7 Ways to Improve Your Business Loan Eligibility and Get a Lower Interest Rate

Keywords: Business Loan, Business Loan Apply

Are you looking to secure business loans to grow and expand your business but worried about the high interest rates? A rejected loan application can slow down your firm’s operations. Fortunately, many lenders consider lowering the interest rate charged on the loan based on several factors. If you have a strong credit score and financial profile, then you can get a loan approval at better terms and conditions.

Here are seven ways to enhance your loan eligibility and receive approval at lower interest rates.

1. Maintain a Strong Credit Score

Your CIBIL or credit score is one of the most important factors in determining your financial health and creditworthiness. A high credit score (potentially more than 700) will define your ability to repay the loan and reduce the risk factor. So, before you business loan apply, ensure the following:

• Timely repayments of all the debts and clearance of credit card bills.
• Avoid applying for too many loans in a short time period.
• Maintain a low credit utilisation ratio.

2. Strengthen Your Business Financials

Lenders evaluate every business’s financial health before approving the loan. So, it is always recommended to show a positive balance sheet and profit and loss statement and make sure that the tax returns are paid in a timely manner. Strong financial records can increase your chances of getting a loan for your business at better terms and low interest rates.

3. Build a Strong Business Plan

A well-structured business plan with all market analysis, strategies, and financial projections shows your understanding of the business and is a powerful tool for convincing lenders. It showcases your ability to repay the business loan.

4. Provide the Right Collateral (If Required)

Although many loan providers don’t ask for collateral to approve loans, if it is required, make sure you pledge valuable assets, such as real estate, equipment, or inventory, to get quick approvals. Provide the right collateral to reduce the risk of lenders and increase your chances of qualifying the eligibility criteria and getting a loan at lower interest rates. Alternatively, you can offer to present a guarantor with a strong credit profile to get a loan at better terms. 

5. Compare Loan Offers

Avoid going for the first lender you see and research your options. Compare the interest rates charged, terms and conditions and eligibility requirements for business loans. Choose a lender that is trustworthy and reliable, like Bajaj Finserv, which offers a loan at competitive interest rates, a complete online application process, flexibility of repayment tenures, does not require collaterals, disburses the amount quickly, and does not charge hidden fees.

6. Apply for the Right Loan Amount

Assess the amount you actually require for your business to avoid overborrowing or underborrowing the sum. Overborrowing leads to excess interest payment, and underborrowing leads to inefficient funds. Applying for a higher business loan may lead to charging higher interest rates, and sometimes the application gets rejected. Know your financial needs and apply for an amount you are comfortable to repay.

7. Choose the Right Loan Type

When opting for the right lender, make sure you choose the correct loan type that fits your needs. Explore different loan types, such as a term loan, a flexi term loan or a flexi hybrid loan and choose the option that aligns with your business goals.

Conclusion

Getting a business loan for your firm gives you a chance to expand the business and its operations. However, you must qualify for the loan at lower interest rates and meet the eligibility criteria. Improve your credit score, maintain a strong business profile, choose the right lender and loan type, compare your options and apply for the right loan amount. By following these essential tips, you can conveniently get a loan for your business at better terms and conditions and make the most of it.