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Factors that Banks and NBFCs Consider When Calculating Business Loan Interest Rates

When you have a long cash conversion cycle, you may need to access funds for your firm, be it for working capital, marketing expenses, or machinery maintenance costs, in the form of a business loan. While applying for business finance is easier today with online application, the interest rate you are offered impacts how affordably you can repay it.

In this regard RBI’s rates and the economic climate affect the interest you are charged by the lender, but note that the rate you are offered may differ from what your contemporaries are given. This is because lenders calculate your business loan interest rate based on certain factors related to you and your firm.

Here are 5 such factors you should know when it comes to business financing.

Your and your business’ credit score

The first thing that lenders look into when calculating business loan interest rate is the credit score of your enterprise. They also consider your personal credit score to check your ability to repay the business loan, should the business default. So, work towards building a good credit score and maintain it to avail loans at affordable interest rates. Having a score of more than 750 helps in securing better interest rates.

Nature of your business

Certain types of businesses like mining, fireworks manufacturing, and arms and ammunition manufacturing are riskier than others. In such cases, lenders factor in the risk posed by business and cover their interests by charging you a marginally higher interest rate. Apart from this, lenders also consider the prevailing market conditions of the industry your enterprise belongs to.

Age of your business

Lenders also consider the number of years that your business enterprise has been in the game for. A younger business enterprise is considered to be riskier and so, lenders charge a higher interest rate. However, the opposite is not always true. Other factors such as the ones mentioned above have a bearing too.

Profits of your business

As a business owner, earning profits is your main objective, but this has another benefit. Lenders are happy to see that your business is profitable as this means your enterprise is capable of making timely repayments in full. In effect, you may be offered a low interest rate as you’re a low-risk applicant.

Cash flow of your business

Having a positive cash flow on a daily basis means that you receive more cash than what you spend. This is another reason for lenders to believe that you will be able to pay EMIs on time. In this case, the opposite is also true. Inconsistent cash flow points to financial mismanagement and may result in lenders charging you higher business loan interest rates.

Now that you are aware of the factors that impact your business loan, work on your shortcomings, if any, to get a better deal. Moreover, compare various loan offerings based not only on interest rates, but also features that make repayment easy. For instance, in addition to a significant loan amount up to Rs.30 lakh at a nominal rate of interest, Bajaj Finserv Business Loans offer other facilities that help your business thrive, such as the absence of collateral.

Moreover, with the convenient Flexi Loan facility you can withdraw funds as per your requirements from your sanction and pay interest only on the utilised amount. You can also choose to pay interest-only EMIs and repay the principal amount at the end of the tenor. This helps you save on payments and manage cash flow better. Through the tenor, you can use the principal amount to meet other pressing needs like buying raw material, paying salaries, and more.

With funds that come with 24-hour approval, you can meet your most urgent business finance needs with this loan. To further expedite access to funds, check your pre-approved offer from Bajaj Finserv.

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Yes, when one wants to buy a property one cannot buy it full on cash. We are not talking about well-settled rich families instead we are talking about the middlemen who have no money in hand to buy the house on cash payment. Therefore, they usually opt for property loans to build their dream house for their family and yes these loans are helping people to get money easily at a good interest rate. But what if you have bad credit scores then you know that none of the banks will provide you with the loans because of your negative credit scores. But now the situation is different banks are providing bad credit loans for the people who have bad credit scores but are able to pay the instalments on time.

Now, do you want to know more about this that how can you get the property loans after having bad credit scores? Then yes this information may help you a lot.

How to get bad credit loans?

You can get the loan by payday lenders but you have to pay a certain amount to get that loan. Yes, you have to pay more than a normal loan taker. They provide you loans even after you have bad credit scores. Yes, another way before purchasing property take your credit scores little up so that you have no need to pay a huge amount for taking a loan.

Benefits of bad credit loans:

• Approval rate will increase - While applying for normal loan with good credit scores chances of application getting rejected are higher by the bank even for a small mistake or less of document but in case of bad credit loans as you are paying the huge amount to the bank there are 80% to 90% of chances that your application will get selected.

