The interest rates for small business loans are different and depend on certain factors such as situation of different lenders and borrowers, since how long business is running, amount of loan, weather its secure loan or unsecure loan and few more things. Often banks charge more than other landing financial institutions. Besides that in banks there are more formalities and paperwork for approval of loan than other landing institutions. Bank rates are always depends on financial statements such as income statement and balance sheet.
Sometimes banks also see the security of assets of the business and guarantees offered against the loan.
Information Required For Small Business Loan
The information required for approval of loans for small businesses is varying. Suppose if an already established business wants a loan for remodeling or expending the existing business than the rates are comparatively lower as compare to newly establish small business. The reason behind that is for already established business there is credit history available due to which it becomes easier to judge whether they can repay the loan or not. Whereas providing loans to the new small business is more risky therefore rates are much higher in that case.
Credit History of the Owner to Decide Rates of Small Business Loans
The other important factor which is route cause of variation in interest rates for small business loans is the credit history of the business as well as owners. If a business has good credit history it becomes easier for the lender to provide loan on good rates.
Otherwise it becomes a risky business and due to that risk involved the lender charges higher rates of interest.
Effect of Repayment Power While Deciding Rates of Small Business LoanAmount of loan and expected monthly income of the business also plays an important role while deciding the interest rates. Obviously the amount of loan depends on the repayment power of that business or the owner of the business therefore, it is important to analyze before approving the loan that whether the said business is earning as much as it can pay back the loan or not.
Currently the small business loan rate is relatively higher than some other loans. One can search on internet regarding rates of different banks and financial institutions who lend the small business loans. It becomes easier to negotiate with the lender if borrower does his research on internet regarding market rates and what other players in the market are offering on internet.
Processing Fee for Small Business Loans
Banks and other financial institutions charge an amount as processing fees in case of approval. If the loan is not approved then no fee will be charged. The reason behind that is, small business loans are mostly based on the personal credit history of the owner which is needed to be check by the bank or lender.