Business Loan Interest Rates

Business loan interest rate usually starts from 10.5% p.a. The rates offered are majorly influenced by several factors including the applicant’s credit profile, nature of the business and the type of business loan scheme.

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

The risk-based pricing models followed by banks and NBFCs may vary widely across lenders, leading to widely varying interest rates for the same applicant. Thus, prospective applicants should compare the personal loan interest rates of as many lenders as possible before making the final loan application.

Bank/NBFCs	Interest Rate (p.a.)
Axis Bank	11.50% – 19%
Flexiloans	12% – 24%
HDB Financial Services Ltd.	22% – 32%
HDFC Bank	10.50% – 15%
IDFC FIRST Bank	11.18% – 15%
Indifi	18% – 35%
Kotak Mahindra Bank	11.75% – 13%
LendingKart	24%
Tata Capital	13.50% – 26%
UGRO Capital	20% – 25%
Aditya Birla Finance	24% – 30%
ICICI Bank	16%
L&T Finance	15% – 19%
Godrej Capital	15% – 27%
Muthoot Fincorp	28%
Shriram Finance	21% – 22%

Note: Interest Rates as of 30 May 2025.

Note: The above-mentioned interest rates and charges are indicative in nature and are subject to the sole discretion of the lending bank or NBFC.

Business Loan Eligibility Criteria

The eligibility criteria for a business loan varies from lender to lender, however most banks and NBFCs follow a common set of basic criteria as below mentioned:

• Age: 21 years at the time of loan application and 65 years at the time of loan maturity (may vary across lenders)
• Business Vintage: Minimum 3 years (may exceed to 7 years)
• Credit Score: Minimum 700 or above
• Annual Income: Minimum Rs. 1 lakh
• Annual Business Turnover: As defined per the lender
• Eligible Entities: Business owners, Self-employed professionals, Entrepreneurs, Startups, Private and Public Limited Companies, Sole Proprietorship, Partnerships, Limited Liability Partnerships (LLPs), etc.

Government Business Loan Schemes with Low Interest Rates

Over the years, the Government of India has introduced a variety of loan schemes designed to support startups, MSMEs, retailers, wholesalers, street vendors, shopkeepers, women entrepreneurs, and small business owners. The Government business loan schemes are mostly collateral-free, providing subsidized loans and regular business loans at comparatively lower interest rates.

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)
• Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
• 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)
• PSB Loans in 59 minutes

How to Get a Low-Interest Rate Business Loan?

To avail business loans at low interest rates, you need to be calculated with your credit profile, financial profile, loan type, and lender selection. Find below the key measures to be followed to avail low-interest business loans.

• Check and Compare loan options from banks and NBFCs before applying
• Maintain a healthy credit profile and high credit score
• Apply for correct loan type – Term Loan, Working Capital, Overdraft, etc.
• Choose the right Government-backed loan schemes from lenders
• Search for Interest Subsidy Programs from various schemes
• Provide accurate and updated financial documents
• Provide collateral/security, if required to secure a loan

Factors Affecting Business Loan Interest Rates

The interest rate set by lenders offering business loans are primarily determined on the applicant’s creditworthiness, loan type, loan amount and term, business income, nature of collateral and various other economic conditions. Here are the main factors that can influence your business loan interest rates:

• Credit Score: Lenders usually check the credit scores of their business loan applicants, especially those opting for unsecured business loans, while setting their interest rates. As lenders consider higher credit scores as a sign of creditworthiness, those having good credit scores are more likely to get lower interest rates on unsecured business loan schemes.
• Type of Loan Facility: Several lenders offer different business loan interest rates depending on the type of loan facility. Lenders offer different business loan facilities including working capital, bill/invoice discounting, cash credit, term loan, overdraft, etc.
• Business Turnover: Lenders offering business loans consider their loan applicants’ business income while setting the interest rates. Some lenders require their loan applicants to have a minimum monthly/annual income or turnover to be eligible for availing business loans. Lenders usually consider loan applicants with higher incomes as having a higher capacity to repay their loan.

• Nature of the Collateral/Security: Business loan lenders usually consider the nature and value of the asset pledged as security or collateral while assessing loan applicants of prospective borrowers. Those furnishing security of a higher value are more likely to get business loan approval at lower interest rates.

Business Loans Hidden Charges

While planning for a business loan, it’s important to check the hidden charges included and not just the interest rates. The hidden charges can significantly impact the total cost of your business loan. Some of the charges to check in the loan agreement before signing it are listed below:

• Processing fees
• Loan cancellation charges
• Administration charges
• Penal charges or late payment penalty
• Part-payment/Pre-payment/foreclosure charges
• Renewal charges
• Balance Transfer charges
• Documentation charges
• Cheque Bounce charges
• Stamp Duty
• Legal Fees
• Loan Insurance costs
• Switch Fees
• Annual Maintenance Charges, etc.

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.