## What do you need to Start a Business?

IDEAINFRASTRUCTURE

# Business Loan Interest Rates and Charges

Indian Infoline Finance Limited (IIFL) offers competitively priced business loans to help you grow your enterprise. Our interest rates are some of the lowest in the market, and our loan terms are flexible, so you can get a loan tailored to meet your specific business needs. We offer a range of features that make it easier for you to manage your finances, including repayment options and access to funds whenever you need them.

## Applicable Business Loan Interest Rate and Charges

Let's start by dissecting the various components of business loan interest rates and charges:

• RATE OF INTEREST:

12.75% - 44% p.a.

• LOAN PROCESSING CHARGES:

2% - 9% + GST

• NACH / E-MANDATE BOUNCE CHARGES (IN RUPEES):

₹ 500/ + GST (if applicable)

• PENAL / DEFAULT CHARGES:

24% p.a. +GST (if applicable)

• (To be charged in case of any failure to make timely payments)
• DOCUMENT CHARGES + GST (IN RUPEES)

Upto ₹ 3000 + GST

• PREPAYMENT / FORECLOSURE:

24% per annum

• PREPAYMENT / FORECLOSURE:

• Within 6 months from the date of first drawdown

7% of the outstanding loan amount together with applicable taxes

• On and from the 7th month and up till 24th month from the date of first drawdown

5% of the outstanding loan amount together with applicable taxes

• After 24 month from date of first drawdown

4% of the outstanding loan amount together with applicable taxes

## Calculation of Business Loan Interest Rate

Understanding the intricacies of how commercial loan interest rates are computed is of utmost importance. It involves a mathematical formula that calculates both the Equated Monthly Installment (EMI) and the total interest payable. Let's delve into this calculation:

Formula for Calculating Business Loan Interest Rate:

Total Interest = P* r* (1+r)^n / ((1+r)^n-1)
• P (Principal Amount): This represents the initial loan amount.
• r (Monthly Interest Rate): It signifies the monthly rate of interest.
• n (Loan Tenure): This parameter indicates the duration of the loan in months.

For a practical example, suppose you intend to secure a business loan of Rs. 45 lakh as your principal amount (P). The loan carries an interest rate of 18% per annum (r), and you plan to repay it over a 5-year tenure (n).

Using the Formula:

Plugging in these values, we can calculate the total interest:

Total Interest = Rs. 23,56,225, which equates to roughly 34% of the overall loan repayment.

Yet, manually performing this calculation can be intricate and time-consuming. To simplify this process, IIFL Finance offers a user-friendly online business loan EMI calculator. By simply inputting essential details like the loan amount, tenure, and interest rate, you can swiftly determine critical figures such as the total interest payable, the comprehensive repayment amount, and your monthly EMI.

This tool streamlines the financial planning process, making it much more accessible for individuals and businesses alike.

## Tips to Avail Business Loans at Low Interest Rates

Securing a business loan with a low interest rate can be a game-changer for your company's financial well-being. Let's expand on strategies and insights to help you secure the most favorable business loan terms:

## Compare Multiple Lenders

Avoid settling for the initial offer that comes your way. Take the time to explore and compare interest rates, terms, and fees from various lenders. This diligent approach can help you identify the most competitive loan offers available.

## Leverage Online Loan Marketplaces

Embrace the convenience of online platforms and loan marketplaces. These tools empower you to effortlessly compare loan options offered by different lenders. They often provide up-to-date information on rates and terms, simplifying your decision-making process.

## Maintain a Favorable Debt-to-Income Ratio

Lenders assess your capacity to repay a loan based on your debt-to-income ratio. To strengthen your loan eligibility, keep your personal and business debts in check. Demonstrating financial stability is key.

## Explore Government-Backed Loan Programs

Many countries extend government-backed loan programs that offer lower interest rates and flexible terms.

## Seek Expert Financial Guidance

Collaborate with financial advisors or accountants who specialize in business financing. Their expertise can provide invaluable insights and assist you in navigating the complexities of the loan application process.

## Cultivate Strong Banking Relationships

Building robust relationships with your business bank or credit union can open doors to preferential treatment when seeking loans. A history of responsible banking practices can work to your advantage and enhance your loan prospects.

## Enhance Cash Flow Management

Effectively manage your business's cash flow by minimizing unnecessary expenditures and optimizing revenue generation. Lenders often favor businesses with stable financial practices.

## Consider Variable Interest Rates

Evaluate variable interest rate loan options, particularly if you foresee the possibility of interest rates decreasing in the future. Such loans can yield long-term cost savings.

## Engage in Negotiation

Don't hesitate to engage in negotiations with lenders. If you possess a good financial profile, you may have the leverage to secure a reduced interest rate or more advantageous loan terms through productive discussions.

A meticulously crafted and compelling business plan can inspire confidence in lenders. Highlight your enterprise's growth potential, supported by thorough market research and well-defined strategies for loan repayment.

## Maintain a Pristine Payment History

Uphold a positive track record of repaying past loans and financial obligations for your business. Demonstrating a consistent history of timely payments can augment your creditworthiness in the eyes of lenders.

## Explore Peer-to-Peer Lending

Investigate peer-to-peer lending platforms, where businesses connect with individual investors willing to provide loans at competitive interest rates.

Mix different types of credit, such as installment loans and revolving credit, to underscore your ability to manage diverse financial responsibilities.

## Leverage Collateral

If you possess valuable assets, contemplate using them as collateral. Secured loans often feature lower interest rates due to the reduced risk perceived by lenders.

## Stay Informed

Stay attuned to developments in financial market trends and fluctuations in lending regulations. This awareness equips you to make well-informed decisions regarding the timing and terms of your business loan.