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Business Loan Interest Rates

Business Loan Interest Rates in India 2021

Last Updated 28th Sep 2021

Bank Business Loan Interest Rate
DCB Bank9.25%
Dhan Laxmi Bank10.50%
Indian Overseas Bank11.00%
SBI11.20%
HDFC Bank11.90%
Apply for Business Loan @ 14.00%*

Compare Best Business Loan Interest Rates 2021

Bank Interest Rates Lowest EMI per lakh
SBI Business Loan Interest Rates 11.20% ₹ 2,594
HDFC Bank Business Loan Interest Rates 11.90% ₹ 2,628
ICICI Bank Business Loan Interest Rates 16.50% ₹ 3,540
RBL Bank Business Loan Interest Rates 18.50% ₹ 3,640
Tata Capital Business Loan Interest Rates 19.00% ₹ 2,990
Lendingkart 12.00% ₹ 3,321
Bajaj Finserv 18.00% ₹ 2,938
IDFC First Bank 19.00% ₹ 2,990
IIFL 16.00% ₹ 2,432
Bank of Maharashtra 14.50% ₹ 3,442
IndusInd Bank 13.00% ₹ 2,275
Kotak Bank 16.00% ₹ 2,432
Fullerton India 17.00% ₹ 2,886
Ftcash 18.00% ₹ 3,615
Indifi 15.00% ₹ 3,467
Neogrowth 24.00% ₹ 5,287
IDBI Bank 12.25% ₹ 2,237
Allahabad Bank 14.50% ₹ 1,902
Yes Bank 16.25% ₹ 3,528
PNB 12.65% ₹ 2,257
OBC 11.95% ₹ 1,763
Indian Overseas Bank 11.00% ₹ 2,174
Dhan Laxmi Bank 10.50% ₹ 2,149
DCB Bank 9.25% ₹ 2,088
Andhra Bank 15.75% ₹ 2,419
United Bank of India 13.00% ₹ 2,275
Corporation Bank 13.55% ₹ 1,849
Syndicate Bank 12.65% ₹ 2,257
Bank of Baroda 14.10% ₹ 3,423

Types of Business Loan Interest Rates

Though the business loan interest rates differ from one lender to another, yet the calculator of business loan interest rates is based on types of interest rates in general. These are listed as follows:

  • Fixed-rate of interests: Under the fixed rate of interests, the rate of interest charged on the loan amount remains constant throughout the loan tenure. Thus, the rate of interest and business loan EMI also remains the same. A fixed-rate of interests is ideal for planning long term business loans.
  • Floating rate of interest: In the case of a floating rate of interest, the business loan rate is not fixed and remains variable. The business loan rate of interest rate, in this case, is linked to the external benchmarks considered by the lender. Thereby, the business loan rates as per this rate type keep changing with market conditions. However, it must be noted that the rate is not fixed; thus, the business loan EMI may increase or decrease abruptly.

Business Loan Interest Calculation & Formula

The business loan interest rate calculation helps the business loan borrower plan his business loan and also check his financial ability to borrow the loan. Pre-planning the loan may help in planning the repayment schedule for the repayment of business loans. Business loan interest rate is calculated using the following formula:

P*r* (1+r)^n/([(1+r)^n]-1)

In this formula,

P is the principal loan amount,

r is the interest rate, and

n is the loan tenure.

Apart from the mathematical calculation, one can also use a Business loan EMI calculator. The EMI calculator functions on the mathematical algorithm similar to the manual calculation. However, using the calculator is hassle-free and time-saving. Using a business loan EMI calculator, one can also get an idea of the business loan interest amount to be paid as a part of the EMI component.

