Last Updated on May 30, 2023 by Harshit Singh
Whether starting a new business or scaling up an existing business, there are various provisions designed by Indian banks to support entrepreneurs financially. They are in the shape of a business loan which a business can avail at any stage of a business lifecycle. Though these business loans come with unsurmountable interest rates, in this blog, we have collated a list of five banks with the best business loans interest rates.
Table of Contents
What is a business loan?
When it comes to meeting your business expenses, a business loan is a viable solution to run operations smoothly. Whether starting a business from scratch or aiming for ambitious growth, it provides your business with the necessary financial security.
However, with the availability of business loans such as startup business loans, government business loans, etc., selecting the right one that aligns with your preferences is crucial, as each has its perks. Therefore, we have consolidated the list of five Indian banks with the best business loan interest rates and other crucial parameters.
Indian Banks With Best Business Loans Interest Rate
HDFC Bank
At HDFC Bank, a business can avail a loan of up to Rs. 50 lakh (up to Rs. 75 lakh in select locations). The tenure can stretch to 12-48 months with a minimum lock-in period of 6 months. The HDFC business loan can cover every business need, from business expansion to working capital, and no collateral, guarantor, or security is required.
People/businesses eligible to apply for a business loan are –
- Businesses with a minimum turnover of Rs. 40 lakh
- Business running for a minimum of 3 yrs, with 5 yrs total business experience
- Businesses recorded profit in the previous 2 yrs
- Businesses with Minimal Annual Income (ITR) of Rs. 1.5 lakh per annum
- Applicants should be at least 21 years at the time of applying for the loan and at most 65 years at the time of loan maturity.
Interest Rate – 1.90% p.a. to 21.35% p.a. (rack interest rate)
Check your HDFC bank business loan eligibility here.
Axis Bank
Axis Bank offers business loans ranging from Rs. 50,000 to Rs. 10 cr. with interest rates starting at 11.25% p.a. and 15-yr repayment terms. They also provide collateral-free, EMI-based loans for business growth. Processing fees range from 1.25% to 1.50%, while missed instalments incur an extra 2% p.a. interest. Bills of exchange and letters of credit are also available.
People/businesses eligible to apply for a business loan are –
- Individuals with business registration
- Proprietorship Firm
- Limited Liability Partnership
- Pvt Companies
- Unlisted Public Ltd. Companies
- Trust & Societies such as educational institutes/hospitals
Interest rates – 11.50% to 20% p.a.
Check your Axis Bank business loan eligibility here.
ICICI Bank
ICICI Bank provides secured and unsecured business loans up to Rs. 2 cr. with interest rates up to 17% p.a. and repayment terms of up to 7 yrs. They cater to diverse entities, offering essential financial support for launching ambitious ventures. Their customisable loan options and streamlined application process have made ICICI Bank a preferred choice among aspiring entrepreneurs, serving the commercial sector’s varied needs nationwide.
People/businesses eligible to apply for a business loan are –
- Self-employed non professionals such as traders, manufacturers, vendors, and wholesalers
- Proprietorship firm
- Partnership firm/LLP and Private limited company
- Unlisted public limited company
- Self-employed professionals such as doctors, architects, chartered accountants, etc.
Interest rates – 17% p.a.
Check your ICICI bank loan eligibility here.
Kotak Mahindra Bank
Kotak Mahindra Bank, a leading business loan provider, offers loans ranging from Rs. 3 lakh up to Rs. 75 lakh without requiring collateral. They provide quick approval and hassle-free processing. With flexible repayment options, borrowers can choose tenures of up to 48 months. Their loan solutions cater to diverse business needs, ensuring convenient access to the necessary funds.
Interest rate – 17% p.a.
Check your Kotak Mahindra Bank business loan eligibility here.
