Business Loan Interest Rates

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 purpose 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

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

SBI Bank

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

HDFC Bank

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

ICICI Bank

Rs. 40 Lakhs Max 12.90% - 16.65% Rs. 2,270 for 60 months

Axis Bank

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

RBL Bank

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

Kotak Bank

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

Capital Float

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

Lendingkart

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

Standard Chartered

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

Deutsche Bank

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

Edelweiss

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

Fullerton India

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

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 business loan interest rate in India. All banks public or private review the credit score of the applicant before giving credit with lowest interest rate for business loan. If you have a high credit score then you can get low the SBI Business loan interest rates, HDFC Business loan interest rate, and low rates from other banks and NBFCs.
  2. Tenure of the company: The business organisation should be for than 3 years in operation irrespective of the kind of business. The older the business house, greater is the chance of credit facility. You can compare business loan interest rates India at loanbaba.
  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 the security and offer a bigger amount of loan. 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 lowest Bank interest loan rates and compare business loan rates 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, to the bank’s policy.

Types of Interest Rates for Business Loan

Business loan interest rates in India are of two types:

1) Diminishing rate of Business Loan Interest

2) 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 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 on the basis of 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 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 Flat rate of interest for Business loan?

Flat interest is calculated on 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 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 a credit of Rs. 2,00,000, with a levied interest rate of 10%per annum for a period of 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. Total amount to be paid by a borrower will be Rs.5000X12X5 =Rs.3, 00,000/-.

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

How to Get Better Interest Rates on Business Loans?

Here are some of the ways you can get lowest interest rate business loans 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 business loan are:
  2. a) ID proof, PAN card for 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) Certified true copy of 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 institute that it will continue to perform well in 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 a 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 instalment. But it also means that you will be able to close the loan earlier and pay 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.

Frequently Asked Questions about Business Loan Interest Rate

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

  • add1. What does the banks 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.

  • add2. Are 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.

  • add3. 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.

  • add4. Do co-applicants help securing 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.

  • add5. Do financial statements of 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 business loan at: https://www.loanbaba.com/online-loans-india/business-loan.aspx

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

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