Business Loan Interest Rates

Latest Business Loan Interest Rates by Banks and NBFCs – September 2025

Note: Interest Rates as of 18th July 2025.

Business Loan Processing Fees & Other Charges

Besides business loan rates, there are several fees and charges that add to the loan’s total cost of borrowing. Hence, prospective borrowers should know about these charges and compare them to know which business loan offer will lead to higher savings.

Business loan fees and charges may vary across lenders. So, here’s a table that gives you a fair idea on these charges:

Factors Affecting Business Loan Interest Rates

Lenders set business loan interest rates primarily on the basis of their internal credit risk policies and their applicants’ credit profile. However, there are several other factors that impacts the business loan interest rates. Some are discussed below:

• Type of Loan Scheme/ Credit Facility: Business loan interest rates may vary across the loan schemes and credit facilities. For instance, the interest rate set for a MSME loan would be different from the interest rate set for a loan against Bill/Invoice Discounting. Similarly, suppose a business loan scheme is offered as a term loan and an overdraft. The interest rate set for the term loan might be different from that of the overdraft facility.

• Nature & Value of the Collateral/ Security: Those pledging asset or security of a higher value are more likely to get business loan approval at lower interest rates. This is because the secured nature of such loans reduces the credit risk of lenders, allowing them to offer lower interest rates to their loan applicants.
• Type of Interest Rate: Which type of interest rate you choose when availing a business loan would also determine the rate at which you will repay your loan. Like most loans, business loans are also offered at fixed and floating interest rates. The interest rates set for fixed rate business loans is usually higher than the interest rates set for floating rate business loans.
• Occupation Profile: Lenders usually set lower interest rates for self-employed professionals as compare to self-employed non-professionals. Also, as compared to self-employed individuals, the interest rates set for business loans for MSMEs would be higher.
• Loan Amount & Tenure: Some banks and NBFCs set business loan interest rates based on the loan amount and tenure. Larger loan amounts and longer tenures can increase lender’s credit risk, thereby, leading to higher interest rates. Shorter loan tenure and loan amounts, on the other hand, might help you get loans at lower interest rates and tenures.
• Business Profile: The nature of your business can impact the interest rate offered by lenders. Lenders assess the risk involved in lending money to a particular type of business. For instance, lenders consider a manufacturing business less risky as such businesses have tangible assets like equipment, machinery, inventory, etc. Lending to service-based businesses like consulting, on the other hand, is riskier for the lenders as such businesses have no substantial assets to pledge as collateral.
• Business Financials: Lenders also consider business revenue while setting the business loan interest rates. Businesses generating higher and more consistent revenue are considered to be less risky and therefore, are seen more favourably by lenders. Also, a growing revenue stream depicts your businesses’ financial stability and potential growth in future, leading to more favourable loan terms including lower interest rates.
• Credit Score & Repayment History: Unlike other loans such as home loans and personal loans, the interest rates of business loans are not set on the basis of credit score. However, having a high credit score and a clean repayment history can increase your odds of availing business loans at lower interest rates.Individuals having high credit scores tend to have greater financial discipline and thus, are seen as a reliable borrower. The reduced credit risk of lenders, increases the chances of availing business loans at lower interest rates as opposed to those having poor credit scores and repayment histories.

Other parameters that could impact your business loan interest rates includes the reputation of your business, loan tenure, margin, etc.

How to Get Business Loans at Low Interest Rates?

Follow the tips below to avail business loans at low interest rates:

