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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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Companies not only need new software but also have to become experts in using these. New businesses may find it challenging to choose the right features when looking to invest in the best GST software in India.

Here are some of the features you should look for in a GST feature:

Reminders for GST filing

Businesses with an annual turnover up to Rs. 1.5 Crore can opt for quarterly retainers filing. Those with income above Rs. 1.5 Crore have to file GST returns every month on the 10th, 15th, and 20th even if they have not conducted any sales or purchases.

Keeping all these dates in mind might not be convenient for you. Hence, having a reminder feature in your GST software is essential. The program will automatically notify you when it is time to file GST.

Accessibility to check accounts in real-time

Choosing a GST accounting software package that enables you to connect to your account in any financial institution is another you should opt for. It can allow you to connect to various accounts and keep track of the developments in real-time.

Accessibility from multiple platforms

Accessing your finances and GST returns from various platforms like desktop, mobile, and tablet is another feature to look out for. This function enables you to comply with GST more effectively and increase your rating. The GST Compliance Rating shows how well your business has adhered to the rules and regulation based on a scoring system ranging from 0 to 10.

Hence, opt for the best GST software that is online or cloud-based. These programs let you keep track of your GST returns irrespective of the platform.

Efficient user interface

A user interface that is hassle-free to navigate without any effort is beneficial even though it is not necessarily a feature. The UI must empower to perform a complex task with as minimal clicks as possible.

E-payment facility

Choose the GST software that connects to the GST portal directly to make the necessary tax payments. CAs invest in GST software with this feature as it eliminates the need for manually logging in to the portal for payments.

Inventory management

A GST software app must also provide real-time information of your inventory when it reaches reorder level. Organising your inventory with cost, vendor information, product image, SKU, etc. is an essential feature. You must also be able to stay informed with detailed inventory reports, record inventory changes in real-time, avail customised rates, etc.

Ability to add contacts

Storing contacts of all your customers and vendors with all of their information makes it easier to track all sales and purchases and file returns. Contacts include name, GSTIN, PAN, address, location of the business, email ID, mobile number, pin-code, etc.

Customer support

Last but not least, the software company must also provide you with support 24x7. Not only support staff that can answer your queries but the company’s website must also have tutorials, articles, and forums to help you out in case of any difficulties.

Using a GST software app must be as easy as the GST registration procedure. This is vital if you are on the verge of initiating your own CA firm.

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