Overview of Business Loans in India
A business loan is a type of unsecured or secured credit that helps entrepreneurs and companies meet their operational and capital expenditure needs. These loans can be short-term or long-term, depending on the business requirement.
Businesses in India can avail loans for:
- Working capital
- Equipment purchase
- Inventory
- Expansion
- Marketing or operations
📊 Factors Affecting Business Loan Interest Rates
Understanding what influences the interest rate on your business loan can help you negotiate better deals.
| Factor | Impact on Interest Rate |
|---|---|
| Credit Score (CIBIL) | Higher score = Lower rate |
| Business Vintage | Older business = Better rate |
| Annual Turnover | Higher turnover = Better terms |
| Loan Amount | Larger amounts may get lower rates |
| Collateral | Secured loans usually cost less |
| Type of Lender | NBFCs may charge higher than banks |
| Government Subsidies | Priority sector lending rates apply |
🏦 Comparison Table: Business Loan Interest Rates in India (2025)
Here’s a comparison of business loan interest rates from top banks and NBFCs in India:
| Lender | Interest Rate (p.a.) | Loan Amount Range | Tenure | Processing Fee |
|---|---|---|---|---|
| SBI (State Bank of India) | 8.35% – 14.20% | ₹50,000 – ₹500 Cr | Up to 15 years | Up to 2% |
| HDFC Bank | 10.00% – 22.00% | ₹50,000 – ₹75 Lakh | Up to 5 years | Up to 2.50% |
| ICICI Bank | 11.00% – 19.00% | ₹1 Lakh – ₹40 Lakh | 1 – 7 years | 2% |
| Axis Bank | 12.00% – 21.00% | ₹50,000 – ₹50 Lakh | Up to 5 years | Up to 2% |
| Kotak Mahindra Bank | 12.50% – 20.99% | ₹3 Lakh – ₹75 Lakh | 1 – 4 years | Up to 2.5% |
| Bajaj Finserv (NBFC) | 12.99% – 28.00% | ₹50,000 – ₹50 Lakh | Up to 7 years | 2% |
| Tata Capital (NBFC) | 13.00% – 24.00% | ₹1 Lakh – ₹75 Lakh | Up to 5 years | 2.5% |
| Lendingkart (Fintech NBFC) | 15.00% – 27.00% | ₹50,000 – ₹2 Crore | 1 – 3 years | 2% – 3% |
| IDFC FIRST Bank | 10.50% – 22.00% | ₹1 Lakh – ₹1 Crore | Up to 5 years | 1.5% – 2.5% |
| Bank of Baroda | 8.65% – 14.70% | ₹1 Lakh – ₹20 Cr | Up to 7 years | 1% – 2% |
💡 Note: Rates are indicative and may vary based on borrower profile, business size, and location.
🏛️ Public Sector vs Private Sector Banks
| Aspect | Public Sector Banks | Private Sector Banks |
|---|---|---|
| Interest Rates | Generally lower | Slightly higher |
| Processing Time | Slower | Faster |
| Documentation | More detailed | Simplified in some cases |
| Accessibility | More branches in rural India | Strong digital presence |
Public banks like SBI and BOB offer cheaper rates under government schemes. Private players like HDFC and ICICI provide quick processing and customized products.
🏢 Top NBFCs Offering Business Loans in India
Non-Banking Financial Companies (NBFCs) are gaining popularity due to their flexibility and less stringent credit evaluation.
| NBFC | Loan Amount | Notable Features |
|---|---|---|
| Bajaj Finserv | Up to ₹50 Lakhs | Same-day approval, no collateral |
| Lendingkart | Up to ₹2 Crores | Online application, fast disbursal |
| NeoGrowth | ₹1 Lakh – ₹75 Lakhs | Merchant-based financing |
| Indifi | ₹50,000 – ₹50 Lakhs | Revenue-based financing for MSMEs |
| FlexiLoans | ₹50,000 – ₹1 Crore | No collateral, pan-India reach |
🏢 Government-Backed Business Loan Schemes (Subsidized Rates)
India offers several schemes to promote MSME and entrepreneurship development:
1. MUDRA Loan (Micro Units Development and Refinance Agency)
- Interest Rate: 8.60% – 12%
- Loan Amount: ₹10,000 to ₹10 Lakh
- Types: Shishu, Kishore, Tarun
2. Stand-Up India
- Loan Range: ₹10 Lakh to ₹1 Crore
- Target Group: SC/ST/Women entrepreneurs
3. CGTMSE (Credit Guarantee Fund Trust)
- Guarantees collateral-free loans up to ₹2 Cr
- Used by most public and private banks
| Scheme | Max Loan | Interest Rate | Target Group |
|---|---|---|---|
| MUDRA | ₹10 Lakh | 8.60% – 12% | Small enterprises |
| Stand-Up India | ₹1 Crore | 9% – 12% approx. | Women, SC/ST |
| CGTMSE | ₹2 Crore | Bank-determined | All MSMEs |
✅ Eligibility Criteria for Business Loans
Each lender will have its own requirements, but the general eligibility includes:
- Indian citizen, age 21 – 65
- Business vintage of at least 1 year (some require 3 years)
- Minimum turnover of ₹10 Lakhs – ₹40 Lakhs
- Good CIBIL score (usually 700+)
- No loan defaults
📄 Documents Required
A well-prepared documentation set improves chances of faster approval.
| Document Type | Examples |
|---|---|
| Identity Proof | Aadhaar Card, PAN, Passport |
| Address Proof | Utility Bill, Voter ID, Lease Agreement |
| Business Proof | GST Certificate, Udyam Registration, COI |
| Financials | Bank Statements, ITR (last 2 years), P&L |
| Others | KYC of partners/directors, ownership proof |
💡 How to Get the Lowest Business Loan Interest Rate
Here are actionable tips to secure the best rate for your business loan:
- Maintain a High Credit Score – Aim for 750+
- Apply with Multiple Lenders – Compare offers
- Provide Collateral if Possible – Reduces risk for lender
- Opt for Government Schemes – If eligible, MUDRA/CGTMSE can reduce cost
- Use Business Loan Brokers/Platforms – Like Paisabazaar, BankBazaar for real-time quotes
- Avoid Frequent Loan Applications – Too many inquiries can hurt your score
📈 Interest Rate Trends in 2025
In 2025, with the RBI repo rate stabilizing and India’s GDP growth sustaining above 7%, banks have started offering competitive interest rates for MSMEs and startups. Government initiatives like Startup India, Digital India, and Make in India have also helped push lenders to prioritize small businesses.
📝 Final Thoughts
Comparing business loan interest rates in India is essential for cost-effective borrowing. While public sector banks offer lower interest rates, private banks and NBFCs provide speed and convenience. Choosing the right lender depends on your business needs, credit profile, and urgency.
Before you sign the loan agreement, ensure you:
- Compare rates and terms
- Check the total cost including processing fees, prepayment charges, etc.
- Know your repayment capacity
With the right strategy, your business loan can be a stepping stone to sustainable growth and financial success.
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