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Business Loan Interest Rate

Business Loan Details

Last Updated 17th Oct 2021

Interest Rate 14.00% onwards
Processing Fee Upto 3% of loan amount
Loan Tenure Upto 5 years
Lowest EMI per lakh ₹ 2,327 for 5 years
Apply for Business Loan @ 14.00%*

Compare Best Business Loan Interest Rates Oct 2021

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Bank Business Loan Interest Rates Processing Fee
SBI Business Loan Rates
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11.20% From 2% to 3%
HDFC Bank Business Loan Rates
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11.90% ₹ 499
ICICI Bank Business Loan Rates
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16.50% Starting from 0.99%, Up to 2%
RBL Bank Business Loan Rates
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18.50% 2.50-3.00% of loan amount
Tata Capital Business Loan Rates
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19.00% From 1.50% to 2.50%
Lendingkart
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12.00% 2% to 3% of loan amount
Bajaj Finserv
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18.00% Upto 2% of loan amount

As per the current rates, Bank of Baroda offers the lowest business loan rate of interest of 14.00%. These rates can vary depending upon your annual turnover, number of years in business, loan amount you have applied for and your repayment capacity. Higher the loan amount, lower will be the rate of interest.

Types of Business Loans

Secured Loans for Businesses

These loans are those which are taken against some type of personal guarantee or any valuable asset as collateral. Inventory loans, equipment loans, term loans and loan against property are secured business loans.

Unsecured Loans For Businesses

In many situations, businessmen and self employed prefer to take unsecured business finance with no collateral requirement because of the following reasons:

  • Short turnaround time of 5 -15 days as compared to secured loans
  • No collateral or security required to get this loan
  • Reduces your dependence on friends, relatives or money lenders for borrowing for urgent or seasonal business expenses

This page contains detailed information about business loan without collateral. To know about secured business loan, you can visit our loan against property page.

Business Loan Rate Trends

As per the current rates, Bank of Baroda offers the lowest business loan rate of interest of 14.00%. The rates were increased by 0.5% on 1 Feb, 2020 from the previous rate of 13.50%. Refer to the table below to understand the rate trend of the top 5 banks offering the lowest business loan rate.

Bank Name Current Rate Previous Rate Rate Difference
Indian Overseas Bank 11.00% 14.90% -3.9%
IDBI Bank 12.25% 13.00% -0.75%
IndusInd Bank 13.00% 14.00% -1%
ICICI Bank 16.50% 16.49% 0.01%
RBL Bank 18.50% 20.00% -1.5%

Business Loan Eligibility

Banks use multiple factors to calculate the loan amount elibility of its borrowers. MyLoanCare Business Loan Eligibility Calculator uses the following factors to give you an estimate about your loan eligibility, amount of loan and best interest rate offer.

Business Loan Eligibility Calculator
Parameters Business Loan Eligibility Criteria
Eligible Entities Self employed non professionals – Sole proprietors, partnership firms, private limited companies, public limited companies involved in the business of manufacturing, trading and services
Self employed professionals – Doctors, CA, CS, Architects.
Age 21 - 65 years
Loan Amount ₹ 50,000 to ₹ 100 Cr
Interest Rate 14.00% - 24.00%
Loan Tenure Up to 5 years
Business Vintage For self employed professional - 3 years
For self employed businessmen - 5 years
Annual Turnover ₹ 1 Cr and above
Banking Stability 6 months and above
CIBIL Score 650 or above
Other Eligibility Conditions Borrower should have a self owned house or work place

Factors That Determine Eligibility for Business Loan Are
  • Eligible Age – Banks consider borrowers with age of 21 years to 65 years
  • Loan Amount – Loan amount of ₹ 50,000 to ₹ 100 Cr can be availed on business loan. Higher the loan amount, higher the chances to get low interest rate.
  • Loan Tenure – Business loans are unsecured loans and are given for a shorter period. Generally, these loans are given for a tenure of 1 year to 5 years.
  • Income Tax Returns (ITR) – A self employed can get a business loan, only when it has filed regular ITRs for the past few years. Banks consider borrowers who have filed ITRs of 2 years or more as eligible to get a business loan. Banks evaluate your monthly income and repayment capacity based on details submitted in the ITRs.
  • Revenue / Turnover - Revenue is the income that a business enterprise has earned from the sale of goods and services to customers. It is also termed as sales or turnover. In case of doctors, this sales or revenues is measured in terms of Gross Annual Receipts. Most banks and NBFCs ask for a minimum annual turnover of ₹ 1 Cr to be eligible for business loans without collateral. However, there are a few NBFCs and banks which lend to businesses or self employed with turnover of less than Rs. 10 lakh as well.
  • Business Vintage and Growth – Business vintage and growth is an important factor consider by banks and NBFCs to take a decision to give you loan. It gives the bank or NBFC an assurance that your business is authentic, stable and can generate profits to repay their loans. Banks typically look for a business stability or profitability of minimum 3 years for self employed professionals. In case of other businessmen, banks and finance companies require a minimum business continuity or existence of 5 years Banks and NBFCs also specify the minimum growth rate of 10-15% in sales or turnover for the last 3 years to be eligible for a business loan. Further, your business or enterprise should be profitable in the last 3 years.
  • Banking Stability – Banks and NBFCs a check bank statements of minimum 6 months of your operational banking accounts to approve your loan. Banks will evaluate your banking stability and repayment capacity based on your average account balance. Banks will also consider your outbound and inbound cheque bounce information to take a view on your credit track record.

