Business loans for small and medium scale industries (SMEs) have been specially designed in India to cater to their financial needs. Small and medium industries and small, medium and small scale industries provide various lenders in India. Small and medium scale industry loans can be secured or unsecured. Guarantees have to be given for secured small and medium industry loans. Whereas unsecured small and medium industry business loan is a loan that is given without any security.
You can get various types of SME loans in India, including machinery loans, working capital loans, term loans, flexi loans and capital loans. Every lender has its own scale of merit. Also, the requirement of documents and interest rate are also different.
Eligibility and documents remain the same for every customer but the interest rates offered may be different for every borrower under certain factors.
Every businessman wants safe and unsecured business loans in India at the lowest interest rates. Let us tell you some factors, with the help of which you can get SME business loan in India at low interest rates.
The CIBIL score is a numerical representation of a person’s financial behavior. It can be between 300 and 900. The higher the CIBIL score, the more the customer is considered reliable. Lenders also give SME loans to the same customers, who have higher credit score.
Hence a higher CIBIL score reduces risk for lenders in India. Therefore, lenders offering SME business loans provide loans at lower interest rates to those with higher credit scores. To get a loan at low interest rates, you should start improving your credit score.
Whether or not you have repaid your previous loans, it is also seen by every business loan lender in India. Also, how soon did you apply for a business loan. This has been called the debt to income ratio. If your debt-to-income ratio is high, then it will show that you are living life on loan and you have many loans going on in the name, which meet your financial needs.
The debt-to-income ratio is calculated by dividing the monthly loan total from your monthly pre-tax income. In addition, if the debt-to-income ratio is high, it means that your salary is being spent in repaying the EMI of the small business loan. Finally, the question arises that how will you repay SME business loan.
The eligibility criteria’s are different for every lender and also demand for documents. Since every lender has different eligibility criteria’s, their interest rates are also different. It is important to check the rules and interest rates of finance companies. Therefore it is important that you search for such SME business loan lender who has the least interest rates.
Also see such a lender, whose eligibility for criterias and documents is less demanding. When choosing a lender, you must look at the online loan application and fast processing, these two things. Apart from this, you must also check how much time the lender will take when sending the loan amount to your account.
Another factor that affects business loan interest rates is the loan term. The longer the SME business loan period, the more interest will be charged. But keep in mind that you will have to pay more EMI than the repayment period of short loan. So choose your loan repayment period wisely.
Negotiation of interest rates is very important for business loans. You can negotiate with business financing companies for low interest rates. But as has been said earlier, you will be able to do this only when the credit score is good. A CIBIL score over 750 is considered the best.
With the advent of technology in the financial sector, you can apply for SME and MSME loans online. But before applying for SME business loan, you must check the eligibility of business loan. Also, before applying for a business loan, also see how much amount you need. You will have to pay additional interest for taking an overdose.