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Business loan is a funding support offered by financial institutions to meet the day-to-day business requirements. Business loan can be availed by individuals, MSMEs and many other entities. Applicants who own house, shop, office and godown have more chances of loan approval, as banks consider them more reliable in repaying loans in time. Most of the banks do not require collateral or security to be submitted to avail unsecured business loan.

The minimum loan amount offered starts from Rs. 30,000 and is usually offered by Non-Banking Financial Companies (NBFCs), Small Finance Banks (SFBs) or Micro Finance Institutions (MFIs), whereas applicants can avail collateral-free business loans maximum up to Rs. 1 crore. Small business loans are also available for MSMEs and startups.

Business Loan Interest Rates from Top Banks/NBFCs

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

Bank/NBFC/Fintech

Interest Rate (p.a.)

HDFC Bank 15% onwards
ICICI Bank 16% onwards
Kotak Mahindra Bank 16% onwards
ZipLoan 16% onwards
Fullerton Finance 17% onwards
FlexiLoans 17% onwards
Lendingkart Finance 17% onwards
Bajaj Finserv 18% onwards
Hero FinCorp 18% onwards
IIFL Finance 18% onwards
PaySense Services India Pvt. Ltd. 18% onwards
SMEcorner 18% onwards
Tata Capital Finance 18% onwards
IDFC First Bank 19% onwards
RBL Bank 19% onwards
HDB Financial Services Ltd. 22% onwards
Indifi Finance 22% onwards
NeoGrowth Finance 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.

CIBIL Score and its Importance in Availing Business Loan

CIBIL score or credit score is a 3-digit numeric that depicts the creditworthiness of an applicant, along with his/her repayment history and repayment capability. The CIBIL score ranges between 300-900 that is calculated on the basis of repayment history. Any score above 700 is usually considered good by banks and NBFCs in providing business loans at competitive interest rates. Applicants with no credit history or low CIBIL score should also maintain decent CIBIL score in order to avail financial benefits. Increasing the CIBIL/credit score is not an overnight process, as it requires time from 3-6 months. Therefore, start to build your credit score from today or at the earliest. At paisabazaar.com, applicants can check their CIBIL score for free and apply for loan online as per their business requirements.

Business Loan Eligibility Criteria

  • Age Criteria: Minimum 18 years & maximum 65 years.
  • Applicant with good credit score and no past loan defaults, if any
  • Minimum Annual Turnover of Rs. 10 lakh for existing enterprises

Below mentioned are the entities that can avail business loan:

  • Individuals
  • Startup Enterprises
  • MSMEs
  • Artisans, Retailers, Manufacturers and Traders
  • Private and Public Limited Companies
  • Closely Held Limited Companies
  • Sole Proprietorship Firms, Partnerships, Limited Liability Partnerships and Large Enterprises engaged only in Manufacturing, Trading or Services sectors
  • NGOs, Co-operative Societies and Trusts
  • Self-employed individuals / Professionals - CAs, Doctors, Architects, Company Secretaries, Allopathic Doctors, Designers, etc.

Documents Required for Business Loan Application

When applying for a business loan, you will need to submit the following documents:

  • Duly filled application form along with 2 passport-sized photographs
  • KYC Documents of the applicant, including PAN card, Passport, Aadhar Card, Driving License, Voter ID card, Utility Bills (Water/Electricity Bills)
  • Last 1 years’ bank statement
  • Annual Business Turnover: Minimum Rs. 10 lakh or above (for existing businesses or enterprises)
  • Non-Collateral Overdraft
  • Copy of Business Incorporation

What are the Business Loan Fees and Charges?

The fees and charges of business loan vary from lender to lender and case to case. The fees and charges depends on the loan amount, interest rate and repayment tenure.

How to Apply for Business Loan from Paisabazaar?

Apply for Business loan by following below mentioned steps:

To apply for a business loan, applicants can check and compare from various loan options that suit the business requirements. Follow the below steps to apply for a business loan by clicking 'Business Loan' on the homepage of the website.  

Step 1: Fill in all the required fields, such as desired loan amount, employment status, annual gross sales or turnover, city of residence, years in current business, collateral type and mobile number.

Step 2: Check the below box to agree on terms and further Click to ''Unlock Best Offers''

Step 3: Further you are required to mention the Company type, Nature of business, Type of industry, Gross Annual Profit, Bank Account, any existing EMI, Full name, Gender, Residence PIN code, PAN card, Date of Birth and Email Address.

Step 4: After submitting all the details, the bank's representative will contact you to proceed with loan formalities.

Step 5: Once your loan application is approved, within defined working days the approved loan amount shall get disbursed in your mentioned bank account.

Special Schemes for Women Entrepreneurs

Nowadays, banks are giving attractive schemes to women entrepreneurs. These business financing 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:

Business Loan Types

1. Term Loan

Term loan is offered under various types, such as short-term loan, long-term loan and other small business loans. The loan amount offered under term loan depends on the applicant’s profile and business requirements that can be repaid in 12 months to 5 years, in the form of EMIs. Term loans are divided into two parts, unsecured business loans and secured business loans. Secured loans require collateral to be submitted with the banks, which is not in the case with unsecured business loans.

2. Working Capital Loan

Working capital loans are availed to meet the day-to-day business requirements or to manage business cash flow. The working capital loan can be availed for various other purposes, such as business expansion, buying equipment or machinery, purchasing raw material or goods, paying-off salaries or rent, enhancing inventory and much more.

3. Bill (Invoice) 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, the buyer has the option of buying goods from the seller. Bills that come under bill discounting are termed as ‘bills of exchange’.