How to Improve Chances of Getting a Business Loan?

In case of unsecured loans, each has its own set of policies. If the borrower does not fulfil the bank's eligibility criteria, the bank rejects his/her loan application. So, here are few tips which will help you to improve your chances of getting your loan application improved.

Improve Credit Score – First of all, identify the factors that have resulted in a low credit score. Credit score can be adversely affected due to late payment of credit card or default in outstanding loan EMI payments. Defaulting and late payments, both result in bad credit score. It is extremely important to maintain healthy credit repayment track record and make all your payments on time. Always ensure that you have adequate balance in your bank account to make ECS transactions.

Avoid multiple loan applications - Sometimes, you apply for business loan with multiple banks in order to improve your chance of getting loan on time. However, applying for loan at multiple banks at the same time increases the chances of the loan being rejected as each query gets captured in your credit report. Customers are also unaware that any loan that is rejected by a bank, has a less chance of getting an approval at other banks as well. Banks tend to become more cautious in lending to customers who have been rejected by other banks.

Choose your Bank wisely – Research the banks which are offering best business loan interest rates. Opt for a bank which offers fast service with low interest rates. You must also calculate your loan eligibility using MyLoanCare Eligibility Calculator to get an estimate of your loan eligibility and your ability to service loan repayments from your monthly cash flows. You can apply for a quick business loan through MyLoanCare to get best deals on rates and processing fee from top banks in India

Business Existence – Generally, banks give loan to businesses with minimum business existence of 3 years. For new businesses, start-ups and loss making businesses, chances of getting an unsecured business loan is low. In this case, you should explore options of secured business loans.

Apply for a loan amount based on your repayment capacity – Determine the loan amount that you can easily repay in future. If you apply for a loan amount which is higher than your eligibility, it can create doubt in the mind of lender and lead to rejection of your loan application. So, make sure you choose the correct loan amount that you can comfortably service.

Maintain proper accounts and financial information- As a business entity, it is extremely critical that you have your GST registration in place. Also, it is advisable to keep audited record of your financial statements, as the same are an important set of documents referred to by the bank at the time of calculating your eligibility.

Regularly check your CIBIL Score: As a business entity which can need to borrow frequently from banks, it is advisable to access your credit score report on a regular basis and do regular timely corrections in your report.

How to Get a High Business Loan Eligibility?

If you are self employed, then there could be a possibility that your reported income is lesser than your real income. Many banks and NBFC have specific programs which offer you a higher eligibility based on an estimate of your real income and not entirely on the basis of your reported income. If you visit a traditional bank for this loan, chances are that you will be eligible for a lower loan amount. There are few banks and NBFCs which offer surrogate products to calculate your correct eligibility and offer you highest loan amount based on your estimated income. Some of these popular loan products are:

  • Banks consider banking surrogate program to define your eligibility. This helps in assessing your net income. Banks track your 1 year banking behavior to estimate your average bank balance. Your net income is the multiplier of your average monthly balance and if you well maintain your bank balance then it won't come your way to get your loan sanctioned.
  • ITR program also helps to calculate eligibility in case you do not have audited financial statements of your company. Banks are strict to the fact that they need income tax report of past 3 years. ITR of 3 years is important to estimate your income, profit and losses of your business and other deductions. It also shows your tax refund or tax liability.
  • Some banks offer turnover program in which your loan amount eligibility is based on the turnover of your company. Turnover eligibility can be different for different industry segments. Some banks consider minimum annual turnover of Rs. 25 lakh for manufacturers and Rs. 50 lakh for traders. However, there are few banks and NBFCs which give small business loan for low turnovers and loan amount. Industry margin is pre-decided by lenders for specific industry segment in which customer falls. Industry margin is used as a multiplier to the turnover of your company that helps in determining your income. Your income eligibility is calculated as : Industry Margin * Turnover – Obligations. Your eligibility will be higher if your turnover is high. However, banks consider bank statement and VAT returns of 6 months to know your real income which is higher than what you have mentioned in books.