• Sole proprietors should aim for high credit scores, preferably 750 and above. This is because applicants having such high credit scores are perceived to have greater financial discipline, which reduces the credit risk of lenders and increases the applicants’ chances of loan approval at lower interest rates.
• Prospective borrowers should also leverage their existing relationship with banks and NBFCs as the lenders may extend benefits such as preferential interest rates to sole proprietors and pre-approved offers to their existing current account customers.
• Due to varying risk-based pricing models, the business loan interest rates offered to an applicant may vary across lenders. Thus, to avail business loan at the lowest interest rate, compare business loan offers of as many lenders as possible. As the task can be tedious, visit online financial marketplaces like Paisabazaar to make the process simpler and faster. Also, comparing business loan offers at such platforms won’t hurt your credit score.
• Offering collateral or security can also help you in getting business loan at a lower interest rate. The presence of an underlying asset lower lender’s credit risk, allowing them to offer lower interest rates to their applicants.
• If possible, build the reputation of your brand/business. Having a history of positive customer reviews and feedback indicates financial stability and trustworthiness to lenders, which can make your business seem more attractive to lenders. This again might give you a leverage when negotiating for lower interest rates with your lender.
• Opt for government-backed loan schemes as such schemes may offer interest concessions or subsidies to eligible applicants. Find below a list of top Government business loan schemes offered in collaboration with or supported by leading private/public sector banks and NBFCs in India.
  • MUDRA Loans (Pradhan Mantri MUDRA Yojana – PMMY)
  • Stand-Up India Scheme
  • Prime Minister’s Employment Generation Programme (PMEGP)
  • SIDBI Make in India Soft Loan Fund for MSMEs (SMILE)
  • Credit Linked Capital Subsidy Scheme (CLCSS)

FAQs on Business Loan Interest Rates

What are current interest rates on business loans?

The business loan interest rates offered by banks and NBFCs shall vary from lender to lender and depend on your credit profile, loan type, nature of business and opted loan scheme.

How do banks decide the interest rate for a business loan?

Lenders determine the business loan interest rates based on various factors, such as borrower’s credit risk profile, financial health of business, loan type, loan amount and tenure, collateral offered, nature and size of business and existing relationship with the lender.

Which bank offers the lowest business loan interest rate?

Several banks, NBFCs and financial institutions offer competitive interest rates on business loans. However, the exact business loan interest rates offered shall depend on various factors, such as your credit score, loan type (secured/unsecured), business financials, and loan amount and tenure.

How can I get a low-interest rate business loan?

To avail low-interest rate business loan, you need to have a strong credit profile with good repayment capacity, as well as you need to choose the right loan type and lender, and search for loans offered under government schemes. Here you can check and compare from loan options offered by various banks and NBFCs and choose as per your business requirements.

Do MSMEs offer concessional or subsidized business loan interest rates?

Yes, MSMEs often qualify for concessional or subsidized business loan interest rates, specifically when borrowing through various Government-backed loan schemes, such as MUDRA under PMMY, PMEGP, CGTMSE, CLSS, etc.

What is the minimum credit score required for a low-interest business loan?

The minimum credit score required for a low-interest business loan typically falls in the range of 685 – 700 based on the borrower’s credit profile, loan type, nature of business, etc.

Can I negotiate my business loan interest rate with a bank?

Yes, you can surely negotiate on your offered business loan interest rates with a bank, primarily if you have strong financials and maintain healthy relationship with the lending bank.

Is collateral required to secure a business loan with low interest rates?

At Paisabazaar, you can explore, compare, and apply for unsecured business loans from various banks and NBFCs that do not require any collateral or security for loan approval. However, secured business loans are backed by collateral or security.

What is the minimum and maximum loan amount that I can avail through business loan?

There is no minimum limit to borrow whereas the maximum loan is up to Rs. 2 crore for unsecured business loans that are collateral free. However, there are specific lenders who offer small business loans starting from as low as Rs. 10,000.

Is the business loan interest rate fixed or floating?

It depends on the banks or lenders to offer fixed or floating interest rates. However, most banks prefer fixed interest rates over floating. Largely, the interest rates offered by private sector banks are fixed.

Is there any need to submit collateral or security with the bank to avail business loan?

There is no need to submit any collateral/security, if you are applying for an unsecured business loan on Paisabazaar. However, there are few secured business loan types that require collateral to be submitted with the bank or NBFC, include Letter of Credit, Cash Credit, POS loan, Bill Discounting, Equipment/Machinery loan, etc.

What is the repayment period of a business loan?

The minimum repayment period is 12 months, whereas the maximum repayment period is of 5 years, however, in may exceed as per business requirements.

What are the pre-closure/foreclosure charges for business loans?

The pre-closure or foreclosure for business loans shall vary from lender to lender and ranges from Nil to 5% of the balance principal outstanding amount.