4. Letter of Credit

Letter of credit is a payment instrument used mainly in international trade in which the bank provides monetary guarantee to enterprises which deal in 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, a letter of credit is important to provide payment assurance to the suppliers or exporters.

5. Point of Sale (POS) Loan

Point of Sale Loan is a type of funding wherein merchants offer their customers some financial assistance at point of their purchase. Business owners, enterprises, MSMEs, entrepreneurs, retailers can avail Loan against POS machines to start a new business or to manage their existing businesses. POS Loan is also termed as Merchant Cash Advance in which the loan amount depends on business volume generated via POS terminals.

6. Overdraft Loan

An overdraft means overdrawing money from ones’ current/savings account even if the account balance is zero. An agreed rate of interest will be charged, if the overdrawn amount is within the limits of a preceding agreement. The interest rate is charged only on the utilized amount of the total withdrawal limit.

Loans Schemes initiated by Govt. of India

FAQs on Business Loan

Ques. What is the best credit score or CIBIL score to get instant business loans?

Ans. Any CIBIL score that is as close to 900 or above 700 is considered good by financial institutions.

Ques. How to choose the ideal repayment tenor for business loans?

Ans. Ideally, if you avail short-term loan then the repayment tenure should not exceed 12 months. However, it may increase as per the desired loan amount. The maximum repayment period can be chosen up to 5 years.

Ques. What is the impact of GST on business loans for new businesses?

Ans. The GST plays an important role in getting business loans, as more the GST is paid, larger shall be the business volume. Therefore, it becomes easy for banks to rely on such applicants or borrowers.

Ques. What is the minimum turnover requirement for a loan to start a business?

Ans. The minimum annual turnover criteria is defined by the lender and varies from bank to bank. However, applicants shall apply online at paisabazaaar.com with minimum annual turnover of Rs. 10 lakh or above for existing enterprises or businesses.

Ques. Can an applicant who is 21 years avail business loan?

Ans. Yes, any individual who is 18 years and above at the time of loan application is eligible to apply for business loan.

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

Ans. No, you are not required to submit any collateral to the bank or NBFC, for few specific secured business loans, collateral is required.

Ques. What are the pre closure and part-prepayment charges in business loans?

Ans. The pre-closure and part-payment charges vary from bank to bank. It may be Nil from some banks and may exceed up to 4%-5% of the loan amount.

Ques. What are the loan schemes initiated by the Government of India?

Ans. Some of the popular schemes include MUDRA Yojana under PMMY, SIDBI loanCGTMSEPMEGPStandup IndiaStartup Indiapsbloansin59minutes.comNSICNABARD, etc.

Business Loan Latest News

SME Loan Relief Measures during COVID-19

30th May 2021, SBI and IBA announce SME loan relief measures for individuals and MSMEs to lower the COVID impact. The Government of India declares an extension of its Rs. 3 lakh crore ECLGS - Emergency Credit Line Guarantee Scheme.

  • Public Sector Banks to offer restructuring loans to individuals, small businesses and MSMEs up to Rs 25 crore
  • For loans up to Rs. 2 crore, Govt. to provide 100% guarantee cover to hospitals, nursing homes, etc. for setting up of on-site oxygen generation plants
  • Interest Rate offered is 7.50%
  • The validity of ECLGS has also been extended to September 30, 2021
  • The disbursement under the scheme has been permitted up to December 31, 2021

RBI announces Rs. 50,000 crore funding support to fight COVID

5 May 2021: RBI Governor, Shaktikanta Das introduced new measures to tackle the second wave of COVID-19 in India. The Governor announced on-tap liquidity funding of Rs 50,000 crore, as a credit facility to be offered to banks, NBFCs and other lending institutions. This funding support is in the form of incentivised loan schemes that shall be offered to the enterprises engaged in healthcare, manufacturing and logistics sectors. Vaccine manufacturers, hospitals, medical equipment makers, as well as patients shall be offered loan schemes by the private and public sector banks, NBFCs, Micro Finance Institutions (MFIs) and Small Finance Banks (SFBs).

Government launches Atmanirbhar Bharat Abhiyan 2020

12 May 2020: Government launches Atmanirbhar Bharat Abhiyan 2020
Launched on 12 May, 2020 by Government of India, Atmanirbhar Bharat Abhiyan or Self-reliant India Scheme 2020 is a funding support scheme for the MSME sector to boost and promote growth and increase employment opportunities in rural and urban areas across India. Its main features include: 

  • MSME Loans worth of Rs. 3 lakh crore
  • Rs. 20,000 crore loan option for MSMEs
  • Repayment Tenure of 48 months with moratorium period offered is 12 months
  • 100% Credit Guarantee Scheme
  • Approx. 50 lakh shopkeepers to benefit, running pedestrian shops
  • Collateral Free Loans to MSMEs
  • For loans up to Rs. 3 lakh, releif of 2% in interest rate
  • Loans of amount Rs. 10,000 offered to pedestrian business owners
  • Manufacturing and Service MSMEs shall be considered as same entities

Self-reliant India is a scheme focusing on MSME sector and it does not mean cutting from rest of the world. New MSME definition was introduced as mentioned:

MSME – Merged Criteria: Investment and Annual Turnover

Sector/Enterprise Type

Micro Enterprise

Small Enterprise

Medium Enterprise

Manufacturing & Services Sector, Both

Investment less than Rs. 1 crore

Turnover less than Rs. 5 crore

Investment less than Rs. 10 crore

Turnover up to Rs. 50 crore

Investment less than Rs. 50 crore

Turnover up to Rs. 250 crore

Business Loan
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Business Loan

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