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Business Loan Interest Rate
Interest Rate

Starting @ 15%

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Processing Fee

Upto 1%

Loan Tenure

1-5 years

Lowest EMI Per Lakh

2,379 for 5 years

Prepayment Charges

2 - 4%

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About Business Loan

A Business Loan is a financing option that can be used to start a new business or to expand an existing one. These loans are provided at the most competitive rates of interest to help businesses fund any expenses that are related to purchasing new equipment, purchase of inventory, overheads, expansion of the current premises, and so on. There are different types of Business Loans that one can avail to meet the exact requirement of the business.

Why Should You Opt for Business Loan?

For any individual who is looking for additional funds for their business, it is best to apply for a Business Loan for the following reasons:

  • These loans are extremely affordable: In comparison to other loan schemes that are available such as personal loans, Business Loans offer a much lower interest rate. As a result, making repayments on these loans is also a lot easier. You can choose a scheme that fits into your budget and allows you to make regular repayments.
  • They give you quick access to funds: Be it instant access to cash or any payments that you need to make to vendors, the best option available to you is a Business Loan. The turnaround time on these loans is quick, which helps you get access to funds when you need. All you need to do is make sure that the application process is completed as per the requirements of the bank. This includes the submission of necessary documents and ensuring that you fit the eligibility criteria that has been set by the bank.
  • You can improve your credit score: The repayment terms on these loans are usually flexible and simple. Therefore, Business Loans are the perfect option for you to improve your credit score. Choosing a loan plan as per your eligibility and affordability ensures that you do not default on the payments. With regular payments on the loan, you can increase your credit score and increase the chances of getting additional funds in the future.
  • There is no restriction on the use of funds: With a Business Loan, the advantage is that the bank will not interfere in the usage of the funds as long as it is not used for any personal requirements. You have the option of using these loans to make payments towards salaries, expand your business, consolidate existing loans, pay utility bills, and a lot more.
  • You can avoid using your personal funds: Even if you have access to personal funds, it is a good idea to opt for a Business Loan. This ensures that you do not lose out on a large bulk of cash in one go. It is also a more feasible option as you can reserve your additional funds for any other financial emergency that may arise in the future.

Features and Benefits of Business Loan

Business Loans are loaded with beneficial features as mentioned below:

  • You can get loans without any security: Collateral free loans can be availed for any investment in your business depending upon the credit score and the eligibility criteria. You also have the option of credit guarantee schemes that provide a cover for the loan that is availed. For businesses that qualify for this scheme, you have the advantage of availing loans without any guarantee or collateral against the loan. All you have to do is pay the annual fee recommended as per the terms of the credit guarantee scheme.
  • Repayment terms are flexible: Business Loans ensure low interest rates that make repayments easier. The interest rate on these loans is flexible as per the credit score of the applicant. You also have a moratorium period or a holiday period in case of new businesses where no equated monthly instalment (EMI) is payable for the set period. Borrowers have the advantage of choosing a repayment tenure as per the repayment capacity and the EMI that is payable each month.
  • Disbursal of loans is hassle-free: Business Loans have a quick turnaround time once the documentation process is completed as required by the bank. Usually, these loans are disbursed within 5 to 7 days of approval, making it easier for individuals to get access to funds when required. Once approved, the loan is disbursed into the bank account of the individual.
  • Loan application process is simple: You have the option of applying for these loans online and offline. All you have to do is fill up an application form and provide the necessary documents. The documentation process is also fairly simple and straightforward with Business Loans. When you apply for a Business Loan, you can get a detailed checklist of the documents that you require. This further simplifies the process and allows you to get loans faster.

Business Loan Interest Rates of Best Banks

You can check the interest rate charged by different banks at the time of application for the loan. The interest rate that is charged depends on several factors such as the credit score of the individual, the time in business, the nature of the business, the turnover, and the collateral that is provided by the individual.

