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Business Loan Interest Rates – Factors and Features to Getting an Optimal Rate

How Business Loan Interest Rates Work

Ever wonder why business loan interest rates vary from lender to lender? There are several factors based on which every financial lender such as a bank or an NBFC determines the interest rate for any loan. The same holds true for a business loan as well. The more you satisfy these factors the lower your interest rate and accordingly, a higher interest rate is the result of such criteria not being satisfactorily met.

Here are the factors which are considered by banks and NBFCs for determining the interest rate for your business loan application.

Credit Score


The most talked about of all factors which determine your eligibility for a business loan and hence your interest rate, is credit score of your organisation. Some financial institutions also account for the credit score of the business owners to gauge their temperament for repaying loans. While having a healthy credit score helps in making the loan process smoother, you can get a business loan with an average credit score if you get the other variables right. The norm is to have a credit score more than 700 to be considered eligible and more than 750 to be favourable.

Age of Your Business


If your business is relatively young/new, lenders will consider your business loan as a high-risk entity, and charge you a higher rate of interest. Then again, having a long-running business does not guarantee a lower interest rates, as is covered in the following point.

Profitability of Your Business


Everyone likes a profitable business. That is especially true when it comes to lenders. If you are running an efficient organisation with large profit margins, lending institutions will most likely discount your business loan interest rates for it.

Volatility of Your Industry


Another important factor considered by lenders while calculating the interest rate for a business loan is the prevailing market conditions in a certain industry. If the market is excessively volatile, the interest rates go up, and if there is a projection of short or long-term stability, the interest rates are likewise relaxed.

Assets and Infrastructure


While unsecured business loans do not require a collateral, having a sound infrastructure and assets help if you are applying for loans in the range of six-digit figures.

Small Business Loan Interest Rates – Fixed vs. Variable


Based on the above factors, a lender will offer you an interest rate on the loan amount. The rate can be fixed or may fluctuate based on a market model that dictates variable interest rates. Although most people prefer a fixed interest over a variable interest rate, both have their advantages. If the market prospects are looking good, a borrower can save on interest payments by opting for a variable interest rate.

Lendingkart Business Loan Interest Rates


At Lendingkart, we understand the needs of our customers and therefore have devised a smart system based on analytics and machine learning. The system allows us to offer customized interest rates to our customer, thus ensuring that every loan application is sanctioned with the lowest possible interest rate. Thus, relieving MSME loan applicants from the dilemma of choosing between fixed and variable interest rates and giving them the best of both worlds.

If you are looking for an online business loan, visit our website to get a quick quote and apply for a business loan in a few simple steps.

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