• You can get a huge amount of money - In a normal loan you can take a limited amount of money but in case of bad credit loans as you are paying more for your loan, therefore, the bank will be ready to give you more amount of money and this is because more the amount of money more will be the interest rate and more it will benefit to the bank.

• It will help to increase your credit scores- Yes, the most important thing of this loan is that if you pay all of your instalment on time then it will definitely help you to bring up your credit scores to a good rate which will eventually help you in future for getting any other loan.

Disadvantages of bad credit loans:

• Firstly, when you take bad credit loans to buy a property it may give you many advantages but there are several disadvantages of it as if you are not been able to pay the instalments on time then it will make your credit scores worse.

• Secondly, you have to pay a huge amount of interest for taking that loan which could be a burden for a middle-class family member.

• When you are taking bad credit loans a bank attaches a lot of terms and conditions with the application which can trap the person and which can financially harm the person a lot.

Hence, bad credit loans are good for buying property loans in case if your credit scores are not good but you have to take some precautions and you have to follow the terms and conditions of the bank properly before opting for any loan.

We hope you will get the best loan offer as per your choice!!

HUDA housing scheme is a project undertaken by the Haryana Urban Development Authority aimed at providing affordable housing to the residents of the state. It introduced the concept of Group Housing in the various Urban Estates scattered across the state. HUDA has allotted approximately 800 acres of land to various registered housing societies and organizations.

HUDA Haryana plans to provide residential plots to different income groups in cities and urban areas like Ambala, Dadri, Faridabad, Hisar, Jind, Gurgaon, Kaithal, Karnal, Rewari, Rohtak, etc. Its reserve prices will be fixed according to collector rates, or at 80% of the current market prices (whichever is higher.)

HUDA initiative will help the hundreds of residents living in the industry-rich areas of Haryana to afford their private residential plot. You can avail a home loan to meet the finances required for the expenses without straining your budget.


How to Apply for Huda Scheme?

You can apply for this housing scheme as an individual or via housing societies or welfare housing organizations. You will have to sign-up at the HUDA procurement portal to participate in an e-auction. Let’s take a look at the step-by-step process to apply for housing under HUDA.

1. Log-in using your ID and password and navigate to the main portal.

2. Select the ‘Sign-Up’ button to navigate to the contractor/bidder/supplier signup form.

3. Fill in the necessary information correctly and submit the form. Keep the login details with you as it will be required to participate in the e-auction.

4. Select the client as Haryana Urban Development Authority while logging in for bidding.

5. You will see the dashboard which will hold a list of current events and properties awarded. Current events will carry the details of live auctions while the awarded section will detail the bids submitted and won by the buyers.

HUDA affordable housing can significantly reduce the number of funds you will have to spend to purchase a house in major areas of the state. A smaller amount is one of the crucial factors that impact your home loan interest rate.

You can also opt for an advance from a financial organization that offers benefits under Pradhan Mantri Awas Yojna. Leading NBFCs such as Bajaj Finserv offers assistance on these schemes which can reduce your home loan rates to only 6.93%, and help you save up to Rs. 2.67 Lakh during the loan tenor.


Eligibility criteria to apply for affordable housing under HUDA Haryana include –

Domicile – Applicants who belong to Haryana are only eligible to apply for HUDA Plot Scheme 2019.

Income – You can apply for the HUDA scheme only if you belong to the EWS (Economically Weaker Section). Your family’s (including the husband, wife and child/children) income should not exceed more than Rs. 3,00,000.

Previous ownership – An applicant should not own any other house or residential plot in his or her name in the state of Haryana.

Group D employees of the Haryana Government are eligible to apply for this scheme.

Furthermore, there are some guidelines you have to follow when you apply for a HUDA housing scheme.

     1. You can become a member of a maximum of 5 co-operative societies and retain the membership of only one society after an auction.

     2. Every applicant is allowed to own a maximum of one flat in a housing society.

     3. You cannot apply for a Co-operative affiliation if your spouse or dependent children own a house, flat, or residential plot in the same urban estate.

HUDA is a great initiative to help the Economically Weaker Sections of the society acquire suitable residential accommodation in Haryana. Purchase a home with a low down payment via HUDA and secure the future of your family in the state Haryana for years to come.

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