Here is a list of some of the top banks in the country and the interest rate that is charged on the Business Loans:

Name of the Bank Interest Rate Charged

HDFC Bank

12.75% to 21.90%

SBI Bank

8.80% to 12.60%

ICICI Bank

  • For secured loans: Up to 6 months MCLR + 2%
  • For CGTSME Backed Loans: Up to 6 months MCLR + 4%
  • For unsecured facilities without CGTSME guarantee: Up to 6 months MCLR + 6.50%

Syndicate Bank

Starting at 8% p.a.

Allahabad Bank

Starting at 1 year MCLR which is currently capped at 8.55%.

Types of Business Loans

The most common types of Business Loans available are as follows:

  • Term Loan: These loans are provided over a fixed repayment tenure that can go up to 25 years depending upon the quantum of finance. The advantage with a term loan is that you are able to get a large loan quantum at the lowest interest rates. With most banks, collateral is required in order to avail a term loan depending upon the scheme that you choose.
  • Working Capital: This is a short-term loan which is usually payable in a period of one year. In some cases, the working capital may be provided without any security or collateral depending upon the repayments made by the individual towards an existing loan or credit facility. You can also avail working capital against securities like FDs, LIC policies, etc. Working capital is one of the best options available for you to get immediate access to funds to meet any overheads such as salary payments, purchase of goods, etc.
  • Line of Credit: A line of credit is provided against the current account of the business. This is a credit limit that functions like a credit card. Based on the security provided, you are given a limit that you can use for any expenses related to the business. You can use as much as you need just like a credit card and the interest is chargeable only on the amount that you have used. Once repayments are made, the entire credit amount is available for use again.
  • Equipment Finance: This is a type of loan that is exclusively provided for businesses to purchase equipment that is required for operations. In case of this loan, the quantum of finance depends upon the funds required to purchase the equipment. The primary security, in this case, is the hypothecation of the equipment that is purchased using the loan. Depending upon the type of business and the credit score of the applicant, the bank may also require additional collateral in order to provide this loan.
  • Government Aided Schemes: There are several schemes introduced by the government to help businesses, particularly in the small, medium, and micro sectors. These loans are available with all the banks across the country. The advantage with these loans is that the rates of interest charged on these loans are extremely low, making repayments affordable. In addition to this, you also have the option of a credit guarantee scheme. This acts as an insurance cover for the loan availed and the individual is required to only make payments towards an annual fee. The advantage of this credit guarantee scheme is that you do not have to provide any collateral or guarantee in order to avail the loan.

Business Loan Eligibility

In order to ensure that the individual will be able to make regular repayments towards the loan, banks set certain eligibility criteria. You need to ensure that you fit into these terms mentioned by the bank in order to get an approval on your loan.

The common eligibility criteria for Business Loans are as follows:

  • The individual should be a minimum of 18 - 25 years of age
  • The individual should not be older than 65 years of age at the time of loan application
  • The minimum turnover of the business should be as per the requirements of the bank
  • The individual should have at least 2 years of experience in the industry that he or she is running the business in.
  • The applicant should be a resident of India

The eligibility conditions for the loan vary with each bank, non-banking financial company (NBFC), or financial institution. It has an impact on the interest rate charged and the loan amount that is provided as well.  The higher the eligibility of the individual, the better are the loan agreement terms. There are some factors that affect the eligibility of an individual for a Business Loan as mentioned below:

  • The credit score: The credit score is one of the primary factors in determining the eligibility of the individual or the business. This score ranges from 300 to 900 and is based on the credit behaviour of an individual and also the business as a whole. When you apply for a loan, banks avail a detailed Credit Information Report from CIBIL or the Credit Information Bureau of India Limited. With most banks, a minimum CIBIL score between 700 to 750 is required. However, the higher the score, the better are the interest rates provided as the individual is considered to be a credible candidate for the loan.
  • The income generated by the business: The income generated by the business helps banks understand the repayment capacity of the business. With some banks, a minimum income is required each month in order to sanction a loan. The higher the income of the business, the lower the interest rates and the higher the chances of approval on the loan.
  • The time in business: This determines the scope of the business in the years to come. The time in business allows the bank to check the possible growth of the business during the tenure of the loan. As a result, it is also a determining factor in the repayment capacity of the individual or the company. In case the industry that you are currently functioning in is extremely volatile, the chances of an approval are lower and the interest charged is also higher.
  • Collateral provided by the individual: If you are able to provide any security against the loan, it mitigates the risk on the part of the bank. As a result, getting an approval on the loan is also easier. In some cases, the hypothecation of assets that are purchased through the loan is used as a collateral or guarantee against the loan. It also helps you get a better quantum of loan.

