a long time, the lenders have more trust in it. They may be willing to issue business loans at a lower interest rate.

Other measures to have a lower interest rate:

• Certain other measures that you can take for the possibility of a lower interest rate:
• Continue with your old credit cards or accounts even if you do not use them
• Apply for a secured business loan and offer suitable collateral as security
• Avoid short-term business loans and go for loans with longer terms
• Apply for a loan from the top private or public sector banks or popular lenders
• Calculate your interest rates before applying for a loan. Use a business loan EMI calculator to get the exact numbers.

While applying for loans, take note of the business loan interest that you have to pay. Since these loans would have varying interest rates, do some research before you apply. There are certainly other factors like your credit score, business history, etc. that would affect the interest rates. Take some measures to reduce the interest rates as you can save a lot of money in the process.