Business Loan Overview

Business loan could be a 1-4 year unsecured loan given by banks, NBFC’s (Non-Banking Finance Companies) or P2P disposition platforms while not posing for any collateral, warrantor or hypothecation of any assets. Entities like proprietary, partnership, private Ltd. or public Ltd. area unit eligible for this sort of borrowing. The usage of a commercial loan is left to the discretion of the receiver and might be used for assets functions, meeting short term income necessities, investments into plant and machinery etc.

Businesses want ample quantity of investment to fund expenditures associated with growth like adding new lines to their existing products/services. In such a state of affairs, business loans can be made available handy as they supply abundant required monetary help to corporations indirectly growing a lot of competitiveness within the chosen markets. Like every alternative loan, a commercial loan could be adept that the corporate is tributary to pay back to the loaner inside a particular tenure in line with the terms and conditions mentioned within the loan agreement. Start-up Business loans will be taken for a range of essential necessities like initiating a replacement firm, business expansions, dealer and merchant funding etc.

The major good thing about business loans in Republic of India is that it typically doesn’t need any collateral and most of the banks sanction business loans with tokenized pre-payment charges. Furthermore special schemes area unit presently obtainable as well as business loans for ladies, gesture them for littler businesses additionally as small business loans for professionals. Another profit is that if there’s failure of repaying the loan, then the business owner won't alone face the burden of penalties however the full company is liquidated so as to clear the commercial loan.

Now you can compare interest, processing fee, tenure and max. Loan offers, of all the banks before choosing your desired loan.


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Features of Business Loan

All loans are not created equal, Business loan has become a great option for people to use.

Business Loans can be availed for as small an amount as Rs.30,000. Larger amounts can be availed depending on various factors including the size of the business, reported profits of the business, existing business liabilities, etc.

Business loans in India are offered in a manner similar to personal loans. Therefore, the documentation to avail a business loan is simple and the turnaround time is relatively short.

Business Loan tenure can be from 12 months to 48 months. In most cases, the borrower can also avail the benefit of prepayment in lieu of a nominal prepayment charge, which provides additional flexibility to the borrower.

Business loan interest rates varies from 17% to 25% which depends on various factors including but not limited to eligibility of the applicant, the size of the business, credit rating/score of applicant, type of business and loan quantum/tenure.

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Comparision Of Business Loan

compare Business loan interest rates by banks

# Providers Interest Rate Processing Fee
1 SBI Business Loan 12.55%-17.65% 1%-3% of the loan amount + applicable Service Tax
2 Axis Bank Business Loan 11.25%-24% 1.50%-2.00% of the loan amount + Service Tax, as applicable
3 ICICI Business Loan 11.29%-22.00% Upto 2.50% of the loan amount + Service Tax, as applicable

Documentation needed to apply for a Business loan:

Different banks and NBFCs have different minimum documentation requirement for Business loans. The common documents required by most banks and NBFCs for individuals requesting a Business loan include :

Documents for Business Loan

 partnership deed/MOA,

 existing loans repayment track record,

 partner/director’s PAN card, KYC, own house proof, ITRs, etc.

 Additional documents may be required on a case to case basis.


 partnership deed/MOA,

 partnership deed/MOA,

 existing loans repayment track record,

 partner/director’s PAN card, KYC, own house proof, ITRs, etc.

 Additional documents may be required on a case to case basis.

Frequently Ask Questions

If you have a question that deals with clients, customers or the public in general, there is bound to be a need for the FAQ page.

Business loan is a 1-4 year unsecured loan given by banks, NBFC’s (Non-Banking Finance Companies) or P2P lending platforms without asking for any collateral, guarantor or hypothecation of any assets. Entities like proprietorship, partnership, private limited company or public limited company are eligible for this type of borrowing. The usage of a business loan is left to the discretion of the borrower and can be used for working capital purposes, meeting short term cash flow requirements, investments into plant and machinery etc.

• PAN Card – For Company/Firm/Individual
• Address proof.
• last two years financial statements including profit and loss account and balance sheet,
• last six months bank statements,
• VAT/Service tax/GST returns,
• partnership deed/MOA,
• existing loans repayment track record,
• partner/director’s PAN card, KYC, own house proof, ITRs, etc.
• Additional documents may be required on a case to case basis.

The rate of interest varies from 16% to 28%. The processing fee of up to 1%-2.5% of the loan amount is levied. Additionally, some banks may also insist on insurance cover.

All the bank/ NBFCs will deliver its decision within 7-10 working days from the date of receiving of the application provided the request is complete in all respects. The calculation of 7-10 days shall start from the day on which the Customer delivers all documents essential for a proper appraisal of the application to the bank.

In normal situations, the minimum loan amount offered is INR 100,000. This may go up to a maximum of INR 50,00,000. Higher loan amounts may be considered after an in-depth discussion between the borrower and the bank willing to lend.

Business Loan eligibility depends on the following factors: Credit score of the loan applicant/co-applicant. The last three years financials of the borrowing entity Information about the Debt Service Coverage Ratio: This information tells the lender whether the borrower will be able to service the EMI for the current loan.

The following people are eligible to apply for a Business Loan:
• Self-employed individuals, Proprietors, Private Ltd. Co. and Partnership Firms involved in the business of Manufacturing, Trading or Services. • The business should have a minimum turnover of Rs. 40 lakhs
• Individuals who have been in the current business for a minimum of 3 years, with 5 years total business experience.
• Those whose business has been profit making for the previous 2 years
• The business should have a Minimal Annual Income (ITR) of Rs. 2.5 lakhs per annum
• The applicant should be at least 21 years at the time of applying for the loan, and should be no older than 65 years at the time of loan maturity

You can repay your loan over a period of 12 to 48 months.

Some banks have a lock-in-period of six months to one year for the business loan. While some others allow you to pre-close the loan even after the first EMI has been paid. Some banks may have a rule that a borrower can use his own funds to pre-close the loan and not use the balance transfer facility of another bank. Additionally, some banks allow pre-closure at no cost while some others charge an upfront fee of 2-5% of the pre-closed amount. Clarifications on this are to be sought from our business loan advisor during the processing of your application.

Some banks may allow part payment while some others may have restrictions on how many times in a year you can part pay and also the minimum and maximum amounts you can part pay. Again, a clarification is to be sought from our loan advisor during the time of loan processing.

The minimum turnover requirement is INR 25 lakh and the maximum turnover requirement is depending on requirement for the business loan.

The bank will levy certain ECS bounce charges or penalties. Additionally, that will also get reported in your credit report. Depending upon the severity and the regularity of the miss, it may have a serious impact on your future credit possibilities like in obtaining a home loan, car loan, etc. Additionally, banks may also take legal action against the borrower.

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