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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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When you look at the vendor finance definition, you’ll realise that it’s applicable to just about every business, regardless of the industry you operate in. This means whether you’re the owner of a manufacturing unit or have a service enterprise, you don’t operate in a silo. You’re sure to be dependent on various vendors for smooth functioning, and hence you need adequate finance to facilitate this. In a nutshell, this is what vendor finance helps you do. It makes sure you have the monetary resources to pay your vendors on time.


Take a look at the larger impact of having the necessary vendor finance on hand at all times.


• Smoother supply chain management

• Low inventory management costs

• Increase in productivity and efficiency

• Better ability to adopt latest technology

• Positive working capital balance

• Adequate liquidity to tackle unexpected expenses

• Financial backing to expand business with ease


To enjoy these benefits, it’s important to have ample vendor finance on hand. If your cash flow doesn’t allow for this, a smart option is to sign up for a vendor financing scheme. By choosing a feature-rich option you can get the money you need in an instant. Bajaj Finserv’s Vendor Finance is one such financial tool that you can count on for all kinds of requirements. Take a look at why it’s beneficial to choose this option over others.


Customised loan scheme with a substantial sanction

This loan is customised to suit your vendor financing needs. So, whether it’s paying a supplier of raw materials or your third-party housekeeping and maintenance staff, you’ll always have the funds at your disposal. Bajaj Finserv offers you Rs.30 lakh via this tailormade loan, ensuring that even if you have multiple vendor finance needs crop up at the same time, you’ll never fall short of cash.


Quick application, quick disbursal


To build long-lasting relationships with vendors, the first and most important step is to honour your payment commitments. To help you do so Bajaj Finserv offers vendor finance instantly, with approval in just 24 hours. Not having to submit collateral makes the process even smoother.


Flexible usage of funds


Bajaj Finserv understands the volatile nature of your business and the need to run a lean operation. This is why it allows you to avail the sum as a Flexi Loan. Here you can borrow in instalments from your total sanction, paying interest only on what you use and not the total you qualify for. Thereafter, you can choose to pay interest-only EMIs, repaying the principal at the end of the tenor. What this means is that you can save up to 45% towards repayment.


Repayment as per your convenience


Another way in which this vendor financing scheme aligns itself with your needs is by offering a flexible repayment plan. You can do so online, over a tenor of 12 to 60 months as per your cash flow. There’s no need to stress, as a long tenor is up for grabs should you need it.


Online application for the new-age businessperson


If you’re setting up your business or expanding it, you are sure to be juggling several tasks at once. In such a situation you don’t want to add the task of getting finance to your already lengthy to-do list. Keeping this in mind most lenders, including Bajaj Finserv, allow you to apply for vendor finance with absolute ease. You can apply online, while you’re on the go, and once your loan tenor begins you can track it too using a secure customer account.


It’s easy to see how a good vendor financing scheme can help you fill in the gaps and make your job of running a business a smooth, hassle-free process. What’s more, should you decide to take vendor finance from Bajaj Finserv, you can further expedite the process. All you have to do is check your pre-approved offer to unlock customised deals and access finance at lightning speed!

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