Business loans are one of the most common sources of financing for small and medium enterprises (SMEs) that need funds to start, expand, or sustain their operations. However, before applying for a business loan, it is important to understand the various factors that affect the interest rate of the loan, as well as the different types of business loans available in the market.
Business Loan Interest Rate of all Banks & NBFCs
| Business Loan Interest of 50 Banks & NBFCs | |||
| Bank/NBFC | Interest Rate | Maximum Loan Amount | Loan Tenure |
| Axis Bank | 14.95% – 19.20% p.a. | Up to Rs. 50 lakh | Up to 5 years |
| Bajaj Finserv | 9.75% – 30% p.a. | Up to Rs. 45 lakh | Up to 8 years |
| Flexiloans | 1% per month onwards | Up to Rs. 1 crore | Up to 3 years |
| HDB Financial Services Ltd. | Up to 36% p.a. | Up to Rs. 20 lakh | Up to 5 years |
| HDFC Bank | 10% – 22.50% p.a. | Up to Rs. 75 lakh | Up to 5 years |
| IDFC First Bank | 10.50% p.a. onwards | Up to Rs. 75 lakh | Up to 5 years |
| Indifi | 1.50% per month onwards | Up to Rs. 50 lakh | Up to 3 years |
| Kotak Mahindra Bank | 16% – 26% p.a. | Up to Rs. 75 lakh | Up to 5 years |
| Lendingkart | 12% – 27% p.a. | Up to Rs. 2 crore | Up to 3 years |
| Mcapital | 2% per month onwards | Up to Rs. 1 crore | Up to 3 years |
| NeoGrowth Finance | 19% – 24% p.a. | Up to Rs. 75 lakh | Up to 3 years |
| Tata Capital | 12% p.a. onwards | Up to Rs. 75 lakh | Up to 5 years |
| UGRO Capital | 9% – 36% p.a. | Up to Rs. 2 crore | Up to 5 years |
| State Bank of India | 8.25% – 15.90% p.a. | Up to Rs. 25 lakh | Up to 5 years |
| Punjab National Bank | 10.15% p.a. onwards | Up to Rs. 25 lakh | Up to 5 years |
| ICICI Bank | 12.25% p.a. (Secured Loans) | Up to Rs. 2 crore | Up to 7 years |
| IndusInd Bank | 13% – 22% p.a. (Fixed RoI) | Up to Rs. 15 lakh | Up to 5 years |
| RBL Bank | Up to 3% of the sanctioned loan amount | Up to Rs. 10 lakh | Up to 5 years |
| Bank of Baroda | Up to BRLLR + SP + 2.70% | Up to Rs. 25 lakh | Up to 5 years |
| Bank of India | 9.35% – 11.10% p.a. | Up to Rs. 5 crore | Up to 7 years |
| Canara Bank | 9.75% – 11.75% p.a. | Up to Rs. 5 crore | Up to 7 years |
| Indian Bank | 8.75% – 10.75% p.a. | Up to Rs. 5 crore | Up to 7 years |
| Indian Overseas Bank | 9.25% – 11.25% p.a. | Up to Rs. 5 crore | Up to 7 years |
| Punjab and Sind Bank | 9.25% – 11.25% p.a. | Up to Rs. 5 crore | Up to 7 years |
| Union Bank of India | 9.25% – 11.25% p.a. | Up to Rs. 5 crore | Up to 7 years |
| Yes Bank | 10.99% – 20.00% p.a. | Up to Rs. 50 lakh | Up to 5 years |
| IDBI Bank | 9.50% – 11.50% p.a. | Up to Rs. 5 crore | Up to 7 years |
| Federal Bank | 9.75% – 11.75% p.a. | Up to Rs. 5 crore | Up to 7 years |
| Karur Vysya Bank | 9.75% – 11.75% p.a. | Up to Rs. 5 crore | Up to 7 years |
| South Indian Bank | 9.75% – 11.75% p.a. | Up to Rs. 5 crore | Up to 7 years |
| Jana Small Finance Bank | 10.75% – 22.00% p.a. | Up to Rs. 50 lakh | Up to 5 years |
| Ujjivan Small Finance Bank | 11.49% – 22.49% p.a. | Up to Rs. 50 lakh | Up to 5 years |
| AU Small Finance Bank | 12.00% – 18.00% p.a. | Up to Rs. 50 lakh | Up to 5 years |
| Capital Float | 16% – 24% p.a. | Up to Rs. 1 crore | Up to 3 years |
| Ziploan | 18% – 24% p.a. | Up to Rs. 7.5 lakh | Up to 3 years |
| Fullerton India | 17% – 21% p.a. | Up to Rs. 50 lakh | Up to 4 years |
| Hero Fincorp | 18% – 24% p.a. | Up to Rs. 30 lakh | Up to 4 years |
| Edelweiss | 16% – 20% p.a. | Up to Rs. 40 lakh | Up to 4 years |
| IIFL | 16% – 20% p.a. | Up to Rs. 50 lakh | Up to 4 years |
