Business Loan
A business loan gives quick funds to shop owners, entrepreneurs, MSMEs, and small businesses for working capital, machinery, inventory, or expansion needs. On CreditEMI, you can compare curated business loan offers of up to ₹1 crore from top banks and NBFCs and apply for the best option based on your eligibility.
Find Best Personal Loan Offers
HDFC Bank
Max. Loan Amt.
Upto ₹75L
Rate of Interest
10.5% - 15%
Tenure upto
Upto 5 Years
Processing Fee
Upto 2%
Axis Bank
Max. Loan Amt.
Upto ₹75L
Rate of Interest
11.5% - 19%
Tenure upto
Upto 5 Years
Processing Fee
Upto 2%
Kotak Mahindra Bank
Max. Loan Amt.
Upto ₹2Cr
Rate of Interest
11.75% - 26%
Tenure upto
Upto 5 Years
Processing Fee
Upto 2%
IDFC First Bank
Max. Loan Amt.
Upto ₹1Cr
Rate of Interest
11.18% - 15%
Tenure upto
Upto 7 Years
Processing Fee
Upto 2%
Tata Capital
Max. Loan Amt.
Upto ₹75L
Rate of Interest
13.5% - 26%
Tenure upto
Upto 5 Years
Processing Fee
Upto 2%
IIFL Finance
Max. Loan Amt.
Upto ₹30L
Rate of Interest
19% - 40%
Tenure upto
Upto 3 Years
Processing Fee
Upto 5%
Lendingkart Finance
Max. Loan Amt.
Upto ₹30L
Rate of Interest
Upto 24%
Tenure upto
Upto 3 Years
Processing Fee
Upto 4%
What is a Business Loan?
A business loan is a financing option for self-employed individuals, professionals, companies, and MSMEs to meet working capital needs, purchase equipment, or fund expansion. These loans can be secured or unsecured and offer flexible terms to support smooth cash flow and business growth.
Eligibility Criteria for Business Loan
Business loan eligibility varies from one lender to another, but most financial institutions evaluate applicants based on a common set of parameters. Below are the key factors that lenders typically consider:
Age Requirement
Applicants are usually required to be at least 21 years old at the time of applying and not older than 65 years at the time of loan maturity. (Limits may differ between lenders.)
Business Vintage
Most lenders prefer businesses with a minimum operational history of 3 years, while some may require 5 years of stability.
Annual Business Turnover
The acceptable turnover range can vary widely—from ₹90,000 for micro-business loans to over ₹250 crore for larger enterprises.
Credit Score
A credit score of 700+ is generally preferred. However, some lenders may still approve loans for lower scores at higher interest rates or with additional conditions.
Minimum Income Requirement
Businesses should typically have an annual income of ₹1 lakh or more, depending on the lender’s internal policy.
Eligible Business Types
Most lenders extend business loans to:
Sole Proprietorships
Partnership Firms
Limited Liability Partnerships (LLPs)
Private Limited Companies
Public Limited Companies
and other registered business entities.
Documents Required for Business Loan
Personal loans are highly flexible and can be used To process a business loan application, lenders typically ask for specific documents that help verify the applicant’s identity, business stability, financial standing, and repayment capacity. While the exact list may vary based on the lender and the type of business, the following documents are commonly required: multiple purposes such as medical emergencies, education, travel, home renovation, or even debt consolidation. Since these loans are unsecured, borrowers can use the funds for almost any personal financial need. Below are the different types of personal loans offered by most banks and NBFCs:
| Requirements | Self-employed Professionals/Non-Professionals |
|---|---|
| Proof of Identity | Passport, Voter ID, Driving License, Aadhaar Card or PAN Card |
| Proof of Residence | Aadhaar Card, Voter ID, Passport or Utility Bills |
| Proof of Age | Birth Certificate, PAN Card, Aadhaar Card, Passport, etc. |
| Proof of Income | – Latest ITR along with income computation, – B/S, P&L account statement for last 2 years certified by a CA – Latest GST returns – Bank statement for the last 6 months |
| Other Documents | – A copy of company’s PAN – Proof of ownership of residence or office – Proof of business continuity – Proof of business registration – Certificate or declaration of sole proprietorship – Deed copy of partnership – Certified copy of MOA, AOA and Board Resolution – Passport-sized photographs |
Business Loan Fees and Charges
Business loan borrowers may incur several types of fees during the loan lifecycle, such as processing fees, prepayment or foreclosure charges, commitment fees, inspection charges, account maintenance fees, penal interest, and documentation charges. These costs are applied based on the lender’s policies and the borrower’s loan agreement.
Since every lender follows its own pricing structure, the charges on business loans can vary significantly. Below is a general range of common fees that lenders may levy on business loan applications.
| Particulars | Charges |
|---|---|
| Processing Fees | Up to 6% of the loan amount |
| Prepayment Charges | Up to 5% of the outstanding principal |
| Penal Interest | 2%-6% on the outstanding loan amount |
Types of Business Loan
Financial institutions offer a variety of business loan products tailored to different operational needs and industry requirements. Before selecting a loan, borrowers should understand each loan type, its cost structure, repayment terms, and how well it aligns with their business goals.
