How to Get the Best Business Loan Deals in India

Securing a business loan with a low interest rate can make a significant difference in the financial health of your enterprise. High interest rates can strain cash flow, increase the cost of borrowing, and potentially lead to financial difficulties.

To help you navigate the complex landscape of business financing in India, this article will explore strategies to avoid high interest rates and secure the best loan deals.

Understanding the Impact of High Interest Rates

High interest rates on business loans can erode profits, limit growth opportunities, and create a cycle of debt that is difficult to escape. For small and medium-sized enterprises (SMEs), where margins are often thin, managing loan costs is critical. High interest rates can make it challenging to meet repayment obligations, leading to potential defaults and long-term financial instability.

1. Leverage Your Credit Score

Your credit score is one of the most critical factors lenders consider when determining the interest rate for a business loan. A higher credit score signals to lenders that you are a low-risk borrower, which can result in lower interest rates. To improve your credit score:

• Pay Bills on Time: Ensure that all your bills, including credit card payments, are paid on time.
• Reduce Existing Debt: Pay down outstanding debt to lower your credit utilization ratio.
• Correct Errors: Regularly check your credit report for errors and dispute any inaccuracies.

OneNDF, a leading digital loan marketplace, offers a free credit score check via a soft pull, which does not affect your credit score. A soft pull is an inquiry that doesn’t impact your credit score, unlike a hard pull, which can slightly lower your score and is visible to lenders.

2. Opt for a Shorter Loan Term

While longer loan terms may seem attractive due to lower monthly payments, they often come with higher interest rates. Opting for a shorter loan term can save you money on interest, even though your monthly payments may be higher. Shorter terms also mean you’ll pay off the loan faster, reducing the total interest paid over the life of the loan.

3. Shop Around for the Best Rates

Different lenders offer different interest rates and loan terms. It’s essential to shop around and compare offers from various banks, non-banking financial companies (NBFCs), and digital loan marketplaces like OneNDF. By comparing multiple offers, you can identify the most competitive rates and terms that suit your business needs.

OneNDF is partnered with multiple RBI-approved banks and NBFCs, offering borrowers access to a wide range of loan products. Their advanced loan matching algorithms ensure that you’re connected with the best lenders based on your specific financial profile and needs.

4. Strengthen Your Business Financials

Lenders look at your business's financial health when determining the interest rate. Strong financial statements, consistent cash flow, and positive growth trends can help you secure lower interest rates. To strengthen your financials:

• Maintain Accurate Financial Records: Keep detailed records of your income, expenses, and cash flow.
• Improve Profit Margins: Look for ways to reduce costs and increase revenue.
• Reduce Debt: Lower your debt-to-income ratio by paying off existing loans and liabilities.

OneNDF uses a four-pronged approach to assess your business's financial health: credit bureau data (soft pull), financial analysis, bank statements review, and GST data analysis. This comprehensive assessment helps in presenting your business in the best possible light to potential lenders.

5. Consider Collateralized Loans

Collateralized loans, also known as secured loans, often come with lower interest rates than unsecured loans. By offering collateral, such as property, equipment, or inventory, you reduce the lender’s risk, which can lead to more favorable terms. However, it’s essential to consider the risk of losing your collateral if you default on the loan.

6. Utilize Government Schemes

The Indian government offers various schemes to support SMEs, many of which provide loans at lower interest rates. Schemes like the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) and the Pradhan Mantri Mudra Yojana (PMMY) are designed to make financing more accessible and affordable for small businesses. Researching and applying for these schemes can help you secure a loan with a lower interest rate.

7. Use OneNDF’s Business Health Card

OneNDF provides a Business Health Card, a detailed report that includes a risk outlook, recommendations, and actionable insights to help improve your business's financial health and performance. This report can be instrumental in negotiating better loan terms and interest rates with lenders, as it presents a clear picture of your business’s strengths and potential risks.

8. Consider Refinancing

If you’ve already taken out a loan at a higher interest rate, refinancing can be a viable option. Refinancing involves replacing your current loan with a new one at a lower interest rate. This can reduce your monthly payments and save you money over the life of the loan. It’s crucial to calculate the costs associated with refinancing, such as prepayment penalties and processing fees, to ensure that it’s a financially sound decision.

9. Build Strong Relationships with Lenders

Establishing a strong relationship with your bank or financial institution can lead to better loan terms and lower interest rates. Regular communication, timely payments, and demonstrating financial responsibility can build trust and may lead to more favorable loan offers in the future.

10. Take Advantage of OneNDF’s Advanced Loan Matching Technology

OneNDF leverages advanced rule engines and API integrations with over 90 lenders to accurately match businesses with the most appropriate financial institutions based on their credit profile and needs. This technology ensures that you receive the best loan offers tailored to your specific situation, helping you avoid high interest rates.

Conclusion

Securing a business loan with a low interest rate is critical to maintaining the financial health and growth of your enterprise. By leveraging your credit score, strengthening your business’s financials, shopping around for the best rates, and utilizing tools like OneNDF’s Business Health Card, you can significantly reduce the cost of borrowing.

Additionally, OneNDF’s digital loan marketplace provides a comprehensive and efficient way to connect with multiple lenders, ensuring that you get the best possible loan deals.

For small business owners in India seeking efficient and customized financial services, OneNDF offers a robust platform that not only helps you find the best loan deals but also provides the tools and insights necessary to improve your financial health and business performance.

By taking a proactive approach and utilizing the resources available through OneNDF, you can avoid high interest rates and secure the financial support needed to grow your business.