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

The minimum loan amount shall vary from lender to lender 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 11.90% onwards which also depends on the eligibility of the applicant:


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.

Business Loan Eligibility Criteria

  • Age Criteria: Minimum 18 years & maximum 65 years.
  • Applicant with good credit score and no past loan defaults, if any

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

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:

Step 1: Visit to check and compare from all the business loan options offered by leading financial institutions.

Step 2: Pick the deal that suits your business requirements by just filling the basic details like your name, mobile number, residence, loan amount, email address, annual turnover & profit, etc.

Step 3: After submitting the details, paisabazaar's customer care professional will contact you to verify the submitted details and to proceed with the discussion on the chosen loan deal.

Step 4: Your business loan application will be sent to respective bank for further verification and then the bank’s representative will further contact you to proceed with loan formalities.

Step 5: After 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

Currently many types of term loans are available, such as short-term loan, long-term loan and other small business 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.

Business loans can be used for business expansion purposes, manage cash flow, buy equipment/machinery, hire/train staff, purchase raw materials, upgrade inventory and much more. Small business loans are also available for MSMEs and startups.

2. Working Capital Loan

Get small business loan and working capital loan 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.

3. MUDRA Loan Under PMMY

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 Pradhan Mantri MUDRA Yojana, loans of minimum Rs. 50,000 and maximum of Rs. 10 lakh are provided to start an enterprise or an 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.

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. Small business loans are also offered under this scheme.

4. 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.

5. 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.

6. Startup India

Startup India Scheme is an initiative by the Government of India that offers financing and handholding support to Startup entities for growth and expansion. Additional key functions include promotion of Startups, wealth creation and employment generation. To avail benefits of government schemes, an entity needs to be recognized as a Startup by applying on Startup India Mobile App/portal and obtaining the certificate of recognition.

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

8. 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.

9. Point of Sale

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

10. 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.

FAQs on Business Loan

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

Ans. Any CIBIL score that is as close to 900 is considered best 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 loan for new business?

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.

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

Ans. The minimum loan amount offered is Rs. 10,000 and maximum loan amount can exceed Rs. 50 crore, depending on the business requirements and applicant’s profile.

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, for few specific secured business loans, collateral is required.

Ques. Can I get a Business Loan without collateral?

Ans. Yes, you can get an unsecured business loan from financial institutions wherein no 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 Government of India?

Ans. Some of the popular schemes include MUDRA scheme under PMMY, SIDBI loan, CGTMSE, PMEGP, Standup India, Startup India,, NSIC, NABARD, etc.

Business Loan Latest News

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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Posted on: Dec 29, 2020