Understanding business loan terminologies can help MSMEs navigate the borrowing process more effectively. Here’s a quick guide:
- Principal: The original amount borrowed, excluding interest.
- Interest Rate: The percentage charged by the lender on the borrowed amount.
- EMI (Equated Monthly Installment): Fixed monthly payments combining principal and interest.
- Collateral: Assets pledged to secure the loan, like property or equipment.
- Creditworthiness: Your financial reliability, assessed through your credit score and repayment history.
By familiarizing yourself with these terms, you can make informed decisions and negotiate better loan terms. For MSMEs, understanding the basics is key to securing the right financial support.
