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Business Loan Interest Rates

Business loan interest rates are subject to change concerning RBI guidelines. Watch this space to keep track of the latest interest rates offered by banks and other lenders here. We. at Loanbaba, work closely with reputed banks, NBFCS, and financial institutions so that you can keep abreast of all details from business loans interest rates offered by the lenders to loan tenures and other charges like processing fees, foreclosure fees, etc.

It is impossible to run a business without proper funding, irrespective of whether it is a small scale or large scale one. Free flow of cash is not only required for investment purposes but also as working capital. Often businesspersons do have sufficient cash when required. Also, the money required varies from time to time, depending on the scale of investment. Entrepreneurs usually prefer to keep their cash handy and borrow low-interest rates Business loans from the financial institutes.

At loanbaba.com, you can compare business loan interest rates across banks and non-financial banking companies.

Particulars of Interest Rate Business Loan

Interest Rate and Other Charges Applicable

Interest Rate

13% onwards

Type of Interest Rate

Flat Rate and Diminishing Rate

Processing Fees

Zero to 2.5% of the loan amount

Loan Amount

Rs. 1 lakh to Rs. 1 crore

Loan Tenure

6 months to 5 years

Preferable Credit Score

700 and above

Compare Business Loan Interest Rates from Top Indian Banks

Following are the interest rate in business loan by leading banks and NBFCs in India.

Bank Loan Amount Business Loan Interest Rates* Lowest EMI per lakh for Max Tenure Processing Fee on the Loan Amount

SBI Bank

Rs. 1 Billion Max 11.20% - 16.30% Rs. 2,594 for 48 months 2% to 3%

HDFC Bank

Rs. 50 Lakhs Max 15.50% - 18.30% Rs. 2,808 for 48 months 0.99% onwards. Max 2.50%

ICICI Bank

Rs. 40 Lakhs Max 12.90% - 16.65% Rs. 2,270 for 60 months 0.99% onwards. Up to 2%

Axis Bank

Rs. 50 Lakhs Max 15.50% to 24% Rs. 2,405 for 60 months Up to 2%

RBL Bank

Rs. 10 Lakhs Max 20.00% - onwords Rs. 2,649 for 60 months 3%

Kotak Bank

Rs. 75 Lakhs Max 16.00% - 19.99% Rs. 2,432 for 60 months Up to 2%

Capital Float

Rs. 1 Crore Max 18.00% – onwords Rs. 3,615 for 36 months Up to 2%

Lendingkart

Rs. 1 Crore Max 18.00% - onwords Rs. 9,168 for 12 months 2%

Bajaj Finserv

Rs. 30 Lakhs Max Interest rate 18% onwards Rs. 2,938 for 48 months Up to 2%

Standard Chartered

Rs. 75 Lakhs Max 13.50% - 20.00% Rs. 2,301 for 60 months 2%

Deutsche Bank

Rs. 50 Lakhs Max 24.00% Rs. 3,923 for 36 months Up to 3%

Edelweiss

Rs. 30 Lakhs Max 18.25% onwards Rs. 2,553 for 60 months 2% onwards

Fullerton India

Rs. 50 Lakhs Max 16.00% onwards Rs. 2,834 for 48 months 2%

Tata Capital

Rs. 50 lakhs Max 18.00% onwards Rs. 2,938 for 48 months 1.50% to 2.50%

Ziploan

Rs. 5 Lakhs Max Interest rate 1-1.5% per month(Flat). 3%

Factors Affecting Business Loan Interest Rates

The top 4 decisive factors that determine the Business loan bank interest rates in India are:

  1. Credit History and Record: To get a loan sanctioned a person’s credit score is important. If you are not a loan defaulter, you can get loans from any bank along with a reasonable rates in India. All banks public or private review the credit score of the applicant before giving credit with the lowest interest rate for a business loan
  2. Tenure of the company: The business organization should be for more than 3 years in operation irrespective of the kind of business. The older the business house, the greater the chance of a credit facility.
  3. Turnover of the Business: If the company has a decent monthly turnover, then the lender will assume that there will be no default in the borrower‘s repayment. So it’s inevitable that a creditor reviews the financial credibility of the borrower before deciding on the loan amount.
  4. Collateral: Sometimes the borrower has to pledge something as security to the bank or NBFC, against a loan sanction. The bank can take a financial risk against security and offer a bigger amount of loans. The borrowers can offer their home equity, real estate, equipment, personal house, or other financial policies as collateral.

It is, however, necessary that a borrower does a thorough market study about the business loan provider. He/she should look for the lowest Bank interest loan rates and compare business loan rates in India. He/she should go for low-interest rate business loans, and make sure that the interest rate and other charges being charged on the loan amount, the interest rate method, and EMI policy, are in accordance with the bank’s policy.

Types of Business Loan Interest Rates

Business loan interest rates in India are of two types:

1) Diminishing rate of Business Loan Interest

2) A flat rate of interest for Business Loan.

What does Diminishing Interest Rate Mean?

