India has some largest banks and financing institutions in the public sector. Every financing agency has its individual loan divisions for various loans like personal loans, home loans, car loans, business loans, etc., that disburses voluminous loan amount to the borrowers. While talking about business loans, the amount can range from 5 Lakhs to up to 5 Crores or more.
However, if you are establishing or planning to start a business of your dream and meet a shortage of funding, having a business loan can help your purpose in every stage. Notwithstanding, if you think about applying for a business loan, then before you even appeal, it’s always better to do some groundwork. It will help you analyse which financing institution currently is providing the best business loans interest rate in India.
Before we jump into discussing the interest rates of top banks and financing institutions, let us understand the type of business loan in brief.
Types of Business Loans:
In India, there are usually two types of business loan – Secured loans and Unsecured loans.
Secured Business Loans-
Secured loans get granted against some type of personal collateral, guarantee or securing any valuable assets as collateral. These business loans include term loans, inventory loans, property loans, equipment loans, etc., to name a few.
Unsecured Business Loans-
In many situations, self-employed or business person consider approaching an unsecured business loan since the borrower doesn’t require to secure any collateral. Unsecured business loans don’t ask you for collateral due to the following reasons,
- These loans allow a short-term turnaround time of 5 -15 days in comparison to secured loans.
- Unsecured loans subdue your dependency on relatives, friends, or money lenders to borrow urgent funds for immediate or seasonal business expenses.
- You don’t require any asset for collateral under this loan.
Current interest rates on business loans in India
| Banks | Business Loan Interest Rates | Processing Fee |
| SBI | 11.20% | From 2% to 3% |
| IDBI | 12.25% | 1.00% |
| PNB | 12.65% | 1.8% + taxes |
| OBC | 12.65% | 0.50% of Loan Amount |
| Syndicate Bank | 12.65% | 0.5%, Min Rs. 500 |
| Dhan Laxmi Bank | 12.90% | N.A |
| United Bank of India | 13.00% | 1.15% |
| Corporation Bank | 13.55% | 1.5%, Min Rs. 500 |
| DCB Bank | 13.70% | 2% |
| IndusInd Bank | 14.00% | 2.50% |
| Bank of Baroda | 14.10% | Upto 1.00% |
| Allahabad Bank | 14.50% | Rs. 229 – per lac, Min Rs. 2,038 Max Rs. 22,928 |
| Bank of Maharashtra | 14.50% | N.A |
| Indian Overseas Bank | 14.90% | Rs. 204 per lakh |
| Andhra Bank | 15.75% | Case to Case |
| HDFC | 15.65% | Starting from 0.99%, Max 2.50% |
| IIFL | 16.00% | Up to 2% |
| Kotak Bank | 16.00% | Maximum 2% of the loan |
| RBL Bank | 16.25% | 1.80-2.20% of loan amount |
| Yes Bank | 16.25% | Up to 2% |
| ICICI | 16.49% | 0.99% – Up to 2% |
| Axis Bank | 17.00% | N.A |
| Hero FinCorp | 18.00% | N.A |
| Bajaj Finserv | 18.00% | Upto 2% of loan amount |
| Lendingkart | 18.00% | 2% of loan amount |
| ZipLoan Business Loan | 18.00% | N.A |
| PaySense Services India Pvt. Ltd. | 18.00% | N.A |
| Ftcash | 18.00% | 2% of loan amount |
| Neogrowth | 19.50% | 2.5% of loan amount |
| Fullerton India | 20.00% | 2% |
| Tata Capital | 21.00% | From 1.50% to 2.50% |
| HDB Financial Services Ltd. | 22.00% | N.A |
| Indifi | 24.00% | 2% – 3% |
Factors affecting interest rates of business loans:
However, there are some major factors that highly affect the interest rates of business loans, which are:
Nature of Business
The nature of your business or venture strongly determines the interest rate on your business loan. This factor mainly falls under the Priority Sector and sometimes, Non-Priority Sector. Generally, lenders classify these divisions. However, Finance that falls under Non-Priority Sector has a higher interest rate in comparison to the priority sector finance.
Monthly Turnover
Your monthly business turnover also plays a vital role. It circumscribes whether your business is generating a profit or acquiring losses. In short, it stands as a key factor in deciding your eligibility to get the loan as well as the interest rates that you need to pay.
Lender Types
The interest rate for business loans varies from lender to lender. Yet, you can compare the interest percentages offered by NBFCs and leading banks. In fact, you can find that banks levy lower interest rates than NBFCs.
Business Existence
The more your business ages, the better it’ll be for you while applying for a business loan. Your business should be a minimum of 2 years old, irrespective of the nature of the business. It determines a higher possibility for you to get low interest rates.
Ending:
From leading banks to Non-bank financial institutions, every financing organisation use multiple factors to evaluate the borrower’s eligibility. Your business loans interest rate may rise or decrease depending upon these factors. However, with the help of the chart mentioned above, you can verify which financing organisation will match your eligibility and criteria.