Compare Business Loan Rates and Other Charges

  • Business Loan Rates - Interest rate on business loan depends upon your business, the loan amount you have applied for and your past relationship with the bank. Current rate of interest on business loan starts at 14.00%.
  • Processing fees – Most banks charges minimum processing fees of 2% to 3% on loans. To get lowest fee, comparison of business loan rates, offers and cashback applying online through MyLoanCare.
  • Insurance premium - Since these loans are unsecured loans, it is advisable to take an insurance policy like life and accidental insurance by the name of the borrower when availing a loan. Most banks give insurance coverage to the owner of the company to protect the financial risks in case of any emergencies. However, the premium varies from bank to bank depending upon the risk coverage under various policies and loan amount borrowed by the applicant. So, check the loan terms of the bank carefully to know the coverage and premium. And, consider other banks and insurance companies also who offer better insurance plan for the same amount.
  • Prepayment and foreclosure – Nobody wants to keep paying interest on a loan when you have surplus money available to repay it. When you want to repay your loan partially before time, its called part prepayment. In case you decide to pay the entire loan amount before time, it is called foreclosure. Banks typically levy prepayment or foreclosure charges in such situations and these can be upto 5%. So, check carefully if the low rate of interest you are getting comes with high prepayment or foreclosure charges. Note that some business loans cannot be repaid before time.

Documents Required for Business Loan

  • Signed Application Form
  • Identity Proof (PAN)
  • Residential Address Proof
  • Last 3 years ITR (self and business), profit and loss account, balance sheets certified/audited by a CA.
  • Last 12 months bank account statement (self and business)
  • Certificate and Proof of Business Existence
  • Business Profile
  • Office address - ownership/ lease / rent agreement/ utility bill
Individuals Firms, Partnerships
Identity Proof PAN card, Passport, Driving License, Aadhar Card, Voter id, Govt issued i-card
Certificate and Proof of Business Existence PAN , sales tax/ excise/ VAT/ service tax registration, Copy of partnership deed, Trade license, certificate of practice, registration certificate issued by RBI, SEBI
Address Proof Passport, Driving License, Election ID card, Electricity/ Telephone/ Mobile bill/ bank statement (not more than 3 months old) Bank statement, utility bill, Registry copy, lease or rent agreement, TAN allotment letter

Latest News about SBI Business Loan

  • SBI New Business Loan Scheme for Healthcare Sector
    SBI, the largest public-sector lender in the country, has launched a new business scheme for the healthcare sector. The scheme aims to extend loan support given the novel coronavirus pandemic. You can avail of the new loans by way of Cash Credit, Term loan, bank guarantee and letter of credit for loan amount Rs. 100 Crores for a repayment period of 10 years.

FAQs

Which bank is best for business loan?

Bank of Baroda is the best bank for taking a business loan based on their current interest rates as they offer low interest rate of 14.00%.

Did business loan rates drop ?

No, the business loan rates have been hiked by 0.5% from 13.50% to 14.00% on 1 Feb, 2020. As per the current rates, Bank of Baroda is offering business loans at the lowest rate of 14.00%. Earlier, was providing the best business loan rates starting at 13.50%.

Do banks provide loans to small business in India?

Most of the top public sector and private sector banks give small business loans in India under various government schemes like Mudra loan, CGTMSE etc. In addition to government schemes, select banks and finance companies also offer unsecured loans to small businesses with an annual turnover of Rs. 1 crore and above based on an assessment of business financials, stability, growth, debt servicing capability and management reputation. Some of the new NBFCs have started offered business loans without collaterals for even smaller businesses, though the rate of interest on such loans tend to be higher than that offered by banks.

How can I apply Business Loan in my city?

Yes, you can apply business loan online in your city provided you have sufficient turnover, business stability and have good credit history. You can also compare business loan offers for different cities at MyLoanCare.

What should be the borrower’s age to apply for business loan?

Borrower should be atleast 21 years old and not more than 65 years of age

Does no CIBIL history affect business loan?

Yes, banks may reject your loan application if you do not have a CIBIL history or poor CIBIL. In that case, you have to opt for a loan with high rate of interest. Banks consider you to avail gold loan or credit card to build some CIBIL history before you apply for a loan.