Documents Required for Business Loan

The documentation process is very important for you to get a sanction on the loan that you have applied for.

The common documents that are required in most banks are as follows:

Category Document Required

Tax Document

PAN Card for the individual/ company/ partnership firm

ID Proof

Voters ID/ Driving License/ Aadhaar Card/ Passport

Address Proof

Voters ID/ Utility Bills/ Passport/ Bank Statement/ Lease Deed or Sale Agreement

Business Continuity Proof

Bank Statement/ Sales Tax Challans/ Shop and Establishment Certificate/ Partnership Deed

Others

Passport sized photographs of all the applicants

Financial Documents

Individuals or Sole Proprietorship

Self-employed professionals

Partnership Firms or Pvt Ltd Companies

  • Latest audited ITR
  • Balance sheet and Profit & Loss Account  for the last 2 years
  • Bank statement of the primary borrower for the last 6 months
  • Latest audited ITR
  • Balance sheet and Profit & Loss Account  for the last 2 years
  • Bank statement of the primary borrower for the last 6 months
  • Professional qualification degree or certificate
  • Latest audited ITR
  • Balance sheet and Profit & Loss Account  for the last 2 years
  • Bank statement of the primary borrower for the last 6 months
  • Partnership agreement and partnership authority letter
  • Memorandum and articles of association
  • For private and public limited companies: Latest shareholding patterns.

Why Apply for Business Loan on MyMoneyMantra?

When you are applying for a Business Loan, choosing MyMoneyMantra gives you a one-stop solution for all your requirements.

Here are some advantages of applying for a loan through MyMoneyMantra:

  • Easiest loan application process: Once you log on to the website, you can choose the loan plan that you wish to apply for. Following this, all you have to do is fill up an application form and submit it. Based on the eligibility criteria, you will be contacted by our representatives. The loan verification and collection will be done at your doorstep. Following this, MyMoneyMantra will help you with submission of the application as well as follow-ups required until the loan amount is sanctioned and disbursed to your account.
  • Get advice from experts: MyMoneyMantra has an in-house panel of experts who will help you get all the financial advice that you need in order to choose a loan plan that is best suited to your repayment capacity and current financial condition. Besides this, if you need any information on a loan plan, you can connect with over 2500 relationship managers who are located across the country.
  • Apply for loans on the go: MyMoneyMantra offers an easy online platform to help you apply for loans. MyMoneyMantra has provided services in over 500 cities across the country, making it one of the most accessible financial options available to you.
  • Innovating products and services: MyMoneyMantra strives to provide the best financial aid to customers. For this, we are constantly improving on our products and services and have also received several awards for extending great services to their customers.
  • Tailor-made loan plans: Before you apply for a loan with MyMoneyMantra, you have to submit certain details such as your name, age, income, employment status, the purpose of loan, type of loan required, loan amount, etc. Once you have submitted these details, a loan plan will be customized for you and a quotation is provided, ensuring that you will be able to make regular repayments on your loans.
  • Free financial tools: In order to help you plan your finances better, MyMoneyMantra provides several simple and free financial tools. This includes and EMI Calculator, Balance Transfer Calculator, Prepayment Amount Calculator, and Foreclosure Calculator. These tools help you make an informed decision when you apply for a loan.
  • Access to multiple financial institutions: When you apply for a loan with MyMoneyMantra, you can compare the products offered by more than 90 banks and NBFCs. This helps you choose a loan plan and product that is not only affordable but also suitable to your requirements.

