Current Business Loan Interest Rates in India
Below mentioned is the detailed table that will help in understanding the latest business loan interest rates, loan amount and repayment tenure offered by leading financial institutions in India:
|Lenders||Interest Rate (p.a.)||Loan Amount (Max.) in Rs.||Repayment Tenure (Months)|
|HDFC Bank Business Loan||15% onwards||75 lakh||6 – 48|
|ICICI Bank Business Loan||16% onwards||40 lakh||6 – 48|
|Kotak Mahindra Bank||16% onwards||75 lakh||6 – 48|
|Axis Bank Business Loan||17% onwards||50 lakh||12 – 36|
|Fullerton Finance||17% onwards||50 lakh||12 – 48|
|Lendingkart Finance||17% onwards||1 Crore||3 – 36|
|Bajaj Finserv||18% onwards||20 lakh||12 – 48|
|Hero FinCorp||18% onwards||25 lakh||12 – 36|
|IIFL Finance||18% onwards||50 lakh||12 – 36|
|Indifi Finance||18% onwards||50 lakh||12 – 36|
|PaySense Services India Pvt. Ltd.||18% onwards||5 lakh||3 – 36|
|Tata Capital Finance||18% onwards||30 lakh||12 – 36|
|ZipLoan Business Loan||18% onwards||5 lakh||6 – 24|
|IDFC First Bank Business Loan||19% onwards||75 lakh||12 – 60|
|RBL Bank||19% onwards||20 lakh||12 – 36|
|HDB Financial Services Ltd.||22% onwards||30 lakh||12 – 60|
|NeoGrowth Finance||24% onwards||75 lakh||6 – 24|
Note: The mentioned interest rates, fees and charges are subject to change and depend on the sole discretion of the bank, NBFC and RBI. GST and service tax shall be levied extra on the mentioned charges.
Note: The above table also contains interest rates of SME loan, MSME loan and Government loan schemes.
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Business Loan interest rate starts from 11.90% onwards per annum. However, other factors too influence the final commercial business loan interest rates decided by the lender that includes applicant’s profile and creditworthiness, business plan, credit score, required loan amount, repayment tenure, business vintage and profit, with various other financial aspects.
Business Loans from Top Banks/NBFCs – Fees & Charges
|Bank/NBFC||Processing Fee||Pre-payment/Foreclosure Charges|
|SBI||1% of the sanctioned limit*||Varies from loan-loan|
|HDFC Bank||Up to 2.50% of loan amount||Up to 4% of outstanding amount|
|ICICI Bank||Up to 2% of loan amount||Charged as per T&Cs under sanction letter|
|Bajaj Finserv||Up to 2% of loan amount||Part-payment: 2% on the amount part-paid|
|Lendingkart Finance||Up to 3% of loan amount||Nil|
|RBL Bank||Up to 3% of loan amount||No foreclosure permitted before repayment of 6 EMIs|
|Tata Capital||Depends on applicant’s profile and business requirements||Foreclosure: 5% of Principal loan outstanding|
|IDFC First Bank||Up to 3.5% of loan amount||Foreclosure: 5% of Principal loan outstanding|
*Processing charge may increase depending upon sanction limit and applicant’s profile
Note: The mentioned fees and charges may change and shall depend on the sole discretion of banks, NBFCs and RBI, GST and service tax are not added in the mentioned charges and will be levied extra.
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Factors that affect Business Loan Interest Rates
The factors that affect business loan interest rates are as follows:
1. Nature of Business
The lender usually classifies the loan under Priority Sector and Non-Priority Sector. Loans that fall under Non-Priority Sector have a higher rate of interest, as compared to the priority sector loans. Hence, the nature of your business too determines the interest rate on your business loan.
2. Business Existence
The longer your business is in existence, the better it is for you. However, irrespective of the nature of the business, the minimum business operation of 2 years is mandatory. With more years in business, you have a higher possibility of getting loans at lower interest rates.
3. Monthly Turnover
The monthly turnover of your business decides if your business is making a profit or incurring losses. In short, it remains a key factor in determining your eligibility to avail a business loan. There are times when the turnover keeps fluctuating. However, maintaining consistency is highly crucial, as it helps your lender to determine the loan amount and repayment terms.
4. Credit/CIBIL Score
Credit/CIBIL score evaluates your creditworthiness and is based on your credit history. In case you have availed a loan in the past and repaid it on time or if you pay credit card bills on time, you will have a good credit score. And, if you have a good credit score, it will work in your favor while applying for a loan. A good credit score will give you more benefits like lower interest rates and flexible tenure or repayment terms.
