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The foremost priority of any entrepreneur is to see his/her business grow, expand and flourish. To fulfill this desire, business owners opt for business loans and meet their financial requirements. However, getting instant funds is not always possible, as banks and NBFCs take their time in deciding whether to sanction loan or not.

Business loans are majorly availed for purposes like business expansion, purchase of machinery or plant, investment in infrastructure, hiring staff, maintain inventory, etc. Further we have discussed all the relevant aspects of business loan for in-depth understanding.

Business loan interest rates start from 14.99% onwards which also depends on the eligibility of the applicant:

  • Minimum loan amount offered is Rs. 5000
  • Maximum loan amount offered goes up to Rs. 2 crore (can exceed depending on the requirements)
  • Minimum repayment period is 12 months
  • Maximum repayment period can go up to 5 years

Bank/NBFC/Fintech

Interest Rate (p.a.)

Bajaj Finserv

15% onwards

Capital First Prime

21% onwards

Fullerton Finance

17% onwards

FlexiLoans

15% onwards

HDB Financial Services Ltd.

15% onwards

HDFC Bank

15% onwards

Hero FinCorp

18% onwards

ICICI Bank

16% onwards

IIFL Finance

25% onwards

Indifi Finance

22% onwards

Kotak Mahindra Bank

16% onwards

Lendingkart Finance

15% onwards

NeoGrowth Finance

21% onwards

PaySense Services India Pvt. Ltd.

24% onwards

RBL Bank

17% onwards

SMEcorner

19% onwards

Tata Capital Finance

17% onwards

Yes Bank Working Capital

10% onwards

ZipLoan

24% onwards

Note: The mentioned interest rates, fees and charges are subject to change and depend on the sole discretion of the bank, NBFC and RBI.

Minimum age – 18 years

Maximum age – 65 years

Business Loans are offered to the following entities:

  • Retailers
  • Manufacturers
  • Traders
  • Sole Proprietorship Firms
  • SMEs, MSMEs and Large Enterprises
  • Partnership Firms involved only in Manufacturing, Trading or Service sectors
  • Self-employed individuals / professionals - CAs, Doctors, etc.
  • Private limited companies and closely held limited companies

Business Turnover, Operation History, Business existence, credit score and profitability criteria are defined by the respective bank and NBFC.

Fixed Interest Rate

Business Loan Interest Rates are mostly fixed, which means the Interest Rate will not change for the entire loan tenure. The business loan interest rate offered by banks and NBFCs starts at 14.99% onwards and can go up to as high as 48% onwards, depending upon the loan amount or applicant’s requirements.

Loan Amount

The loan amount that one can avail in business loan can be up to Rs 2 crore and even more depending on the requirement of the business. The loan amount mainly depends on the financial credibility of the applicant and financial institutions check the eligibility of the applicant before lending the amount. Moreover, financial institutions like banks and NBFCs review the applicant’s credit history/score, Identity proof, business location, business existence, income details before loan sanctioning.

Collateral Free Loan

Business Loans being unsecured loans do not require any collateral from the applicant. However, there are specific and very few loans in which plant, machinery or raw material need to be provided as collateral. Applicant does not require providing any asset like car or house to avail business loan.

Flexible Repayment tenure

The loan applicants enjoy flexible repayment tenure that goes up to 5 years, making it more preferable over other loans. The applicant also have an option of loan pre-payment in which he/she can foreclose the loan by paying some additional charges defined by the respective bank or NBFC.

Bill Discounting

Invoice discounting is a financial instrument offered by banks and NBFCs. Bill discounting is a source of working capital finance for the seller of goods on credit. it is a discount which, a financial institution takes from a seller’s customer. Through the payment being made by letter of credit, buyer has the option of buying goods from the seller. Bills that come under bill discounting are termed as ‘bills of exchange’.

Letter of Credit

Letter of credit is a payment instrument used mainly in international trade in which bank provides monetary guarantee to enterprises which deal in import and export of goods. Letter of credit is used for both import and export of goods. Enterprises doing businesses overseas have to deal with unknown suppliers and they require assurance of payment before performing any transaction. Therefore, letter of credit is important to provide payment assurance to the suppliers or exporters.

Loans for Self-employed Entrepreneurs

This is the most popular category among all as the loans for self-employed entrepreneurs are taken in large numbers. The loan amount can range anywhere between Rs. 50,000 being the minimum and can reach up to 10 crore. The interest rate offered depends on the financial history of the applicant and is decided by the lenders as per their discretion.

MUDRA Loan

Micro Units Development and Refinance Agency (MUDRA) loan is a funding provided by most of the leading banks to Micro, Small and Medium Enterprises (MSMEs) nationwide. Under the MUDRA scheme, loans of minimum Rs. 50,000 and maximum ofRs. 10 lakh are provided to start an enterprise or a SME unit. Through the Mudra Loan Yojana, the Government wants to ensure that proper funding is provided to first-time entrepreneurs or existing business owners.

