How To Get a Lower Interest Rate on a SME Business Loan?


With the government releasing so many benefits to new budding entrepreneurs, more and more Small and Medium Enterprises are coming every year. The latest report shows that the number of SMEs in India is estimated to be 42.50 million, registered & unregistered together. Which means that 95% of the total industrial units in the country. Also, the SMEs employ about 106 million, 40% of India's workforce. Next only to the agricultural sector.

Keeping these stats in mind most of the lenders have extended their hand in support of the SMEs in the form of SME loan which is given to help them grow by purchasing machinery, hiring more people and increasing their revenue.

How To Get A Lower Interest Rate On Sme Business Loans?

SME loans can be of two kinds secured or unsecured. In a secured loan, the applicant has to provide security, whereas in an unsecured loan no security is required. No matter which loan you apply to, everyone looks for a loan with the lowest interest rate. As there are various lenders available, they provide personal loans at a different interest rate. In this article, we will discuss how you can get an SME loan at a lower interest rate. Let us see.

1. Eligibility Criteria: For every loan, there are some business loan eligibility criteria that the applicant must fulfil. The eligibility criteria for various lenders is different but some common ones include the age of the applicant which should be between 21 to 60 years. With the age, the income of the applicant, credit score are some other factors that are also part of the eligibility criteria and will affect your loan interest rate. 

2. Loan Terms: The three important points to keep in mind for lower interest are: The loan amount, interest rate, and the tenure of the loan. So, it is necessary to strike a perfect balance between the three and accordingly finalise on your loan terms. With the EMI calculator, you can check the monthly debt you have to pay.

3. Existing Debts: If you have earlier taken a debt and repaid it completed on time, this will positively impact your interest rate and the lender will provide you with a lower rate. Also known as the debt-to-income ratio. If your debt-to-income ratio is high, this represents that you live on loans. That you have so many running loans on your name and they fulfil your financial needs.

4. Lenders: With so many lenders available online, offering SME loans at different loan terms, you can explore the market before making a final decision. It will help you find the lender which offers the lowest interest rate on an SME loan. You can also look for lenders who do not look much into the documentation, CIBIL score and offer exciting interest rates under your budget.

You should check the credibility of the lender before applying. There are various online portals which will provide you with the correct reviews. The lender must also provide a flexible repayment option providing you customised services.

5. Negotiation: There is always negotiation which is the last resort. No matter how much the loan executive might try to convince you about the loan terms, you can always negotiate with them. However, this negotiation is only possible if you have a good CIBIL score, and you meet the business loan eligibility criteria offered by the lender. 

In this digital age, all the details are readily available on the website of all the lenders. Before you apply for the SME loan make sure that you have checked all the relevant data and accordingly choose the lender.