How to Apply for Business Loan on MyMoneyMantra?

Applying for a Business Loan with MyMoneyMantra is extremely simple. All you have to do is follow these steps:

  • Log on to the official MyMoneyMantra website
  • Select the loan that you wish to apply for
  • You will be directed to a loan application form that requires you to provide details like your name, purpose of the loan, income, etc.
  • Select the preferred partner for Business Loan
  • Based on this a loan quote will be provided and you can complete the application
  • A representative from MyMoneyMantra will contact you for the documentation process
  • The documents are collected and verified at your doorstep
  • The complete application is submitted to the chosen bank or financial institution
  • MyMoneyMantra will follow up on the loan application process to ensure quick disbursement

How to Calculate Business Loan EMI?

Before you apply for a loan, calculating the EMI is extremely important. This helps you check the affordability of a loan. You can either calculate the EMI manually or using the MyMoneyMantra EMI Calculator with the following steps:

Using an EMI Calculator is the simpler option to calculate the EMI as it is quick and free from any errors. EMI Calculators are financial tools that you can get on most bank websites. These tools are completely free of cost. In order to calculate the EMI, provide the loan amount, the rate of interest, and the tenure of the loan. The exact EMI will be calculated and displayed on the screen instantly. EMI calculators use the formula mentioned above in order to calculate the EMI.

Once you have calculated the EMI, it is a good idea to check if it fits into your budget. For this, you can calculate all the overheads and compare it with the income generated by the business. If you have enough funds to make EMI payments, you can apply for the loan. However, you may have to make changes in the budget or the terms of the loan agreement in order to ensure that the EMI is affordable for you. This ensures that you do not default on the repayments as it has an impact on the credit score. This can affect your chances of getting any other credit facilities for your business in the future.

Business Loan - Processing Fees and other Charges

Banks charge a processing fee for Business Loan, which is usually between 2% to 5% of the loan amount that is sanctioned. This amount varies with each bank and the type of product that you have chosen. There are other fees that are charged on these loans, such as the documentation fees, late payment fee, prepayment fee, foreclosure fee, etc. These charges are based on the internal policies of the bank. It is highly recommended that you check all the fees and charges involved thoroughly before you make any loan application.

FAQs - Business Loan

Can I get a Business Loan for a startup?

Yes. There are special schemes that provide easy funding options to startups as well. Any company that is under 5 years old and has a turnover under 25 Crores can avail these startup loan schemes.

What factors affect interest rates on Business Loans?

Business Loan interest rates are usually negotiable based on several factors. A high credit score, the income generated by the business, and the collateral that you provide for a Business Loan can help you reduce the interest rates considerably.

Who can avail a Business Loan?

Business Loans are provided to sole proprietorship firms, partnership firms, limited liability partnerships, and corporates. These loans are reserved for any investment in the business, including making repayments towards overheads, expanding the business or purchasing equipment or goods for the business.

What collateral can be provided for a Business Loan?

Any movable asset that has good value as per the loan amount that is sanctioned can be provided as security for the loan. This includes property, financial assets like FDs and even LIC policies. With most banks, the hypothecation of assets that are purchased using the loan serve as primary security.

Can I foreclose a Business Loan?

In some banks, it is possible to foreclose your Business Loan. However, it is recommended that you check the foreclosure fees for the loan before you do so. In case this amount is higher than the interest paid towards the loan, it is best avoided. You must also remember that foreclosing loans can affect your credit score negatively. You will also lose access to a large amount of funds when you foreclose any loan.

Can part payments be made on Business Loans?

Yes part payments are allowed by most banks on the Business Loans. These part payments can be made after you have paid a few EMIs as per the terms of the bank. Some may also have restrictions on the number of part payments that you make on the loan each year.

How will a Business Loan affect my credit score?

Each time you apply for a loan, the credit score does reduce. However, when you make regular repayments towards any credit facilities availed, you can restore your credit score. Make sure that you do not miss on any EMI and make the payment on or before the due date to build a strong credit score.

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