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Banks and Non-Banking Financial Companies (NBFCs) provide both secured and unsecured business loans to support the financial needs of self-employed individuals, MSME borrowers, and self-employed professionals. Paisabazaar.com offers a platform where potential business loan applicants can compare the features and interest rates of loans from leading lenders. This comparison helps applicants select the best loan options available, tailored to their credit profiles, and apply online for a business loan. Apply now to learn more.
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Business loan interest rates can differ among lenders based on several factors, including the applicant’s credit profile, the nature of the business, the type of loan facility chosen, and the collateral or security offered by the borrower.
| Bank/NBFCs | Interest Rate |
|---|---|
| Axis Bank | 10.75% p.a. onwards |
| Flexiloans | 1% per month onwards |
| HDB Financial Services Ltd. | 8% - 26% p.a. |
| HDFC Bank | 10.75% - 25% p.a. |
| IDFC First Bank | 10.50% p.a. onwards |
| Indifi | 1.50% per month onwards |
| Kotak Mahindra Bank | 16% - 26% p.a. |
| Lendingkart | 12% - 27% p.a. |
| Mcapital | 2% per month onwards |
| NeoGrowth Finance | 15% - 40% p.a. |
| Tata Capital | 12% p.a. onwards |
| UGRO Capital | 9% - 36% p.a. |
Interest rates offered by top Business Loan lenders are mentioned below.
| Bank/NBFC/Fintech | Interest Rates |
|---|---|
| HDFC Bank | 10.75% – 22.50% p.a. |
| IIFL Finance | 12.75% – 44% p.a. |
| FlexiLoans | 1% per month onwards |
| ZipLoan | 1% – 1.5% per month (Flat) |
| ICICI Bank | Up to 17% p.a. |
| Axis Bank | 10.75% p.a. |
| Indifi Finance | 1.5% per month onwards |
| Kotak Mahindra Bank | 16% p.a. onwards |
| RBL Bank | 14%-26% p.a. |
| Lendingkart Finance | 1.25% per month onwards |
| Tata Capital Finance | 12% p.a. onwards |
| NeoGrowth Finance | 15%-40% p.a. |
| Hero FinCorp | Up to 30% p.a. |
Note: Business Loan Rates are updated as of July 2024.
HDFC Business Loan
HDFC Bank provides secured and unsecured business loans starting at 10% per annum. These loans are available for amounts up to ₹3 crore and can be repaid over a tenure of up to 7 years, catering to the needs of self-employed individuals and business enterprises.
| Interest Rate | Loan Amount | Tenure | Processing Fee |
|---|---|---|---|
| 10% p.a. onwards | Up to Rs 3 crore | Up to 7 years | Up to 2% of loan amount |
ICICI Bank Business Loan
ICICI Bank provides both secured and unsecured business loans, catering to importers, exporters, new businesses, and those without audited financials. The interest rates for ICICI business loans start from 17% per annum, with loan tenures of up to 7 years.
| Interest Rate | Loan Amount | Tenure | Processing Fee |
|---|---|---|---|
| Up to 17% p.a. | Up to Rs 10 crore | Up to 7 years | Up to 2% of loan amount |
Axis Bank Business Loan
Axis Bank offers business loans with interest rates starting from 10.75% per annum and a tenure of up to 15 years. Eligible borrowers can access loan amounts of up to ₹10 crore. Additionally, Axis Bank provides facilities such as bills of exchange and letters of credit to its business loan applicants.
| Interest Rate | Loan Amount | Tenure | Processing Fee |
|---|---|---|---|
| 10.75% p.a. onwards | Up to Rs 10 crore | Up to 15 years | Up to 2% of loan amount |
Applicants can utilize the Business Loan EMI Calculator provided below to estimate the monthly EMIs and total interest cost over the loan tenure. These calculations are based on the interest rate, loan amount, and loan tenure offered by the lender.
