1. Back Your Business Loan with Collateral

Pledging an asset as collateral for a loan may seem intimidating. Unfortunately, reluctance to pledge assets can result in expensive financing alternatives like higher interest rates or worse, no access to credit.

Small and medium enterprises can pledge assets like the business's accounts receivables, goodwill, equipment and inventory as collateral for a loan. Lenders only require real estate, blanket liens or personal assets as collateral when the asset does not fully cover the loan amount. Actually, pledging accounts receivables and inventory can shield the business owner from pledging any of their personal assets.

2. Consolidate Your Business Loans

Apply for lines of credit with lower interest rates than the existing debt. Consolidating various outstanding loans as one debt instrument may offer an easier payment plan, lower installments and/or a longer tenure. Businesses over 18 months old have a better chance of accessing unsecured lines. Unsecured lines of credit are a much cheaper method of financing than conventional loans. A market survey for options before applying is a good idea.

3. Swap Business Loan Products

Convert to a floating interest rate loan from a fixed rate product when interest rates are falling and vice versa. Small business owners can access up-to-date information on RBI and government policies to monitor interest rate trends. However, before shifting products, borrowers should research pre-payment penalties and service charges to assess whether the value of the transition.