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Business Loan

Business Loans

Starting a business or even successfully running one, often brings about the need for capital or in other words, monetary funds. This need can be fueled by different factors and most business owners or entrepreneurs look into different ways to meet this need. One way to access capital or monetary funds for business purposes is to look into the possibility of acquiring a business loan. Fortunately, for aspiring Indian entrepreneurs and startup businesses on a growth trajectory, the possibility of acquiring a business loan is high owing to the many private and public sector banking corporations offering business loans. As mentioned, prior, the need for capital or monetary funds to start a business or run a business may come up for various reasons. However, it makes sense to research further into the many terms and conditions that apply to business loans before applying for one. This article aims to provide the reader with all the information needed on the subject of business loans. Read further for in-depth insights.

General Overview of Business Loans

Many banks and NBFCs in India specialize in business loans. While these banks and financial corporations may have varying terms and conditions, the infographic below provides a general overview of business loans in India.

Interest Rates

Interest Rate Types

Processing Charges

Loan Amount

Repayment Tenure

Credit Score Eligibility

13% and above

Flat and Diminishing Interest Rates

2.5% of Loan Amount or Less

Rs 1 Lakh to Rs 1 Crore

6 Months to 5 Years

700 or Above

Interest Rates on Business Loans

It must be noted that different banks have different interest rates for business loans. Furthermore, interest rates may vary in keeping with different factors such as...

  • The repayment tenure of the loan
  • The borrower's credit history
  • The loan amounts
  • Number of years the company has been in operation
  • Collateral
  • Turnover of the company

While interest rates differ, the type of interest charged on the loan amount may vary as well. Borrowers often have the choice to pay flat interest rates or diminishing interest rates. Flat interest rates are quite straightforward, as in the borrower pays the same EMI amount for the entirety of the loan repayment tenure.  With diminishing interest rates, the borrower pays lower interest rates based on the loan balance amount even as he or she pays off the loan in installments as and when stipulated by the lending agency or bank. The infographic below makes the process of shopping for the lowest interest rates on business loans easier with an overview of interest rates on business loans offered by leading banks and NBFCs in India.


Maximum Loan Amount

Interest Rates

Lowest EMI on Longest Tenure

State Bank of India

INR 1 Billion

11.20% to 16.30%

2,594 – 48 Months


INR 50 Lakhs

15.50% to 18.30%

2,808 – 48 Months


INR 40 Lakhs

13.90% to 16.65%

2,270 – 60 Months

Axis Bank

INR 50 Lakhs

15.50% to 24%

2,405 – 60 Months

RBL Bank

INR 10 Lakhs

20% and Above

2,649 – 60 Months

Kotak Bank

INR 75 Lakhs

16% to 19.99%

2,432 – 60 Months

Capital Float

INR 1 Crore

18% and Above

3,615 – 36 Months


INR 1 Crore

18% and Above

9,168 – 12 Months

Standard Chartered

INR 75 Lakhs

13.50% to 20%

3,301 – 60 Months

Deutsche Bank

INR 50 Lakhs


3,932 – 36 Months


INR 30 Lakhs

18.25% and Above

2,553 – 60 Months

Fullerton India

INR 50 Lakhs

16% and Above

2,834 – 48 Months


*It must be noted that the infographic above depicts the interest rates for a limited number of banks and NBFCs in India. These, however, are the leading banks and financial corporations in the country.

Eligibility Criteria

Banks and NBFCs simply do not give away business loans, the borrower must conform to standard eligibility criteria. Listed below are the primary criteria for business loan eligibility.

  • Fitting into Bank Scheme/Product - Most banks have more than one scheme or financial product for business loans. The borrower must do his or her research and apply for a loan that his or her business is most suitable for.
  • Documentation – Having all the necessary documentation to prove the viability of one’s business goes a long way in securing business loans.
  • Cash Flow and Profit – Banks and NBFCs prefer to lend to businesses that project profitability and positive cash flow in the long run.
  • Borrowers Margin – As banks are not willing to lend 100% of working capital or investments needed, the borrower must ensure that he or she can meet the borrower's margin which can vary from 10% to 50%.
  • Primary Security – Banks require primary security that needs to be materialized using the funds lent to the borrower. If the borrower is using the funds as working capital to buy raw material and stocks, this primary security will be hypothecated by the bank in the event of failure to pay back the bank.
  • Collateral- borrowers are also expected to pledge personal assets as collateral which is a source of secondary security for the bank.
  • Experience and Reputation – The experience of the borrower pertaining to running a business and the reputation of the borrower in terms of credit history is subject to scrutiny.


As mentioned, prior, documentation to prove the viability of one’s business and the credibility of the borrower is required to avail of business loans. The paperwork needed by leading banks and NBFCs to sanction business loans and to process applications for the same is as listed below.

