It’s all about reducing your banker’s risk
A lower interest rate can save your company thousands of dollars over the life of a business loan. But what steps do you need to take to get a lower rate?
The interest rate on a loan reflects the bank’s assessment of the risk that you won’t repay the money. To compensate for its risk, the bank decides how much additional interest to charge you over the rate it gives to its best, most creditworthy customers.
To reduce your rate, you must persuade your banker you will repay the money on time and in full, says Paul Ciciola, Director, Credit Risk Management at BDC.
He offers these four tips to improve your chances of getting a better rate for your business loan.
1. Boost your company’s profitability
- The more profitable your business is, the better your chances of getting a lower rate
2. Raise your credit score
- Your credit score from agencies such as Equifax and TransUnion depends on your repayment history, how much credit you’ve applied for and how much of your available credit you are using, among other factors
3. Offer valuable collateral to secure the loan
- If you have tangible assets to put up as security, it can make the loan cheaper.
4. Build a relationship with your bank
- Bankers are going to look favorably on clients who have a long history with the bank and an excellent repayment history.
5. Look beyond the interest rate
- The cheapest loan isn’t necessarily the best loan for you. Look for financing on the basis of what your business needs, not the interest rate.
Article obtained from www.bdc.ca. Click the link below to read more.
