Business Loan

Business loans are unsecured financial assistance provided by banks and NBFCs in India. The primary aim of these is to support the urgent needs of your growing business. Most financial institutions offer term loans and flexi loans to cater to the business needs of a company. Business loans are also called commercial loans. All types of businesses such as a sole proprietorship, privately held company, partnership firms, self-employed individuals and retailers can avail these loans.

Factors that affect Business Loan Interest Rates

The factors that affect business loan interest rates are as follows:

  • 1

    Nature of Business

    The lender usually classifies the loan under Priority Sector and Non-Priority Sector. Loans that fall under Non-Priority Sector have a higher rate of interest, as compared to the priority sector loans. Hence, the nature of your business too determines the interest rate on your business loan.

  • 2

    Business Existence

    The longer your business is in existence, the better it is for you. However, irrespective of the nature of the business, the minimum business operation of 2 years is mandatory. With more years in business, you have a higher possibility of getting loans at lower interest rates.

  • 3

    Monthly Turnover

    The monthly turnover of your business decides if your business is making a profit or incurring losses. In short, it remains a key factor in determining your eligibility to avail a business loan. There are times when the turnover keeps fluctuating. However, maintaining consistency is highly crucial, as it helps your lender to determine the loan amount and repayment terms.

  • 4

    Credit/CIBIL Score

    Credit/CIBIL score evaluates your creditworthiness and is based on your credit history. In case you have availed a loan in the past and repaid it on time or if you pay credit card bills on time, you will have a good credit score. And, if you have a good credit score, it will work in your favor while applying for a loan. A good credit score will give you more benefits like lower interest rates and flexible tenure or repayment terms.

  • 5

    Collateral

    Collateral is the security, which is pledged to the lender to avail a loan. Higher the value of collateral, the more will be the benefits. Highly valuable collateral like real estate, equipment, machinery, deposits or home equity gives security to the bank. After examining the collateral, the bank may grant you a higher loan amount as the risk is low.

  • 6

    Type of Lender

    Business loan interest rates vary from one lender to another. But if you compare business loan interest rates offered by banks and NBFCs, you will find that banks levy lower interest rates, as compared to NBFCs.

Current Business Loan Interest Rates in India

Below mentioned is the detailed table that will help in understanding the latest business loan interest rates, loan amount and repayment tenure offered by leading financial institutions in India:

Lenders Interest Rate (p.a.) Loan Amount (Max.) in Rs. Repayment Tenure (Months)
HDFC Bank Business Loan 15% onwards 75 lakh 6 – 48
ICICI Bank Business Loan 16% onwards 40 lakh 6 – 48
Kotak Mahindra Bank 16% onwards 75 lakh 6 – 48
Axis Bank Business Loan 17% onwards 50 lakh 12 – 36
Fullerton Finance 17% onwards 50 lakh 12 – 48
Lendingkart Finance 17% onwards 1 Crore 3 – 36
Bajaj Finserv 18% onwards 20 lakh 12 – 48
Hero FinCorp 18% onwards 25 lakh 12 – 36
IIFL Finance 18% onwards 50 lakh 12 – 36
Indifi Finance 18% onwards 50 lakh 12 – 36
PaySense Services India Pvt. Ltd. 18% onwards 5 lakh 3 – 36
Tata Capital Finance 18% onwards 30 lakh 12 – 36
ZipLoan Business Loan 18% onwards 5 lakh 6 – 24
IDFC First Bank Business Loan 19% onwards 75 lakh 12 – 60
RBL Bank 19% onwards 20 lakh 12 – 36
HDB Financial Services Ltd. 22% onwards 30 lakh 12 – 60
NeoGrowth Finance 24% onwards 75 lakh 6 – 24