Factors that affect Business Loan Interest Rates

Some of the factors affecting Business loan interest rates are listed as follows:

  • Borrower’s Age: Business loan lenders consider borrowers with an age of 21 years to 65 of age. Thereby, any shortcomings in meeting the age requirement may force the lender of the business loan interest rate.
  • Loan Amount: A business loan can be borrowed for a loan amount ranging from ₹ 50,000 to ₹ 100 Cr. The higher is the loan amount; the higher is the chance to get a low-interest rate.
  • Business Turnover: A business turnover is an important factor that affects the business loan interest rate. In general, 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 a turnover of less than ₹ 10 Lakh as well.
  • Banking Stability: Banks and NBFCs check bank statements of a minimum of six months of your operational banking accounts to approve the business loan. This is evaluated based on the average account balance and other information like outbound and inbound cheque bounce information.
  • Loan Tenure: The unsecured business loans are given for a short tenure. In general, these loans are given for a tenure of 1 year to 5 years.
  • Income Tax Returns (ITR): Any self-employed individual can get a business loan, only when he or she has filed regular ITRs for the past two years. The ITR is required to evaluate the monthly income and repayment capacity based on details submitted in the ITRs.
  • Business Vintage: Business vintage is the age of the business that helps lenders verify the authenticity and stability of the business units. In general, business vintage of three or more years is required. Some lenders may also require a minimum vintage of five years with the profitability of three years.

How to Get the Lowest Interest Rate on Business Loan?

In order to get the a business loan low interest rate, follow the below-mentioned steps:

  • Check for prevalent discounts: Before applying for a business loan, it is always better to check current offers and interest rates offered to employees of large reputed companies. Self-employed business loan borrowers, on the other hand, may look out for discounts prevailing due to offers like festive season discounts. This may help them grab a lower business loan interest rate.
  • Compare interest rates: As mentioned above, the business loan interest rate may vary across lenders. Thus, it is better to compare interest rates before availing the loan to opt for the lender offering the lowest business loan rates. Some banks offer low-interest rates at higher loan amounts.
  • Apply with your regular Bank: It is better to apply for a business loan with a lender that you are already associated with either with a savings account or a current account. This is because an existing association with the lending institutions can improve your chances of approval of loans at lower rates.
  • Check for tenure based discount: Various business loan lenders, offer tenure-based discounts. This means that lenders may offer lower rates on business loans for certain tenure. Thereby it is better to opt for tenures with lower interest rates.
  • Check other charges:A business loan interest rate is not the only charge that one is bound to pay for availing the business loan, but involves various other charges as well, such as processing fee, administrative fee, or legal fee among others. Thus, being aware of these charges may help you grab a lower business loan interest rate, on the grounds of negotiating that you are already paying other compulsory charges.

Things to consider before applying for a Business loan

It is better to consider the following points before applying for a business loan:

  • Check the interest rate across various business loan interest rates.
  • Check for the other charges charged by the lender such as processing fee, legal fee and administrative fee amongst others.
  • Know about the foreclosure and prepayment charges. This may help you plan your business loan prepayment in advance.
  • Ensure checking the Required Documents & eligibility criteria in general and across the particular lender before applying for the business loan.
  • Check out the business loan offers available at a particular time before applying for a loan. These offers may be particular to the respective lender or may be available at online marketplaces like MyLoanCare, that can help you grab a loan at affordable and easier terms.

FAQs

What is the lowest interest rate on a business loan?

Currently, DCB Bank offers the lowest business loan interest of 9.25%, amongst various business loan lenders.

How do you calculate interest on a business loan?

The interest rate on a business loan is calculated using the mathematical formula, P*r* (1+r)^n/([(1+r)^n]-1). Apart from the manual calculation, one can also use the business loan interest rate calculator available at various online platforms such as MyLoanCare.

What factors decide the business loan’s rate of interest?

Business loan interest rate is dependent on various factors such as borrower’s age, loan amount, business turnover, banking stability, loan tenure, years of filing income tax returns (ITR), and business vintage among others.

Which Bank or NBFC gives the lowest interest rate for a business loan?

DCB Bank offers the lowest business loan interest rate in India.

What are the pre-closure/foreclosure charges for business loans?

The pre-closure/foreclosure charges for business loans may differ across various business loan lenders. The charges may range from 1% to up to 6% of the outstanding loan amount. However, some banks offer Nil foreclosure charges after a certain period under a special scheme.

What is the repayment period of a business loan?

The repayment period of a business loan may range between 1 month to 84 months.


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