| Shriram City Union Finance | 15% – 19% p.a. | Up to Rs. 10 lakh | Up to 4 years |
| Magma Fincorp | 18% – 22% p.a. | Up to Rs. 10 lakh | Up to 4 years |
| Aditya Birla Finance | 14% – 18% p.a. | Up to Rs. 15 lakh | Up to 4 years |
| Reliance Capital | 16% – 20% p.a. | Up to Rs. 15 lakh | Up to 4 years |
| Mahindra Finance | 16% – 20% p.a. | Up to Rs. 15 lakh | Up to 4 years |
| Cholamandalam | 16% – 20% p.a. | Up to Rs. 15 lakh | Up to 4 years |
| Incred | 18% – 24% p.a. | Up to Rs. 10 lakh | Up to 3 years |
| SMEcorner | 18% – 24% p.a. | Up to Rs. 25 lakh | Up to 3 years |
| Qbera | 18% – 24% p.a. | Up to Rs. 15 lakh | Up to 3 years |
| Lendbox | 18% – 24% p.a. | Up to Rs. 10 lakh | Up to 3 years |
Features and benefits of business loan Interest rate
- It can be fixed or variable, depending on the market conditions and the lender’s discretion.
- It can be lower or higher, depending on the credit score, financials, leverage, business stability, industry outlook, loan amount, loan tenure, collateral/security, etc., of the borrower.
- It can be negotiated and compared with different lenders, depending on the eligibility and requirement of the borrower.
- It can be reduced by following some tips, such as improving the credit score, maintaining the financials, reducing the leverage, choosing the right loan type, comparing different lenders, and negotiating the terms of the loan.
- It can be tax-deductible, depending on the purpose and nature of the loan.
Check: Business loan Emi Calculator
Eligibility for business loan
- The borrower should be an Indian citizen and a resident of India.
- The borrower should be at least 18 years old and not more than 65 years old at the time of loan application.
- The borrower should have a valid PAN card, Aadhaar card, and GST registration number.
- The borrower should have a business that is registered, operational, and profitable for at least 1 year (for existing businesses) or 6 months (for new businesses).
- The borrower should have a minimum annual turnover of Rs. 10 lakhs (for existing businesses) or Rs. 5 lakhs (for new businesses).
- The borrower should have a minimum credit score of 650 (for existing businesses) or 600 (for new businesses).
Document required for business loan
- Identity proof, such as PAN card, Aadhaar card, passport, voter ID card, driving license, etc.
- Address proof, such as Aadhaar card, passport, voter ID card, driving license, utility bill, bank statement, rent agreement, etc.
- Income proof, such as bank statement, income tax return, audited financial statement, profit and loss account, balance sheet, etc.
- Business proof, such as business registration certificate, GST registration certificate, trade license, partnership deed, memorandum of association, articles of association, etc.
- Loan application form, duly filled and signed by the borrower.
- Collateral/security proof, if applicable, such as property papers, vehicle papers, stock papers, etc.
How to apply for a business loan
Steps of applying for a business loan are:
- Check the eligibility and interest rate of the business loan from different lenders, using online platforms, such as Bankrate, Paisabazaar, Bankbazaar, etc.
- Choose the best lender and loan offer that suits the business needs, preferences, and eligibility of the borrower.
- Fill the online or offline loan application form, providing the personal, business, and loan details of the borrower.
- Upload or submit the required documents, such as identity proof, address proof, income proof, business proof, collateral/security proof, etc.