1. Unsecured Term Loans
Collateral-free loans designed specifically for MSMEs and small businesses. These loans can be used for:
Business expansion
Technology upgrades
Working capital needs
Improving day-to-day cash flow
No security or assets are required to avail these loans.
2. Secured Term Loans
Loans provided against collateral such as:
Commercial property
Business assets
Financial securities
These loans generally come with lower interest rates due to the security pledged.
3. Unsecured Overdraft Business Loan
A flexible credit line offered without collateral. Borrowers can:
Withdraw funds as needed
Pay interest only on the amount utilized
Ideal for managing short-term working capital requirements.
4. Secured Overdraft Business Loan
An overdraft limit provided against collateral such as property or financial instruments.
Suitable for established businesses needing:
Continuous cash flow
On-demand access to funds
Lower interest than unsecured overdrafts
5. Professional Loans
Loans designed for self-employed professionals like:
Doctors
Architects
Chartered accountants
Lawyers
These loans help finance office setup, equipment, expansion, and other profession-specific needs.
6. Bill Discounting
A short-term credit facility where businesses can raise funds by selling their invoices or receivables to a lender at a discount.
Useful for improving liquidity while waiting for customer payments.
7. Machinery Finance
A loan facility used to purchase new or upgraded:
Machinery
Manufacturing equipment
Industrial tools
Enables businesses to expand capacity or enhance productivity.
8. Purchase Financing
Financing support for procurement of:
Raw materials
Inventory
Trading goods
Suitable for manufacturers, traders, and service providers who need liquidity to maintain supply chains.
9. Letter of Credit (LC)
A payment assurance issued by the lender to support domestic or international trade transactions.
Helps businesses reduce credit risk when dealing with new suppliers or overseas vendors.
How to Calculate EMI for a Business Loan
Business loans taken as term loans are repaid through Equated Monthly Instalments (EMIs). To estimate the EMI amount manually, you can use the standard formula given below:
EMI Formula:
[P x R x (1+R)^N]/[(1+R)^N-1]
Where:
P = Principal loan amount
R = Monthly interest rate
N = Loan tenure in months
Manual EMI calculation can be time-consuming and may lead to errors, especially for longer tenures or varying interest rates. A more convenient and accurate method is to use an online Business Loan EMI Calculator.
Why Use an EMI Calculator?
An EMI calculator only requires three basic inputs:
Loan amount
Interest rate
Loan tenure
Once these values are entered, the tool instantly displays:
Monthly EMI
Total interest payable
Complete amortization schedule
Using this calculator helps borrowers compare different loan options, understand their repayment capacity, and choose a business loan that fits their financial needs.
Personal Loan vs Business Loan – Which One Is Right for You?
Choosing between a personal loan and a business loan depends on your financial needs and the purpose of borrowing. Here’s a simplified comparison to help you decide:
1. Purpose of the Loan
Personal Loan: Can be used for both personal expenses and business needs.
Business Loan: Strictly for business-related activities, such as working capital, expansion, equipment purchase, or operational requirements.
2. Collateral Requirement
Personal Loan: Generally unsecured, requiring no collateral.
Business Loan: Can be secured or unsecured, depending on the lender and loan amount.
3. Loan Structure & Facilities
Personal Loan: Offered mainly as term loans with fixed EMIs; some lenders also provide an overdraft feature.
Business Loan: Available in multiple formats—
Term loans
Overdraft and cash credit limits
Bill discounting
Non-fund facilities like Letter of Credit (LC) and Bank Guarantee (BG)
4. Best For Smaller Loan Requirements
If you need a small loan without collateral, both personal loans and unsecured business loans are suitable options.
5. Best For Complex Business Needs
When businesses require higher loan amounts, flexible repayment structures, or specialized facilities, a business loan is the better choice.
5 Things to Know Before Applying for a Business Loan
Before submitting a business loan application, keep these key points in mind:
1. Interest Rates
Interest rates vary from one lender to another.
Compare rates across banks and NBFCs to find the lowest offer.
A lower interest rate helps reduce your overall borrowing cost.
2. Turnaround Time
Approval and disbursement timelines differ between lenders.
Choose a lender known for fast processing, especially if you need funds urgently.
Turnaround time may also depend on the type of business loan and collateral provided.
3. Credit Score or Credit Rating
A credit score of 700+ increases the chances of approval.
Borrowers with high scores often get lower interest rates.
A low score may result in higher charges or even rejection.
4. Processing Fees & Other Charges
Processing fees differ across lenders.
Evaluate all associated charges, including:
Processing fees
Prepayment penalties
Documentation charges
Inspection or service fees
Negotiate wherever possible to reduce your upfront and future costs.
5. Collateral Requirements
Many business loans require collateral such as:
Property
Stocks or inventory
Book debts
Equipment or machinery
Financial securities
If your credit score is weak, opting for a secured business loan may improve approval chances and reduce interest rates.
FAQs on Business Loans
How is a business loan different from a personal loan?