Collateral is the security, which is pledged to the lender to avail a loan. Higher the value of collateral, the more will be the benefits. Highly valuable collateral like real estate, equipment, machinery, deposits or home equity gives security to the bank. After examining the collateral, the bank may grant you a higher loan amount as the risk is low.
6. Type of Lender
Business loan interest rates vary from one lender to another. But if you compare business loan interest rates offered by banks and NBFCs, you will find that banks levy lower interest rates, as compared to NBFCs.
Must Read: How to Get Collateral Free Business Loan?
How to avail Business Loan at Low Interest Rate?
To avail business loan at low interest rate, applicant should consider below mentioned suggestions and techniques:
- Prepare a self-written Business Plan
- Maintain financial stability along with good loan repayment history
- Improve CIBIL score up to 700 or above
- Improve your creditworthiness by paying bills and EMIs on time
- Should have a decent source of income
- Apply for a long-term business loan, instead of short-term
- Build a relationship with bank, open account
- Do not close old accounts or credit cards
- Increase your company’s profitability
- Submit all the required documents – authentic and audited by CA
- Apply for loan with top private or public sector banks
- Offer or submit valuable collateral or security, if required for secured business loan
Business Loan Balance Transfer – Online
Business Loan Balance Transfer Online is a credit facility in which customers can transfer their existing business loan from one bank to another online. In this process, the outstanding balance of the loan amount is transferred from one bank to another at comparatively lower interest rates. The main purpose of making balance transfers is reducing EMIs and choosing a lower interest rate for outstanding balance of loan amount. Customers can perform business loan balance transfer online by selecting the required fields from the balance transfer EMI calculator and submitting the request online.
Types of Business Loan Interest Rates
1. Reducing or Diminishing Balance Rate
Reducing or diminishing balance rate is calculated each month on the remaining loan amount. If you opt for this type, the EMI comprises interest that is payable for outstanding loan amount for each month along with the principal repayment. The good part is that after each EMI payment, the outstanding amount of the loan is reduced. Hence, the interest rate for the subsequent month would be the calculation of interest applicable only on the outstanding amount.
2. Fixed Rate of Interest
Fixed/flat interest rate is calculated on full loan amount during the course of its tenure. The interest is charged without considering the fact that the monthly EMIs would decrease that principal amount, and hence the interest rate.
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Q. What is the lowest interest rate on a business loan?
Ans. The business loan interest rate starts from as low as 11.90% onwards per annum.
Q. Which bank gives the lowest interest rate for business loans?
Ans. SBI is among the leading banks that offer SME or business loans at low interest rates.
Q. What is the small business loan interest rates offered by SBI?
Ans. SBI offers Mudra loans under PMMY at an interest rate of 9.75% onwards.
Q. How do I get the lowest interest rate business loan?
Ans. You can visit paisabazaar.com to check and compare all the leading banks and NBFCs offering business loan deals under one online platform.
Q. What is the interest rate for business loans in HDFC?
Ans. HDFC business loan is offered at 15% onwards.
Q. What is the minimum and maximum amount can I take through a Business Loan?
Ans. There is no minimum limit criteria to borrow a business loan. However, the maximum loan amount for an unsecured business loan is up to Rs. 1 crore.
Q. Is the interest rate fixed or floating?
Ans. It depends on the banks or lenders to offer fixed or floating interest rates. However, both types of interest rates are offered in the banking sector.
Q. How to Calculate Interest Rate on Business Loan?
Ans. Business Loan EMI is calculated from the below-mentioned formula:
E = P x r x (1+r)n / (1+r) n-1Here,
E = EMI amount
P = Principal amount
r = Rate of interest at which you will be borrowing the loan
n = tenure of the loan over which you will be repaying the loan.
Q: Is there any need to provide collateral to avail Business Loan?
Ans: There is no need to provide any collateral/security or asset in order to apply for a Business Loan, except few secured business loans like a Letter of Credit, equipment and machinery loan that are secured business loans.
Q. What is the repayment period of a business loan?
Ans. The minimum repayment period is 12 months, whereas the maximum repayment period is of 5 years, however, in some special cases it may exceed up to 6 years.
Q. How to choose the ideal repayment tenor for business loans?
Ans. The repayment tenure should be chosen as per your financial health, loan amount and repayment capability. The loan can be paid in short-term that is 12 months and long-term that exceeds up to 5 years. Lesser the loan amount, shorter should be the repayment tenure and vice-versa.
Q. What are the pre-closure/foreclosure charges for business loans?
Ans. The pre-closure or foreclosure for business loans shall vary from lender to lender and ranges from Nil to 5% of the balance outstanding amount.