- Wait for the verification and approval of the loan application and documents by the lender.
- Sign the loan agreement and accept the loan terms and conditions.
- Receive the loan amount in the bank account or through a cheque or demand draft.
Tips to Get a Lower Business Loan Interest Rate
The interest rate of a business loan is one of the most important factors that determine the cost and affordability of the loan. Therefore, it is advisable to compare and negotiate the interest rates of different lenders before applying for a business loan. Moreover, the following tips can help the borrower to get a lower business loan interest rate:
- Improve credit score: The credit score of the borrower is one of the key factors that affect the interest rate of the business loan. Therefore, the borrower should try to improve their credit score by paying their bills on time, maintaining a low credit utilization ratio, avoiding multiple loan inquiries, and correcting any errors in their credit report.
- Maintain financials: The financials of the borrower are another important factor that affect the interest rate of the business loan. Therefore, the borrower should try to maintain their financials by increasing their income, reducing their expenses, managing their cash flow, enhancing their profitability, and growing their business potential.
- Reduce leverage: The leverage of the borrower is another significant factor that affect the interest rate of the business loan. Therefore, the borrower should try to reduce their leverage by paying off their existing debt, increasing their equity, and avoiding unnecessary borrowing.
- Choose loan type: The type of the business loan is another crucial factor that affect the interest rate of the business loan. Therefore, the borrower should try to choose the loan type that suits their business needs, preferences, and eligibility. For instance, secured loans usually have lower interest rates than unsecured loans, but they also require collateral/security. Similarly, fixed interest rates offer stability and certainty, but they also tend to be higher than variable interest rates, which offer flexibility and adaptability.
- Compare lenders: The lender of the business loan is another vital factor that affect the interest rate of the business loan. Therefore, the borrower should try to compare the interest rates, fees, charges, terms, and conditions of different lenders before applying for a business loan. The borrower can use online platforms, such as Bankrate, Paisabazaar, Bankbazaar, etc., to compare and apply for business loans from various banks and NBFCs in India.
- Negotiate terms: The terms of the business loan are another essential factor that affect the interest rate of the business loan. Therefore, the borrower should try to negotiate the terms of the loan with the lender, such as the loan amount, loan tenure, repayment schedule, prepayment penalty, etc. The borrower can leverage their credit score, financials, leverage, business stability, industry outlook, collateral/security, etc., to bargain for a lower interest rate and better terms.
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Business Loan Interest Rate Calculator
Conclusion
Business loans are a valuable source of funding for SMEs that need capital to start, grow, or sustain their business. However, business loans also come with a cost, which is the interest rate of the loan. The interest rate of a business loan depends on various factors, such as the credit score, financials, leverage, business stability, industry outlook, loan amount, loan tenure, collateral/security, etc., of the borrower, as well as the type and lender of the loan. Check: Paytm business loan
Therefore, it is important for the borrower to understand these factors and how they affect the interest rate of the business loan. Moreover, the borrower should also follow some tips, such as improving their credit score, maintaining their financials, reducing their leverage, choosing the right loan type, comparing different lenders, and negotiating the terms of the loan, to get a lower business loan interest rate and a better deal. By doing so, the borrower can save money, reduce their debt burden, and enhance their business prospects.
FAQs
1. What factors determine the interest rate of a business loan?
The interest rate of a business loan is influenced by factors such as credit score, financials, leverage, business stability, industry outlook, loan amount, tenure, and collateral.
2. How do business loan interest rates vary among different banks and NBFCs?
Business loan interest rates vary across banks and NBFCs, with examples ranging from 9.75% to 30% p.a. Understanding these variations is crucial for borrowers.
3. Can business loan interest rates be negotiated?
Yes, borrowers can negotiate business loan interest rates based on their eligibility and requirements. Effective negotiation can result in a more favorable deal.
4. What eligibility criteria do borrowers need to meet for a business loan?
Borrowers should be Indian citizens, aged 18 to 65, with a valid PAN card, Aadhaar card, GST registration, and a registered, operational, and profitable business.
5. What steps are involved in applying for a business loan?
Steps include checking eligibility and interest rates, selecting a suitable lender, filling the application form, submitting required documents, awaiting verification, signing the agreement, and receiving funds.