Overdraft Loan

An overdraft means overdrawing money from ones’ current/savings account. In simpler words, an account holder takes out more money that has been deposited in the account. An agreed rate of interest will be charged, if the overdrawn amount is within the limits of a preceding agreement.

Pradhan Mantri Mudra Yojana (PMMY)

PMMY is a scheme launched by Government of India to offer funds up to Rs. 10 lakh to non-farm small/micro enterprises and non-corporate companies. Mudra loan scheme is divided into three categories named as Shishu, Kishore & Tarun wherein these loans are offered by Private Sector Banks, Public Sector Banks, Regional Rural Banks (RRBs), etc.

Stand-Up India

Stand-up India scheme was introduced by Government of India to provide funding to people who come under SC/ST category and women entrepreneurs. The primary purpose of this scheme is to help banks in offering loans between Rs. 10 lakh and Rs. 1 crore to at least one SC/ST borrower and at least one women entrepreneur per bank branch in enabling them to set-up their own enterprise.

Term Loan

Currently many types of term loans are available, such as short-term loan, long-term loan and other intermediate loans. An entrepreneur can avail these loans according to his/her requirements and economical position. Mainly the loan tenure for a short term loan is 12 months and for long-term loan it goes up to 5 years.

Term loans are divided into two parts, unsecured business loans and secured business loans. In secured loans, the collateral or security can be a certain property, machinery or a business ground and they will usually possess lower interest rates as compared to an unsecured one. Most of the business loans are unsecured loans and do not require any collateral or security to be submitted to banks or NBFCs.

Working Capital Loan

Working Capital Loans are are used to overcome the day-to-day financial requirements of enterprises. The daily expenditure of enterprises include paying-off salaries, buying raw materials, paying rent, undertaking trainings, etc. 

Nowadays, banks are giving attractive schemes to women entrepreneurs. These lending schemes are exclusively for women and it gives them relief in terms of interest rates and collateral. Some of the banks also have special departments for women entrepreneurs where they provide them business consulting, training and counseling along with avenues for marketing and showcasing of their products. Women entrepreneurs whose ownership is less than 50% in the company are not eligible to avail the benefits of the women’s special schemes.

Some of the popular loan schemes for women entrepreneurs are as follows:

  • Mahila Udyam Nidhi Scheme
  • Mahila Samridhi Yojana
  • Cent Kalyani from Central Bank of India
  • Stree Shakti Package from State Bank of India
  • Shringaar and Annapurna from Bhartiya Mahila Bank
  • Dena Shakti Scheme from Dena Bank

Below mentioned is the detailed table that will help in understanding the latest interest rates, processing fee and loan amount of business loans offered by popular financial institutions:

Bank/NBFC/Fintech Loan Amount (Min.-Max.) in Rs.  Repayment Tenure (Months) Interest Rate (p.a.)
Bajaj Finserv 1 lakh 40 lakh 3 - 36 15% onwards
Capital First Prime 1 lakh 9 lakh 12 - 36 21% onwards
FlexiLoans 50,000 1 crore 12 - 36 15% onwards
Fullerton Finance 1 lakh 50 lakh 12 - 48 17% onwards
HDB Financial Services Ltd. 75,000 30 lakh 12 - 60 15% onwards
HDFC Bank 75,000 50 lakh 6 - 48 15% onwards
Hero FinCorp 3 lakh 35 lakh 12 - 36 18% onwards
ICICI Bank 1 lakh 40 lakh 6 - 48 16% onwards
IIFL Finance 1 lakh 7.5 lakh 12 - 36 25% onwards
Indifi Finance 1 lakh 50 lakh 12 - 36 22% onwards
Kotak Mahindra Bank 5 lakh 75 lakh 6 - 48 16% onwards
Lendingkart Finance 50,000 2 crore 3 - 36 15% onwards
NeoGrowth Finance 2 lakh 10 lakh 6 - 24 21% onwards
PaySense Services India Pvt. Ltd. 5,000 5 lakh 3 - 36 24% onwards
RBL Bank 2.5 lakh 20 lakh 12 - 36 17% onwards
Tata Capital Finance 3 lakh 50 lakh 12 - 36 17% onwards
Yes Bank Working Capital 30 lakh 3 Crore As per applicant's profile 10% onwards
ZipLoan 1 lakh 5 lakh 6 - 24 24% onwards

Note: The mentioned interest rates, fees and charges are subject to change and depend on the sole discretion of the bank, NBFC and RBI.