  • ID Proof
  • Address Proof
  • Company Pan Card
  • 6 Months Company Bank Statements
  • Continuation documentation in the form of establishment proof, sales tax certification, and trade license
  • Computation of income, Profit and Loss Statements for 2 Years, financial statement
  • Sole proprietorship declaration
  • Partnership deed

Additionally, borrowers must have a business plan in place. This is to convince the bank or the lender that the business is well able to make profits and repay the bank loan. The emphasis here is on having a long-term business plan drawn up, that truthfully indicates the company’s ability for growth and stability.

Special Schemes

To get the best deals on business loans, it does help to enquire from banks about special government schemes for startup funds or working capital. These schemes offer special benefits for special groups such as entrepreneurial women and those belonging to scheduled castes and scheduled tribes. The Pradhan Mantri Mudra Yojana and Stand Up India are outstanding examples of these special schemes.

In conclusion, the information above is sure to serve as an in-depth insight into business loans. Readers are welcome to use this article as a guide for availing of business loans with an emphasis on getting the best deal possible.

Bank Interest Rate Minimum Age (in yrs.) Minimum Income (in Rs.)
State Bank Of India
State Bank Of India
12.50-13.00% Not applicable Not applicable
ICICI Bank Limited
ICICI Bank Limited
NA Not applicable Not applicable
Allahabad Bank
Allahabad Bank
Starting from 11.15% 25 to 65 years Regular Income
Andhra Bank
Andhra Bank
Starting from 15.75%
Bank of Baroda
Bank of Baroda
14.50% Not applicable Not applicable
Bank of India
Bank of India
Starting from 13.00%
Canara Bank
Canara Bank
NA Not applicable Not applicable
Punjab National Bank
Punjab National Bank
12.00 - 13.25% Not applicable Not applicable
Union Bank of India
Union Bank of India
N.A. Not applicable Not applicable
United Bank Of India
United Bank Of India
Starting from 13.00% Not applicable Not applicable
Axis Bank Limited
Axis Bank Limited
The Interest Rate is based on the assessment of the financial profile of the loan applicant, loan amount and credit history. Not applicable Not applicable
HDFC Bank Limited
HDFC Bank Limited
Starting at 15.65% Not applicable Not applicable
Industrial Development Bank of India (IDBI)
Industrial Development Bank of India (IDBI)
Not available Not applicable Not applicable
Not Available Not applicable Not applicable
Yes Bank
Yes Bank
10.99% - 20.00% Not applicable Not applicable
Disclaimer: The Details shown may be different from actual. Please confirm on the bank site before process.
Frequently Asked Questions (FAQ)
What is a business loan?

​​​​​​The business loan comes in the category of unsecured loan. You can avail business loans from various banks and financial institutions. Banks don’t ask for any collateral for providing business loans. If your business is in terms of proprietorship, partnership, private limited company or public limited company, then you can quickly get business loans.

What are the eligibility criteria of availing business loans?

​​​​​​The eligibility of business loans depends upon the following factors:

  • A credit score of the entity
  • Financial turnovers for the past two years
  • DSCR score

Can one repay in part payment in case of a business loan?

​​​​​​​Not all the financial institutions allow for part payment of the business loan in a year. You can repay in part payment in certain banks only. However, there are strict rules and regulations on how many times you can pay as well as what maximum and the minimum amount you can pay.

What documents are required for business loan approval?

​​​​​​You would need to submit the following documents at the banks for availing a business loan:

  • Pan Card
  • Residence Proof
  • Two years of financial statements
  • Statement of bank for the past six months
  • Tax returns
  • Payment history of existing loans
  • KYC documents

What is the tenure of business loan repayment?

​​​​​​​The business loan payment duration differs from one bank to another. However, in general, the banks let the customers pay back the complete repayment within 3 years. The applicant can comfortably pay back the amount by the help of electronic clearing system or by submitting postdated cheque in the bank.

What is the rate of interest of business loan?

The rate of interest for business loans in India lies in the range of 16 – 23%. This depends upon the banks from where you wish to avail a business loan. The rates of interest keep on changing, and you will find it different from different banks.

What are the processing charges involved in a business loan?

​​​​​​You would need to pay almost 2.5% of the total amount of loan as the charge of processing. In some cases, the banks can reduce the processing fee if you have an excellent credit history or you are one of their past customers possessing a good record.

How long do banks take to disburse your business loan?

​​​​​​Banks usually take a period of one or two weeks to process the business loan. This is only possible if you have submitted all the essential documents asked for by the bank. If the documents submitted are not up to the mark, then the time of processing will be longer.

Can an NRI apply for a business loan?

​​​​​​​Yes, you can get a business loan from India. However, not all banks offer business loans to NRI's. You can get loans from some of the selected banks if they are waged. You can read all the guidelines for applying for business loans if you are not aware of the rules and regulation in regards to NRI's for detailed clarity.

What happens if you fail to pay one of the EMI?

​​​​​​In case if you fail to pay the EMI or there is an ECS bounce, then the bank will levy a certain amount of penalty. The same will also is reported in your credit report. It can create problems in case of severity the bank may also reject any application for loans in the future. To keep your credit history sound, you should make sure that you pay all the repayment within the stipulated timeframe. This is undoubtedly not a good practice, though.