Keeping track and effectively managing cash in an enterprise is considered, an essential part of any big or small business. There could be various reasons for a company to suffer from a shortage of financial capital; sluggish nature & inappropriate layout for the business are all after-effects of the build-up.
To evade the crisis, organizations rely on loans for business finance without understanding the return rates and the procedure of it. Here’s more to it:
Charges like Fees & Penalties
There are some lenders, who charge a certain sum of money on making prepayment, or on foreclosing the account. The processing fee, statement charges, and penalties vary from one institution to another. Hence pick a lenient bank, whose operating costs are less.
There are also some banking institutions like Bajaj Finserv that offers flexibility in the repayment process. They even allow long tenure thus you can pay back the amount before time, without the need to rush here & there, to collect the requisite amount, for on-time loan clearance.
Decoding interest rates
Low-Interest Rates are good for small businesses, no doubt about that! Before haggling with banks regarding percentage, you should understand that these are fixed, by the top financing body of the country. There aren’t bank banks that can lend money as loans below the Marginal Cost of fund based Lending Rate, while everything above is justified.
The two kinds of interest rates
Before availing the loan, an individual should be fully aware of the sort of business loan interest rates that the company has to submit to a particular lender. There are two types, floating & fixed rates.
While the percentage of interest remains as it is, throughout the entire course of the tenure in fixed type, floating interest type has rates that fluctuate with time. The charges in floating are comparatively low than, the fixed alternative.
Additional Read:Various Credit Alternatives for Entrepreneurs Owning Small Businesses