What is a Business Loan in India?

A business loan refers to a credit facility provided to businesses by lenders in India to fund business related activities like working capital requirements, scaling or expanding business units, upgrading or buying machineries, etc. Business loans can be both secured and unsecured. Secured business loans require collateral to be pledged, while unsecured loans do not require collateral.

Startups, MSMEs, large businesses, proprietors, partnership firms, LLPs, private limited companies, traders & service providers can apply for business loans.

Business loans are provided by most banks and NBFCs in India. Entrepreneurs looking for a business loan can head to Paisabazaar's website and apply for an unsecured business loan.

To apply for a business loan through Paisabazaar, businesses can follow the steps below:

• Visit the business loan section on the Paisabazaar platform
• Enter your mobile number in the form and verify using the OTP sent
• After verification, enter the required information
• Offers from multiple lenders will appear on your screen
• Scroll through, compare and apply for the most suited offer.

Term Loan

Short-term loan offered to businesses for a fixed repayment period to meet their short term goals.

Best for:

• Expanding operations by opening new units.
• Buying inventory
• Funding important projects

Working Capital Loan

Businesses can avail of working capital loans to fund the expenses of their daily operations.

Best for:

• Meeting day-to-day expenses like payrolls, utilities bills, rent, etc.
• Meeting cash flow shortfall
• Handling seasonal dips or sudden disruption

MSME Loan

Special credit facility designed to meet the financing needs of small businesses or startups in India.

Best for:

• First-time borrowers or small enterprises to fund their business needs
• Businesses lacking strong collateral can opt for these loans
• Funding both operational and expansion needs

Equipment Financing

Credit offered to businesses for the purchase of new machinery or equipment.

Best for:

• Upgrading existing equipment or buying new machinery
• Avoiding large upfront capital expenditure
• Spreading the cost of high-value assets over time

Invoice Financing

Credit provided to the borrower against pending invoices.

Best for:

• B2B businesses with long payment cycles
• Companies facing working capital gaps despite strong sales
• Unlocking cash without waiting for clients to pay

The eligibility criteria for business loans in India may vary depending on the internal risk policies of lenders. However, the common ones are mentioned below:

• Age: Minimum 21 years at the time of loan application, maximum 65 at the time of loan maturity
• Credit score: Preferably, 760 and above, good financial history with no defaults
• Business vintage: Minimum 2 years of stable business
• Business revenue: Specific to lenders
• Eligible Entities: Sole Proprietorship, Partnerships, Limited Liability Partnerships, Private Limited Companies, Public Limited Companies, etc.

Personal Details

• Passport-sized photographs
• Passport, Voter ID, Driving License, Aadhaar Card, or PAN Card

Financial Details

• Latest ITR along with income computation
• Balance Sheet and P&L account statement for last 2 years (certified by CA)
• Latest GST returns
• Bank statement for the last 6 months

Company Details

• Copy of company PAN
• Proof of ownership of residence or office
• Proof of business continuity
• Proof of business registration
• Certificate/declaration of sole proprietorship
• Partnership deed copy
• MOA, AOA, and Board Resolution (certified copy)

Read more: Documents Required for Business Loan

Interest rate of business loans start from 13% p.a. at Paisabazaar. To get lower interest rate, applicants can follow the tips mentioned below:

• Keep your credit score above 760
• Keep your debt-to-income ratio low
• Apply for a loan amount as per your need
• Choose the correct tenure
• Show stable business income and operation

Also, these factors are weighed in by lenders to decide the final business loan interest rate. Interest rate is also one of the main factors affecting business loan EMI .

Business loans can help businesses in many ways, including:

• Meeting the day-to-day expenses like, rent, utilities bill, etc.
• Expanding and scaling business units
• Expanding manpower for smooth operations
• Buying inventories, machineries, raw materials

Suppose you have a small shop and you need funds to scale your business. You can head to Paisabazaar and apply for a business loan. Before applying for a loan, you can check your EMI using Paisabazaar’s business loan EMI calculator . This will help you understand the monthly installments that you will have to pay. Accordingly, you can apply for a loan amount that will help you meet your financial needs.

If you apply for a loan of Rs. 5 lakh for 3 years, your EMI will look like the following:

Personal Loan vs Business Loan