  • Recent Passport-sized Photographs
  • Identity Proof - PAN card, Aadhaar card, Valid passport, Voter's ID card, Driving License
  • Address Proof - Voter's ID card, Aadhar card, Passport, Driving license, Utility bill, Water Bill, Electricity Bill
  • Business Address Proof
  • Proof of business existence for last 3 years
  • Last 6 months' bank statement
  • Last 3 years’ Income Tax Return (ITR)
  • Balance sheet and Profit & Loss account statement
  • Financial documents audited/attested/signed by Certified CA
  • Copy of Trade License
  • Sales Tax Certificate
  • Certified Copy of Partnership Deed
  • GST Registration Certificate

Proof of ownership of the possessions used for business activities

Like any other loan, business loan also analyses an individual’s creditworthiness by checking the repayment capability, business records, financial history and stability.

The following is the handy checklist of business loan requirements; you must keep these things in mind before applying to bank for a loan:

  • You must be ready with a well-written business plan to submit to the lender
  • You must keep a decent credit/CIBIL score that shall range between 650-900 points
  • Ensure that you meet the eligibility criteria, business loan requirement and have all the required documents
  • Repay your existing debts at the earliest, if any
  • Have sufficient funds ready, in case the lender needs you to put something forward in advance
  • As you are applying for business loan, you must maintain an inclusive database of the company’s financial situation and past performance along with its cash flow statement

If you are applying for a loan for new business then you must focus on the ideas and presentation. With the above checklist, you will be able be go in right direction of acquiring the necessary funding for your business.

  • Helps to increases the cash flow
  • Comes with flexible re-payment tenure
  • Higher loan amount can be availed
  • Collateral Free Loans
  • Get pre-approved loans from selected lenders
  • Availability of short-term loans, as well
  • Minimum paperwork
  • Quick disbursal

Mudra scheme might get revamped by PSU banks

02 September 2019 - Finance ministry has suggested the PSBs to review their Mudra loan schemes. It has been observed regarding Mudra loans becoming potential source for the bad loan crisis, along with additional MSME schemes. Chances are that finance ministry might increase the maximum loan amount of Rs. 10 lakh to Rs. 20 lakh to benefit startup enterprises, SMEs & MSMEs. Being a collateral free loan, Mudra loan schemes may be offered at an interest rate that might range between 8-12% and onwards as per the requirements. As per the recent reports from banks, total NPAs for loans extended under PMMY during the last 3 years were Rs 596.72 crore (2015-16), Rs. 3,790.35 crore (2016-17) and Rs. 7,277.31 crore (2017-18). Mudra loan is categorized under three schemes that are named as Shishu, Kishor and Tarun, wherein Shishu scheme offers loans up to Rs. 50,000, Kishor offers from Rs. 50,000 to Rs. 5 lakh and maximum goes up to Rs. 10 lakh under Tarun loan scheme.

 

Ques. I am 19 years old; can I get a business loan?

Ans. Yes, any individual who is 18 years and above is eligible to avail business loan.

Ques. How much is the minimum and maximum loan amount I can get?

Ans. The minimum loan amount offered is Rs. 5,000 and maximum loan amount can exceed Rs. 2 crore, depending on the requirements.

Ques. What is the maximum age of availing business loan?

Ans. The maximum age of availing a business loan is up to 65 years.

Ques. What is the interest rate offered under Business Loan?

Ans. Interest rate offered by various banks and NBFCs starts from 14.99% onwards.

Ques. For how long I can repay the loan amount?

Ans. You can repay the loan amount in minimum 12 months and maximum up to 5 years, depending on the respective bank or NBFC.

Ques. Do I need to submit any collateral to bank before applying for a business loan?

Ans. No, you are not required to submit any collateral to bank or NBFC.

Ques. What are the foreclosure charges and processing fees of business loan?

Ans. The foreclosure charges and processing fees varies from bank to bank. Every bank and NBFC has different charges, so you need to check online from their official website.

Ques: For what purposes business loan can be availed?

Ans: Business loans can be availed for small or large scale businesses. If you are willing to start a new business, expanding the existing business, buy machinery and other capital goods, expand the business operations and purchase equipment you can apply for business loan from your preferred provider.

Ques: What are the types of business loans in India that I can avail?

Ans: There are different kinds of business loans offered by banks and NBFCs and that include loans for self-employed and MSMEs, Mudra loans, Loans under PMMY and Stand-Up India, Working Capital loans, Term loans, SIDBI loan scheme, invoice discounting, letter of credit, loan for equipment purchase, etc.

Ques: Are there any business loans for women entrepreneurs?

Ans: Yes, women entrepreneurs too can avail business loan which are specifically designed for women. Most of the banks and NBFCs offer women entrepreneur centric business loans.

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