When the interest rate is levied per month on the remaining loan amount, it is referred to as Diminishing or Reducing the rate of interest. In this system, the EMI stands out to be the interest rate that is to be paid for the outstanding amount for every month in addition to the principal amount of repayment. In this process, after each EMI payment the amount of borrowed loan decreases. So the interest rate next month is calculated on the remaining amount of loan. It is calculated based on the given formula:

Interest payable per payment = interest Rate per Payment X Remaining loan amount.

Given below is a detailed explanation of how this calculation work is:

If a person has borrowed a loan amount of Rs. 2,00,000, with reducing the rate of interest applicable being 10% per annum, for 5 years tentatively, the EMI payable would reduce with every month‘s repayment. So the first year the loan applicant has to pay an interest of Rs 20,000, in the following year the interest rate would come down to Rs. 18000, as the principal amount would come down Rs. 1,80,000. This will continue till the last year of loan clearance when the borrower would have to pay only Rs. 4000 as interest. This method works just opposite to the fixed rate of interest payment method.

What is the Flat rate of interest for a Business loan?

Flat interest is calculated on the total amount of loan, taking into account its time period of repayment. In this system, the monthly payment of EMI does not decrease. The formula for calculating the flat rate of interest is given below:

Interest Payable per Payment = (Original loan amount * Number of Years * Interest Rate per annum)/Number of Payments.

This means that if a businessperson takes credit of Rs. 2,00,000, with a levied interest rate of 10%per annum for 5 years, then he would pay Rs. 40,000/- as principal repayment(2,00,000/5)+20,000 interest @10% of 2,00,000 equal to a total of Rs.60,000/- or Rs. 5000/- every month. The total amount to be paid by a borrower will be Rs.5000X12X5 =Rs.3, 00,000/-.

Besides, all business loan interest rates charged by nationwide banks and credit companies follow a value principle of the amortization table. Financial companies and banks Business loan interest rate vary within 13%-24%p.a.

How to Get Better Business Loans Interest Rates?

Here are some of the ways you can get the lowest interest rate for yourself.

  1. Keep All Documents in Place You can get lower rates on loans if you are prepared with complete documents needed to get the loan. Some of the documents for a business loan are:
  2. a) ID proof, PAN card for the company, and proof of address
  3. b) Bank statement of the company for the last 6 months
  4. c) Proof of continuation such as sales tax certificate, establishment proof, trade license, etc
  5. d) A certified true copy of the financial statement, computation of income, P and L account of last 2 years
  6. e) Certified copy of partnership deed and sole proprietorship declaration
  • Have a Good Business Plan: Your business may be performing well at the moment. However, you need to convince the financial institution that it will continue to perform well in the future. If you have a good business plan that proves that the financial position of the company will remain stable and grow, then it is easier for you to negotiate for a lower interest rate.
  • Government Business Loans: The government of India has come ahead with attractive business loan rate schemes for small and medium-sized enterprises. You can check with the financial institution if they offer these schemes. You may find a lucrative offer at the lowest interest rate.

Business Loan Interest Rates Tips

Here are some business loan rates tips to help you get a suitable offer:

  • Choose a Suitable Tenure: Shorter tenure means greater equated monthly installment. But it also means that you will be able to close the loan earlier and pay a lower amount as you save on the interest payout on a longer tenure. If you can afford to pay larger EMIs then you should do so.
  • Special Business Loans: Some financial institutes have special loan schemes for specific business purposes. For example business extension loan, business equipment loan, business investment loan and so on. Rather than taking a general loan, you can choose specific ones and enjoy the discounted rates and greater benefits associated with the scheme.

Compare Charges of Business Loan interest rates in India

To understand the total cost of the loan, you must know not only the interest rate but other involved charges. Below, we have mentioned a clear listing of the charges and rates that apply on a loan for business.

Business Loan Rates: The rate of interest depends on the loan amount you apply for and the nature of the business, besides the other factors discussed above. Also, your past relationship with financial institution matters. If you have had a good repayment history with a financial institution, then the same lender can offer discounted or a lower rate on the loan. Thus, the rates on the loan differ from person to person, based on certain factors and criteria.

Processing Fees: Banks and NBFCs can charge between 2% and 3% of the loan amount as processing fees. To know the lowest applicable fee to process the loan, compare offers by financial institutions on Loanbaba.

Prepayment and Foreclosure Fees: If you have surplus funds with you, then you can choose to prepay or foreclose the loan. You do not always have to pay the specified EMIs through the tenure, but can a greater amount to repay sooner and reduce the EMI burden, and at times, even reduce the interest amount by repaying faster. If you pay the entire loan amount before the tenure ends, then it is known as foreclosure of the loan.

If you partly pay the amount before time, then it is known as prepayment. The charges for the same can be up to 5% of the outstanding amount, depending on the interest rate applicable on the loan. Some of the business loans however cannot be paid back before time, so check the clauses for foreclosure and prepayment with the financial institution you are applying with.

