Small Business Loans

Small businesses often struggle with timely access to credit. To address this, financial institutions offer small business loans to meet their business requirements. These loans are offered by private and public sector banks and Non-Banking Financial Companies (NBFCs) at competitive interest rates and flexible repayment tenures.

Who Can Apply for a Small Business Loan?

The following table provides a list of businesses that can apply for small business loans:

Small business loans can be of various types, including:

Short-term Loans

Term loans (short-term loans) can be availed for smaller amounts and shorter repayment tenures with no collateral required.

Working Capital Loans

Loans to meet the day-to-day operational needs of a business and manage business cash flow.

Mudra Loans

Business loans offered to SMEs and MSMEs to expand their existing business, buy equipment and machinery, or start a new business. The minimum loan amount has no limit, whereas the maximum loan amount can go up to Rs. 20 lakh.

Startup Loans

Startup loans are offered to launch a new business or enterprise with limited capital investment, starting from Rs. 1 lakh to Rs. 10 lakh and more.

Business Loans for Women

Discounted and competitive interest rates are offered to women entrepreneurs, with loan amounts that are affordable to repay.

The government has introduced various small business loan schemes and initiatives for the MSME sector and small businesses, such as Mudra Loan, Prime Minister’s Employment Generation Programme (PMEGP), subsidy schemes for term loans, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), SIDBI Make in India Loan for Small Enterprises (SMILE), and so on.

• Pradhan Mantri Mudra Yojana (PMMY): Provides loans up to Rs. 20 lakh to non-corporate, non-farm micro and small enterprises under the MUDRA framework.
• SIDBI SMILE (Soft Loan Fund for MSMEs): Offers soft loans to MSMEs to support establishment and expansion by addressing debt-equity requirements.
• Swarojgar Credit Card: Enables simplified and timely access to credit for small entrepreneurs and self-employed individuals.
• PSB Loans in 59 Minutes: Facilitates quick, digital in-principle approval for business loans up to Rs. 5 crore within 59 minutes.
• Credit Guarantee Scheme for Startups (CGSS): Provides credit guarantee cover to lenders to support funding for eligible startups.
• Startup India Seed Fund Scheme: Extends early-stage financial support to startups for validation, prototyping, product trials, market entry and commercialisation.

Uses of Small Business Loans

Small business loans can be used to meet various business financial requirements, including:

• To meet working capital requirements
• To purchase inventory and raw materials
• To fund business expansion
• To cover the cost of opening a new branch or outlet
• To buy or upgrade machinery and equipment
• To cover renovation expenses
• To fund marketing costs
• To hire employees
• To manage supplier payments
• To manage seasonal demand

Small business loan interest rates start from 13% p.a. at Paisabazaar. These interest rates may vary across lenders. The table below provides a list of interest rates offered by top lenders in India in 2026.

*Interest rates as on 22nd September 2026

Multiple factors are taken into consideration by lenders to decide the final interest rate on your small business loan, including:

• Credit score
• Business turnover
• Business profitability
• Business revenue
• Repayment history
• Existing debt-to-income ratio

Small business loan amount depends on:

• Turnover
• Business vintage
• Profit/cash flow
• Credit score
• Existing obligations
• Banking transactions
• Loan purpose
• Repayment capacity
• Lender policy

By assessing all the above-mentioned points, lenders decide the final loan amount. Higher and stable business revenue, along with a strong repayment history and credit profile, may help businesses qualify for a higher loan amount.

Small Business Loan Eligibility

Most lenders have prescribed their own set of eligibility guidelines for small business loans. However, the common eligibility criteria are listed below:

• Age Criteria: Minimum 18 years and maximum 65 years at maturity
• Business Tenure: Minimum 2 years (in profits)
• Business Turnover: Depends on the lender
• Credit Score: Preferably above 760, with a strong repayment history
• Good financial history with no defaults
• An Indian citizen with no criminal record
• Applicant should have a self-owned house or shop

Documents Required for Small Business Loan

The following are the basic documents required for small business loans:

• Duly filled application form along with recent passport-size photographs
• KYC documents of the applicant, co-applicants, and guarantors
• Identity and address proof, including PAN card (mandatory), Aadhaar card, voter ID, passport, or driving licence
• Proof of business registration, such as Udyam Registration Certificate, Certificate of Incorporation, or GST Registration Certificate
• Proof of business address, including property ownership documents, utility bills (electricity, water, telephone), or rent/lease agreement
• Financial documents, including the latest ITRs (for the past 1–3 years), balance sheet, profit and loss statements, and bank account statements for the last 6–12 months

Additionally, lenders can ask for more documents as and when required.

How to Apply for a Small Business Loan Online?

To apply for a small business loan online, you can download the Paisabazaar application and follow the steps mentioned below:

• Log in to your Paisabazaar account
• Head to the Business Loan section
• Enter basic details
• The app will display curated small business loan offers based on your eligibility
• Scroll, compare and apply for the best-suited offer

Additionally, borrowers can also visit Paisabazaar’s Business Loan page to apply for a small business loan.

Small Business Loan Without Collateral

You can get an unsecured business loan on Paisabazaar. An unsecured small business loan does not require any property or security pledged as collateral.

Lenders evaluate creditworthiness and business cash flow to assess a borrower for business loans without collateral. Loan amounts offered for unsecured business loans are usually lower than secured business loans.

Small Business Loan Fees and Charges

Lenders charge various fees and charges on small business loans. A few of them are listed below:

• Processing fee: Up to 5% of the loan amount
• GST on applicable charges
• Prepayment/foreclosure charges: Usually up to 4-5% of the outstanding amount
• Late payment/penal charges: May vary across lenders
• Documentation charges, if applicable
• Other lender-specific fees

Borrowers should check the KFS (Key Facts Sheet) while applying for the loan.

Benefits of Small Business Loans

The benefits of small business loans are numerous. A few of them are listed below:

• Access to funds for working capital, business expansion, inventory financing, equipment purchase, etc.
• Offers flexible tenure
• Complete online application option available
• Unsecured choices available
• Potentially faster access to funds