Broadly, there are 8 types of business loans in India:
1. Working Capital Loan
Working capital loan is a short-term credit facility offered to businesses to meet their everyday operational expenses like paying salaries, rent, utilities, purchasing inventory, raw materials, etc.
Features of a Working Capital Loan:
2. Term Loan
Term loan is a financing option offered to businesses for a fixed repayment period. Term loans are categorized into short-term loans and long-term loans, with tenure ranging from 12 months to 60 months, respectively.
Features of Term Loans:
3. Bill Discounting
Bill or Invoice Discounting is a funding facility where lenders provide loans to business sellers against outstanding invoices of customers. The seller gets an amount in advance at a discounted rate from the lender.
For example:
4. Overdraft Facility
Overdraft facility is a type of funding offered by a bank to its account holder to withdraw cash from his/her account even if the account balance is zero. The interest rate is charged only on the utilized amount from the sanctioned limit on a daily basis.
Features of Overdraft Facility:
5. Equipment Finance or Machinery Loan
Equipment finance is a loan option offered to businesses to buy new equipment/machinery or upgrade existing ones to boost productivity. Enterprises or business owners availing equipment finance or machinery loans also enjoy tax benefits. The interest rate, loan amount, and repayment tenure offered shall vary from lender to lender.
Features of Equipment Finance:
6. MSME Loans
MSME loans are credit facilities provided to Micro, Small and Medium Enterprises (MSMEs) to meet their funding needs. As of March 2026, more than 7.9 crore MSMEs and informal micro enterprises have registered under the Udyam Registration and Udyam Assist platforms.
Features of MSME Loans
7. Startup Loans
Startups loans are financing options available for new ventures to support their business growth and expansion. Unlike traditional business loans, these loans are tailored to meet the needs of early-stage companies. As of March 2026, more than 2.23 lakh recognized startups have been registered under the Startup India initiative.
Features of Startup Loans
8. Loans under Govt. Schemes
The Government of India has initiated various loan schemes for individuals, MSMEs, women entrepreneurs, and other entities engaged in trading, services, and manufacturing sectors. The loans under government schemes are offered by various financial institutions, such as Private and Public Sector Banks, NBFCs, Regional Rural Banks (RRBs), Micro Finance Institutions (MFIs), Small Finance Banks (SFBs), etc.
Some of the major Government Loan schemes include
How to Apply for a Business Loan
Businesses looking for an unsecured business loan can head to the Paisabazaar platform (website or app) and follow the steps mentioned below:
At Paisabazaar, applicants get end-to-end expert support throughout the loan approval process. They can check and compare offers from multiple lenders to select the most suitable loan offer. The business loan EMI calculator enables applicants to zero-in on the optimal loan amount and tenure basis their eligibility and repayment capacity.
To apply for loans under government schemes, borrowers can visit the designated lenders’ website and apply for their desired scheme.