Insurance Premium: It is not mandatory to take insurance for your company or personal insurance as a business owner. However, if the loan amount is big, and the loan itself is an unsecured one, then it is advisable to take an insurance policy that offers coverage to the company or you, as an owner, to the amount of the loan. This way, during emergencies, if there is any financial risk, the policy will cover the outstanding dues.

The premium rates will differ based on the risk coverage, so study the insurance plans carefully before choosing one. Sometimes, the bank may offer a policy with the loan, on an additional premium. But also study other similar policies that you can take from insurance companies. Compare the features and cost of the policy, before selecting the right one.

Effect of Tenure and Loan Amount on Business Loan Rate of Interest

Apart from the factors mentioned above, two major things influence the interest rate.

A) Loan Amount: The higher the loan amount, the greater will be the rate of interest. So, you must borrow funds only as per your need and not exceed the requirement. You may seek a little more amount than what you may require in case you think a need for backup funds. Otherwise, be wise when calculating the amount you need to borrow, and curtail unnecessarily increasing the loan burden. Usually, a lower rate is charged for a higher loan amount, and vice-versa.

The loan amount you are eligible for depends on many factors, especially related to the annual turnover of the company, and the establishment’s current financial position. To boost the loan amount eligibility, make sure to have a strong company credit score, and keep all the documents in place for verifications and checks.

B) Tenure: Longer the tenure, lower will be the monthly EMI, but higher will be the total interest outgo. Similarly, shorter tenure, higher will be the monthly EMI, but lower will be the total interest outgo. Tenure of the loan may also impact the rate of interest. Shorter tenure may apply a higher rate of interest sometimes, or vice-versa. It is best to check with the financial institution you wish to apply with as to the rate applicable over different tenures.

Remember to choose a tenure that entails an EMI suiting to your pockets. You may want to reduce the total interest payout, but if you cannot handle to pay higher EMIs on a shorter tenure, then it is best to stick to a longer tenure as per your repayment capacity.

How to Avail a Business Loan?

You can either apply for the loan by visiting a bank branch or financial institution personally or choose to take benefit of our Loanbaba’s free service of connecting you with the right financial institution for the loan. We take care of the loan procedure, and you do not have to personally worry about anything after applying for the funds on our website. We offer you complete customer support without charging any fee or commission.

Manually applying for the loan is time-consuming, not to mention the huge amount of effort and time you have to spend personally contacting every bank and NBFC to know their loan offers. Below-mentioned is how our team helps in easing your journey to avail of a loan for business.

1. A much more comfortable option is to visit the website of Loanbaba to find a list of top banks and NBFCs, offering business loan. Compare the offers and select the one most suitable for your needs.

2. We list out all the latest details of the loan online, right from the loan amount, eligibility criteria, interest rate, tenure, charges, fees, and other information.

3. You can drop in your online loan application on the website, and a customer care executive will get in touch with you in a short time to discuss further. It takes just a few minutes to apply for the loan on the website.

4. There is an option to upload a soft copy of documents with the application so the loan process is completely hassle-free and paperless.

5. You can also keep a track of your loan application on Loanbaba. Any update on the loan application will be communicated to you by our team. On loan approval and signing of the loan agreement, funds will be disbursed to you shortly.

Frequently Asked Questions about Business Loan Interest Rate

Following are the FAQs on business loan rate of interest in India:

  • 1. What do the bank's business loan interest rates depend on?
    The rate of interest charged by the lender depends on factors like: annual income, credit history, existing loans, CIBIL score, business stability and its share values in the market, whether it’s a start-up or long running business and finally the risk factors involved.
  • 2. Are the lowest bank business loan interest rates the best offer?
    Always read the terms and conditions for company loan. Lowest business loan interest rate in India from a financial institute may not mean it is the most suitable offer. Sometimes the financial institute may incur hidden charges. In fact you should take information of all charges applicable, such as processing fee, administrative costs, late penalty, prepayment charges etc before choosing a suitable offer.
  • 3. Do NBFC business loan rates vary from public sector banks?
    There is hardly much difference in rates charges by NBFCs and banks (both public and private). However, some banks charge lower than leading NBFCs, but may offer lesser benefits. To find the perfect fit of interest rate, you can compare top providers of business loan and their rates at loanbaba.com.
  • 4. Do co-applicants help to secure lower business loan rates?
    If the business has co-owners then the co-owners become co-applicant for the loan. If you are unable to secure better interest rate on your loan, then the co-owners income profile may come to rescue. However, since the loan is for business, the analysis of interest rate will depend primarily on the performance of the business.
  • 5. Do financial statements of the company affect the business loan interest rates?
    Yes, the company’s financial statements such as Profit and loss statement, balance sheet, liabilities portfolio, tax paid etc will be considered to understand the creditworthiness of the company in question. If the organization has good financial statements, then the financial institute will readily provide the loan at lower interest rate.

How to Apply for a Business Loan?

Applying for an unsecured Business Loan at Loanbaba.com is simple, just follow the below-mentioned steps.

Step 1: Apply for a business loan at: www.loanbaba.com/business-loan

The application is sent electronically to the Loanbaba team. The customer service representative gets in touch with the applicant directly.

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