To calculate the EMI on your car loan, you can use the formula:
EMI=P×R×(1+R)N(1+R)N−1\text{EMI} = \frac{P \times R \times (1+R)^N}{(1+R)^N – 1}
where:
Manual calculations can be error-prone, complex, and time-consuming, so using an online personal loan EMI calculator is preferable. This calculator requires only a few basic details such as the interest rate, loan amount, and loan tenure.
Once these details are entered, the EMI amount is calculated instantly. Additionally, the calculator provides the total interest amount and an amortization schedule for easy reference.
Individuals, groups of individuals, and entities can apply for a business loan online through the official websites of banks and NBFCs. Business loan features, such as interest rates, loan amounts, margin, collateral requirements, guarantor requirements, fees, charges, and eligibility, vary by lender.
Therefore, applicants should visit online financial marketplaces like Paisabazaar.com to compare interest rates, loan amounts, and other features across various lenders, helping them choose the option that best fits their eligibility and needs.
Lenders typically impose various fees and charges on business loan borrowers, including processing fees, prepayment charges, commitment fees, inspection charges, account service fees, penal interest, and documentation charges.
However, these fees and charges can differ significantly between lenders. Below is an overview of the general range of some common charges associated with business loans.
| Particulars | Charges |
|---|---|
| Processing Fees | Up to 6% of the loan amount |
| Prepayment Charges | Up to 5% of the outstanding principal |
| Penal Interest | 2%-6% on the outstanding loan amount |
Features of Business Loans Offered by Various Lenders:
Lenders typically determine business loan eligibility based on the following criteria:
Applicants typically need to provide the following documents when applying for a business loan:
Lenders typically offer the following types of business loans:
Unsecured Term Loans are available to MSMEs to support business needs such as expanding operations, upgrading technology, and managing cash flow, all without requiring collateral or security.
Secured Term Loans are backed by collateral, such as mortgaged immovable property, existing business assets, or financial securities.
This is a collateral-free credit line facility allowing applicants to withdraw funds from their business accounts up to a predetermined limit, even if the account has a zero balance.
Secured Overdraft Business Loans are offered to existing customers who maintain current or savings accounts with the lender. These loans support business operations and cash flow and are secured against residential, commercial, or industrial property, or financial securities like LIC Policies, KVP/NSC, Fixed Deposits, Mutual Funds, etc.
Professional Business Loans are tailored for self-employed professionals, such as doctors, architects, CAs, and CSs. These loans can finance business expansion, office premises, machinery, furniture, equipment, and stock purchases.
Bill Discounting allows businesses to receive early payments on their outstanding invoices. The lender pays the borrower the invoice amount, minus a discount or commission, and then collects the full payment from the borrower’s customer on the due date. Any delays may incur interest charges payable by the borrower or the customer.
Machinery Finance provides funds for purchasing machinery and equipment for business use.
This facility supports manufacturers, traders, and service providers in paying for raw materials and trading goods purchased from suppliers.
Working Capital Loans cover day-to-day business expenses, such as purchasing raw materials and paying wages.
A Letter of Credit (LC) is a payment guarantee issued by the lender, which helps businesses engaged in international trade minimize credit risk.
This loan facility targets small and medium enterprises involved in online sales or using Point of Sale (POS) machines. Repayments are made through direct deductions from online sales or sales processed via POS machines.
Personal loans can be utilized for both personal and business purposes, whereas business loans are specifically designed to fund various business activities, such as raising working capital or financing business expansion. Personal loans are typically unsecured, while business loans can be either secured or unsecured.
Personal loans are generally available as term loans, which are repaid through EMIs, or as an overdraft facility. In contrast, business loans come in various forms, including term loans, limit-based facilities like overdrafts and cash credit accounts, bill discounting, and non-fund-based facilities such as letters of credit and bank guarantees.
Applicants seeking smaller loan amounts without collateral may consider personal loans or unsecured business loans. Those with more complex needs or requiring greater repayment flexibility should choose the appropriate business loan schemes based on their specific requirements.
Interest Rate: Business loan interest rates vary among lenders. It’s essential to compare rates from different lenders and choose the one offering the lowest interest to minimize the cost of borrowing.