What factors affect my business loan interest rate?

Interest rate on business loan can be affected by 3 main factors:

  • Higher the loan amount, lower will be the rate of interest
  • Higher the business turnover, lesser will be the interest rate
  • Longer time in business can avail you loan at lower rates

Can I reduce EMI on business loan?

You can reduce your loan EMI if the bank offers part prepayment or full prepayment. Most banks allow prepayment after repayment of 6-12 EMI’s and some banks allow after 1 EMI only. So, you can easily opt for prepayment of loan if you have surplus amount and want to lower your burden of EMI during the loan tenure.

How can I apply for business loan?

You can apply in several ways. You can directly visit the bank branch and meet the sales person, contact a loan agent or apply online at any bank or NBFC’s website. You can also compare business loans rate of all banks online at MyLoanCare and apply for loan. We can connect you to banks with best loan offers at lowest rate of return. We also assist you throughout the loan process and allow you to apply online for a loan without a long tedious process.

What is the minimum and maximum tenure of business loan?

These are generally taken for a short period of time. Generally, the loan tenure is between 12 months to 60 months.

What are the charges for unsecured business loan?

In addition to rate of interest, banks charge the following two fees on loan.

  • Processing fee: Processing fees is charged when you apply for a loan. The processing fee can range upto 3% of the loan amount and can be negotiated down, if you bargain. If you apply for loan through an online market place like myloancare.in, then we negotiate with the bank on your behalf and also, offer attractive cash backs on sanctioned loans. Sometimes, we also get to offer exclusive loan schemes on behalf of the banks such as nil processing fees for our valued customers.
  • Pre-closure fee: This fees is charged when you want to close your loan before the completion of loan tenure. Banks imposes this penalty to cover the loss. Preclosure charges can range up to 5% of the outstanding loan amount. You need to carefully read the terms and conditions of your loan agreement to check on the prepayment clause and ensure that it is not too strict compared to market benchmarks.

What security should I provide to get a business loan?

For business loans, banks do not ask for security or collateral to approve your loan, though banks needs complete documents to evaluate your eligibility.

Does it affect my co-applicant if I default in business loan?

Yes, if you fail to pay the loan on time then it will also affect your co-applicant as default in loan will affect his/her CIBIL rating as well.

Am I eligible for a business loan despite a poor credit score?

Yes, you may be eligible for qualifying a business loan even with a bad credit score. But, the lenders may charge a higher rate of interest on your loan and may ask you to apply for loan along with a co-applicant who can take the responsibility in your absence.

How much time does it take for a business loan to get disbursed?

Business loan disbursement can take approximately 15 working days after all the documents are submitted. Some banks and NBFCs can give you an in-principle approval subject to verification of documents submitted by you and the results of their field visits. In this case the loan disbursement process can also be as short as a week.


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Business Loan News - Oct 2021
  • 2021-10-11 : IIFL Finance Launches Instant Business Loan
    IIFL Finance has launched instant business loans on WhatsApp to avail of loan amount upto Rs. 10 Lakhs with benefits such as minimum documentation and quick approval.
  • 2021-10-05 : IndusInd Bank Advances Grow by 10% Y-O-Y
    IndusInd Bank has posted a growth in advances by 10% on a Y-O-Y basis. Retail Deposits and Deposits from Small Business Customers amounted to Rs 1,11,749 crore as of 30 September 2021 as compared to Rs 1,05,737 crore as of 30 June 2021.
  • 2021-10-05 : HDFC Bank Reports Growth in Advances in Q2
    HDFC Bank has reported a growth in advances by 15.4% in quarter 2. As a result, the advances have grown to ₹ 11.98 lakh crore as of September 30, 2021, from ₹ 10.38 lakh crore a year ago.
  • 2021-10-04 : Yes Bank Posts Growth in Loans and Deposits
    Yes Bank has posted growth of 3.6% (year-on-year) in advances at Rs 1,72,945 crore for the quarter ended September 2021 (Q2FY22). Its advances stood at Rs 1,66,923 crore at end of September 2020 (Q2FY21).
  • 2021-09-30 : Govt Extends Emergency Credit Scheme for Micro, Small and Medium Enterprises
    The government has extended the emergency credit scheme for MSMEs till 31st March 2022. The new deadline for disbursement of loans under this scheme is 30th June 2021.
*Terms and conditions apply. Credit at sole discretion of lender, which is subject to credit appraisal, eligibility check, rates, charges and terms. Information displayed is indicative and collected from public sources. Read More
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