A personal loan can be used for both personal and business purposes, except for activities that are illegal or speculative.
A business loan, however, is strictly meant for business-related needs, such as purchasing raw materials, funding working capital, or financing capital expenditure.
What is the difference between a secured and unsecured business loan?
Secured Business Loan: Requires collateral such as property, machinery, or financial assets.
Unsecured Business Loan: Does not require any collateral and is approved based on creditworthiness, income, and business stability.
What types of business loans are available in India?
Some of the commonly available business loan products include:
Secured and unsecured business loans
Working capital loans
Term loans
Overdraft and cash credit
Bill/invoice discounting
Letter of credit and bank guarantees
Machinery/equipment finance
MSME-specific loan schemes
What are the eligibility criteria for a business loan?
Lenders usually require:
Age: 21 years at application and up to 65 years at loan maturity
Business Vintage: Minimum 3 years of operations
Financial Requirements: Consistent turnover, GST/ITR filings, minimum margin contribution, and stable cash flow
Credit Score: Preferably 700+
Compliance: Valid registrations, certifications, licenses, and business documents
What is the minimum loan amount available for business purposes?
The minimum loan amount varies by lender and loan scheme. The approved loan amount depends on:
Nature and size of the business
Repayment capacity
Availability of collateral
Business stability and income
Can I get a business loan of ₹50 lakh?
Yes, you may qualify for a ₹50 lakh business loan if you meet the lender’s requirements related to income, credit score, business performance, existing liabilities, and collateral (if applicable).
How does GST impact business loans for new businesses?
GST is not charged on loan interest. However, GST may apply to:
Processing fees
Documentation charges
Prepayment charges
Other service-related fees
Are there foreclosure charges for business loans?
Floating Rate Business Loans: No foreclosure charges for individual borrowers (as per RBI rules).
Fixed Rate Business Loans: Lenders may apply foreclosure charges which vary by institution.
Can a salaried employee apply for a business loan?
Generally, salaried individuals are not eligible for business loans. However, they may use:
Personal loans
Loan against securities
Top-up home loans (for existing home loan borrowers)
These can be used for business purposes since they have no end-use restriction.
Who is eligible for a small business loan?
Small business loans are available to:
Self-employed individuals
Self-employed professionals
MSMEs
Partnership firms
Proprietorships
Small companies
How do I choose the right repayment tenure for a business loan?
Select a tenure that aligns with your projected cash flow. Longer tenures reduce EMI burden but increase total interest, while shorter tenures increase EMI but reduce the overall cost.
What are the pre-closure and part-prepayment charges for business loans?
Floating Rate Loans: No pre-closure or part-prepayment charges for individual borrowers.
Fixed Rate Loans: Charges may range from 0%–6%, with a lock-in period of around 12 months.
Some lenders may restrict part-payments during the first 6 months.
Can I get a business loan of ₹2 crore?
Yes, many lenders offer high-value business loans up to ₹2 crore or more, depending on:
Your business turnover
Credit score
Vintage
Cash flow
Collateral availability
What is an MSME business loan?
An MSME loan is a credit facility provided to Micro, Small, and Medium Enterprises to support:
Business expansion
Working capital
Equipment purchase
Other business-related requirements
What is the minimum credit score required for a business loan?
Credit score requirements differ across lenders.
A score of 700+ generally increases approval chances, especially for unsecured business loans.
What is margin money in business loans?
Margin money is the borrower’s own contribution towards the asset purchase.
If a bank finances 80–90% of the asset’s cost, the remaining 10–20% must be paid by the borrower.
Example: For a machine costing ₹10 lakh with a 25% margin requirement, the lender funds ₹7.5 lakh and the borrower contributes ₹2.5 lakh.
How can I apply for a business loan?
You can apply by:
Visiting the lender’s website
Applying through their branch
Using financial marketplaces like Paisabazaar to compare multiple lenders and choose the best offer
What can a business loan be used for?
Business loans can be used for:
Working capital (inventory, raw materials, salaries, rent)
Capital expenditure (machinery, equipment, fixed assets)
Business expansion and diversification
Operational and cash flow management
What documents are required for a business loan?
Though requirements vary by lender, common documents include:
KYC documents (Aadhaar, PAN, Passport, Voter ID, DL)
Address proof (utility bills, rent agreement, sales deed, etc.)
Business registration certificates
Proof of business continuity
ITR with financial statements
Partnership deed / MOA / AOA
Board resolution (for companies)
Proof of office or property ownership
Who can apply for a business loan?
Eligible applicants include:
MSMEs
Proprietorships
Partnership firms
LLPs
Self-employed professionals (CA, doctors, architects, etc.)
Private Limited and Public Limited Companies
What is the interest rate for business loans?
Interest rates vary widely depending on the lender, loan type, collateral, credit score, and government subsidies (if applicable).
Rates generally start from around 14.99% p.a., with variations based on risk and scheme type.
How do I apply for a business loan?
You can apply directly through a bank or NBFC’s website/branch, or compare multiple lenders through online marketplaces like CreditEMI to find the best interest rates and loan terms.