Turnaround Time: Understand the time frame required for loan approval and disbursal by the bank or NBFC. Lenders who process and disburse loans quickly are often preferred. Turnaround time can vary based on the business loan type and collateral provided.
Credit Score/Rating: A higher credit score (700 and above) generally increases the chances of loan approval. Some lenders may also offer lower interest rates to applicants with excellent credit scores.
Processing Charges: Be aware of the processing fees and additional charges imposed by the lender before applying for a business loan.
Collateral: Business loans are often secured by collateral, which can include hypothecation of stocks, book debts, mutual funds, immovable property, liquid securities, or commercial/construction equipment. Ensure you understand the collateral requirements and how they might impact your loan application.
You can apply for a business loan directly through the official website or app of banks and NBFCs, or by visiting their branches.
For obtaining a business loan without Income Tax Returns (ITR), consider exploring lenders who offer loans based on other criteria like business cash flow, credit score, and collateral. Some lenders may offer loans to new businesses or those with alternative financial documentation.
Start-up businesses can explore unsecured business loan options or government schemes that may offer loans without requiring collateral. Some lenders also provide loans based on the business plan and projected cash flows.
Business loan interest rates vary significantly among lenders and are influenced by factors such as the loan scheme, type of collateral, and any government subsidies available. Typically, rates start from around 9% p.a., though they can vary widely.
Eligibility for business loans generally includes MSMEs, Limited Liability Partnership Firms, Proprietors, self-employed professionals (like CA, CS, doctors, architects), self-employed individuals, Private Limited Companies, and Public Limited Companies. Criteria vary depending on the lender and loan scheme.
Documents required for a business loan typically include:
To find the best bank for a business loan, consider factors like interest rates, loan tenure, loan amount, margin, collateral requirements, processing charges, and turnaround time. Online financial marketplaces like Paisabazaar.com can help compare these factors across multiple lenders.
Business loans can be used for various purposes including working capital requirements (like purchasing inventory, paying salaries, and rent) and capital expenditure (such as buying machinery, acquiring fixed assets, or expanding the business).
You can obtain a small business loan through the official websites of banks and NBFCs or by visiting their branches. Online financial marketplaces like Paisabazaar.com also offer tools to compare loan options and rates.
Margin money is the portion of the cost that the borrower must cover from their own resources, while the remaining amount is financed through the loan. For example, if a borrower needs to finance equipment costing ₹10 lakh with a 25% margin, they would contribute ₹2.5 lakh, and the lender would provide ₹7.5 lakh.
The minimum credit score required can vary among lenders. Generally, a credit score of 700 or above increases the chances of loan approval, especially for unsecured loans.
An MSME business loan is a credit facility provided to Micro, Small, and Medium Enterprises for meeting financial needs such as business expansion and working capital.
Yes, you can obtain a business loan of ₹2 crore, depending on factors like business nature, business history, credit score, and collateral offered.
For floating rate business loans, pre-closure or part-prepayment charges are generally not applicable. For fixed rate loans, pre-closure charges may range from 0% to 6%, with a lock-in period of 12 months. Part-prepayment charges may be up to 5%, and borrowers may be restricted from part-prepaying within the first 6 months.
The Government of India offers several schemes for MSMEs, including:
Choosing the ideal repayment tenure depends on the business’s expected future cash flows and the repayment structure of the loan. A longer tenure may reduce monthly EMI amounts but may increase overall interest costs.
Eligibility for small business loans typically includes self-employed individuals, self-employed professionals, partnership firms, and MSMEs.
Salaried individuals generally cannot apply for business loans directly. However, they can consider personal loans, loans against securities, or top-up home loans (if applicable) to finance their business needs.
Foreclosure charges may apply to the pre-closure of business loans. However, as per RBI regulations, lenders cannot charge foreclosure fees on business loans with floating interest rates for individual borrowers.
GST is not applied to the interest component of loans, but GST is levied on various fees and charges associated with the pre- and post-disbursal phases of business loans.
