Business Loan Interest Rates – January 2023
|Axis Bank||14.95% - 19.20% p.a.||Apply Now|
|Bajaj Finserv||9.75% - 25% p.a.||Apply Now|
|Flexiloans||1% per month onwards||Apply Now|
|HDB Financial Services Ltd.||Up to 36% p.a.||Apply Now|
|HDFC Bank||10% - 22.50% p.a.||Apply Now|
|IDFC First Bank||15% p.a. onwards||Apply Now|
|Indifi||1.50% per month onwards||Apply Now|
|Kotak Mahindra Bank||16% - 19.99% p.a.||Apply Now|
|Lendingkart||1% - 2% per month||Apply Now|
|Mcapital||2% per month onwards||Apply Now|
|NeoGrowth Finance||19% - 24% p.a.||Apply Now|
|Tata Capital||12% p.a. onwards||Apply Now|
|UGRO Capital||14.90% p.a.||Apply Now|
Note: Business loan interest rates are updated as on January 2023.
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% of the sanctioned loan amount||Up to 4% of the outstanding amount|
|ICICI Bank||Up to 2% of the sanctioned loan amount||Charged as per T&Cs under sanction letter|
|Bajaj Finserv||Up to 2.95% of the sanctioned loan amount||Part-payment: 2% on the amount part-paid and 4% are foreclosure charges|
|Lendingkart Finance||Up to 2% of the sanctioned loan amount||Nil|
|RBL Bank||Up to 3% of the sanctioned loan amount||No foreclosure permitted before repayment of 6 EMIs|
|Tata Capital||2% onwards||Foreclosure: 4.5% of Principal loan outstanding|
|IDFC First Bank||Up to 3.5% of the sanctioned loan amount||Foreclosure: 5% of Principal loan outstanding|
*Processing charge may increase depending upon sanctioned limit and the applicant’s profile and required loan amount. Processing fee updated as on Jan 2023
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Types of Business Loans
Business loans can be classified into various credit facilities and loan schemes as follows:
- Term Loan
- Working Capital Loan
- MSME Loan
- Cash Credit
- Bill/Invoice Discounting
- Letter of Credit
- Equipment Finance
- Machinery Loan
- Loans with Bank Guarantee
- Point of Sale (POS) Loans/ Merchant Cash Advance
- Loans under Govt. Schemes, such as Mudra Loan, PMEGP, CGTMSE, PMRY, SIDBI, NABARD, CLCSS, PSB Loans in 59 minutes, Stand Up India, etc.
Tips to avail Business Loans at Low-Interest Rates
To avail business loans at low interest rates, the applicant should consider the below-mentioned suggestions and techniques:
- Improve your credit score and maintain it above 750 out of 900
- Maintain financial stability along with good loan repayment history
- Improve your creditworthiness by paying bills, loan EMIs, and credit card payments on time
- Maintain a decent source of income
- Apply for a long-term business loan, instead of short-term
- Build a relationship with the bank, open an account
- Do not close your old bank accounts or credit cards
- Apply for a loan with top private or public sector banks
- Offer or submit valuable collateral or security, if required for a secured business loan
Credit Score: Key factor in availing Business Loan at Low Interest Rate
Credit score is numeric that is calculated and generated by credit bureaus to estimate the possibility of loan approval or probability of loan denial. On behalf of credit score, financial institutions decide to approve or deny loans or credit cards. Good credit score that is above 750 assures loans at comparatively low-interest rates, as well as instant and hassle-free card approvals. However, few partner banks do consider a credit score of 650 and above in offering loans, if the applicant passes the defined eligibility criteria by the lender.
Credit score can be built up and maintained by individuals, startups, small business owners with no credit history or people who are New to Credit by availing any loan or credit card. As business loan interest rates vary from lender to lender, similarly minimum credit score requirements by the Banks/NBFCs for loan approval also differ. Generally, it varies as per the applicant’s profile, nature of business, loan type, and other related factors.
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Factors that affect Business Loan Interest Rates
The factors that affect business loan interest rates are as follows:
Nature/Type 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 and type of your business determines the interest rate on your business loan.
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 1 year is mandatory. With more years in business, you have a higher possibility of getting loans at lower interest rates.
Annual Turnover and Profitability
The annual business turnover 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. Persistent profitability of business also helps in availing loan at comparatively lower interest rates.
Credit 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 (750 or above), 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. However, unsecured business loans are collateral free wherein you are not required to submit any security with the Bank/NBFC.
Type of Lender
Business loan interest rates vary from one lender to another. But if you compare business loan interest rates offered by Banks or NBFCs, you will find that usually, Private and Public Sector Banks offer comparatively lower interest rates, as offered to Non-Banking Financial Companies (NBFCs), Small Finance Banks (SFBs), Micro Finance Institutions (MFIs) or other financial institutions.
Business Loan Balance Transfer (BLBT) – Online
Business Loan Balance Transfer (BLBT) is a credit facility in which customers can transfer their existing business loan from one bank to another online at comparatively lower interest rates or for other benefits. The main purpose of making balance transfers is to reduce EMIs and choose a lower interest rate for the outstanding balance of the loan amount.
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Q. How do I get the lowest interest rate business loan?
Ans. You can check and compare all the leading Banks and NBFCs offering business loan deals under one online platform and pick one as per your business requirements.
Q. What is the minimum and maximum loan amount can I avail through Business Loan?
Ans. The minimum loan amount has no limit to borrow and the maximum loan is up to Rs. 2 crores for unsecured business loans that are collateral free.
Q. Is the business loan interest rate fixed or floating?
Ans. It depends on the banks or lenders to offer fixed or floating interest rates. However, most banks prefer Fixed interest rates over Floating.
Q: Is there any need to provide collateral or security to avail Business Loan?
Ans: There is no need to submit any collateral/security or asset in order to apply for an unsecured business Loan, except few secured business loans like a Letter of Credit, Cash Credit, POS loan, Bill Discounting, Equipment Finance, 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 may exceed as per business requirements.
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 principal outstanding amount.