IDFC First Bank
IDFC FIRST Bank offers business loans to MSMEs and non-individual entities such as private limited companies, partnership firms, LLPs, and sole proprietors, provided they meet the minimum requirements of Rs. 1 cr. turnover and a business vintage of at least 3 yrs. The interest rates start at 15% p.a., with loan amounts ranging from Rs. 9 lakh to Rs. 1 cr. The lowest EMI per month starts from Rs. 2783* per lakh for a tenure of 48* months. A processing fee of up to 3.5% of the principal loan amount is charged, which is adjusted against the overall loan cost. Furthermore, a foreclosure charge of 5% of the principal is outstanding. Additionally, self-employed individuals and businesses can avail collateral-free funding up to Rs. 1 cr.
Interest rate – 15% p.a. onwards
Check your IDFC bank business loan eligibility here.
Key benefits of business loans
Some underlying benefits of business loans are as follows –
- Easily accessible
Technological advancements make business loans from banks easily accessible via their online portal. From document submission to making transfers, banks have made it convenient for individuals and businesses to apply for loans without the stress of visiting the bank.
- No share in Profit/Loss
Unlike venture capitalists and angel investors, banks do not demand any share in business profit or loss or seek partial ownership.
- Exciting interest rates
Banks charge relatively low-interest rates and effective repayment plans compared to other lending agencies.
- Tax deduction
Companies that opt for business loans can get a tax deduction under Section 80C.
Different types of business loans
There are different types of business loans that an individual/business can apply for –
- Term loan
Banks commonly provide term loans as the primary form of business financing, with the loan amount primarily determined by the business’s credit history. Generally, the duration of a term loan falls within the 1 to 5-yr range. A business can obtain a term loan by stating the loan’s intended purpose.
- Startup loan
As its name implies, a startup loan is designed to assist in financing the costs associated with launching a new business endeavour. It benefits businesses in their early stages, particularly those with limited or no credit history. To qualify for a startup loan, a business must have been established for a specific period.
- Working capital loan
When a business experiences financial strain, it hampers the day-to-day operations. In that case, a business can apply for a working capital loan. This loan proves particularly beneficial when there is a sudden requirement for additional cash flow.
- Loan against property
When a business requires a loan amount exceeding Rs. 50 Lakh, they can opt for a loan against property. This type of loan is provided with the property serving as collateral. Since the amount of the loan is relatively high, the repayment period for the same high, and typically spans between 10 to 20 yrs.
Both commercial or residential property, can be utilised to obtain the loan. But before you apply for the loan, ensure that the property being rendered as collateral is free from any legal disputes.
- Invoice financing
If a business encounters a financial crunch caused by delay in receiving payments after issuing invoices, they can opt for invoice financing. This type of business loan is primarily intended for small businesses who can obtain funds based on the value of the invoices.
Documents checklist for a business loan
While applying for the business loan, here are some of the documents you should keep ready –
- KYC Documents like Passport, Voter ID, Aadhar card, PAN card, Driving licence, and Utility bills like water & electricity bills (in case you’re taking a business loan against property)
- Income Proof: Bank statement of one year with ITR
- Business address and vintage proofs
- Business PAN Card
- Company’s Incorporation Certificate
Conclusion
For a budding business looking to scale up its operations or someone who is in a financial crunch, a business loan is a suitable external financing option. Moreover, exciting repayment plans and low interest rates alleviate financial stress and ensure that the loan does not become an overwhelming burden for the business.
FAQs
How to get a business loan in India?
Numerous public and private banks offer business loans at exciting interest rates and repayment plans. All you have to do is go to their online portal and check your eligibility. Then, if qualified through the same online portal, you can apply for a business loan.
Can an early-stage startup apply for a business loan?
Each bank has its criteria for lending a startup loan. Depending on your business operations, you can check with each bank for a customised loan plan that fulfils your financial needs.
As an investment fanatic, I’ve dabbled in early-stage startups, mutual funds, gold, stocks, smallcases, and real estate to identify which assets generate the highest ROI. At Tickertape, I’m dedicated to presenting my learning and providing insightful suggestions to help my readers make sound investment decision.
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