Business Loan Interest Rates in India
Business loan interest rates in India vary depending on the lender, loan amount, repayment tenure, business profile, and creditworthiness of the borrower. Banks, NBFCs, and fintech lenders use different risk assessment models to determine the applicable rate of interest.
At Lendingkart, business loan interest rates start from 13.5% per annum and are customized based on factors such as business turnover, financial performance, repayment capacity, and credit history.
| Rate of interest | Starting from 13.5% annually |
|---|---|
| Tenure of the loan | 1-3 years |
| Collateral | NA |
| Amount of loan | ₹1,00,000 to ₹50,00,000 |
| Pre-Closure fees | No foreclosure charges on unsecured business loan |
| Processing charges | Upto 4% of the sanctioned amount (Note: The sanctioned amount is equal to the gross loan amount.) |
| Time to sanction a loan | Within 3 working days |
| Eligibility | > ₹ 75,000 turnover in the three months preceding the loan application. |
Before applying, businesses should compare business loan rates, processing fees, repayment flexibility, and total borrowing costs to choose the most suitable financing option.
*based on your business’s health and credit score
**Pre-closures are only allowed after the first EMI has been paid in full
What is Business Loan Interest Rates?
Starting a business involves essential steps such as planning, organising, and staffing, all of which require sufficient funding for success. Business loans have emerged as indispensable financial tools for aspiring entrepreneurs, facilitating the financing of business operations from inception to execution. These loans enable swift capital acquisition, averting potential capital shortages along the way. Securing an optimal business loan largely depends on the interest rate.
Lendingkart’s loan offerings feature competitive and attractive business loan interest rates tailored to support your business aspirations without imposing undue financial strain. With LendingKart, access attractive business loan interest rates in India, customised to suit your specific loan requirements and financial circumstances. Know all about business loan percentage and business loan maximum tenure in this guide below.
Calculation of Quick Business Loan Interest Rate
Determining the interest rate on a business loan is essential for borrowers to comprehend their financial responsibilities. When obtaining a business loan, the lender provides the principal amount along with an interest rate, representing the additional sum payable during loan repayment. To ascertain the interest rate for the desired loan amount, you can utilise this basic formula:
EMI = P × r × (1 + r)^n / [(1 + r)^n − 1]
Where:
P = Loan Amount
r = Monthly Interest Rate
n = Loan Tenure (in months)
For example, if one plans to borrow ₹1 lakh at a 15% interest rate over a 1-year tenure, the Equated Monthly Installment (EMI) would amount to ₹9,026. The total payment, including ₹8,310 as interest, would be ₹1,08,310. While manual calculations may be complex, tools like those offered by LendingKart simplify this process, assisting borrowers in making well-informed financial decisions.
Tips for Securing a Business Loan at Low Interest Rate
- Improve Your Credit Score: Aim for a credit score of 700 or above to qualify for lower interest rates.
- Stay Consistent with EMI Payments: Avoid defaulting on loan payments to build trust with lenders and qualify for lower rates.
- Craft a Solid Business Plan: Impress lenders with a well-defined business plan outlining your company’s goals and strategies.
- Strengthen Financial Statements: Showcase your business’s financial stability and growth potential to lenders.
- Consider Refinancing Options: Explore the possibility of transferring your loan to lenders offering better rates or terms.
- Offer Collateral: Pledge assets to mitigate lending risk and potentially secure lower interest rates.
- Build Positive Relationships with Lenders: Maintain a strong repayment history and communicate transparently with your bank to negotiate better loan terms.
Types of Business Loan Interest Rates in India
Lenders in India typically offer two types of business loan interest rates: fixed and floating. Understanding the difference helps you choose the right loan based on your repayment capacity and market conditions.
Fixed Business Loan Interest Rate
A fixed interest rate remains constant throughout the loan tenure. This means your EMI stays the same every month, making it easier to plan your cash flow and budget. Fixed rates are ideal for businesses that prefer stability and want protection from market fluctuations.
Floating Business Loan Interest Rate
A floating interest rate changes over time based on benchmark rates like the Repo-Linked Lending Rate set by the Reserve Bank of India. As market interest rates rise or fall, your loan interest rate and EMIs may also increase or decrease. Floating rates are suitable for borrowers who are comfortable with some risk and want to benefit from potential rate reductions.
Factors Influencing Business Loan Interest Rate
Business loan interest rates play a crucial role in determining the overall cost of borrowing. Securing a low-interest rate can lead to significant savings over the loan term. However, several factors influence the interest rates offered to businesses. Here’s a breakdown of these influential factors:
- Healthy Cash Flow: Lenders favor businesses with strong cash flow, as it indicates financial stability and lower risk, resulting in lower interest rates.
- Business Type and Industry: Businesses operating in stable or growing industries are perceived as less risky by lenders, leading to lower interest rates. Conversely, businesses in declining industries or seasonal sectors may face higher rates.
- Creditworthiness: A high credit score demonstrates your ability to manage debt responsibly, leading to lower interest rates and better loan terms. Conversely, a lower credit score may result in higher interest rates and less favorable conditions.
- Collateral: Offering collateral can lower lending risk for lenders, potentially resulting in lower interest rates. However, not all businesses have significant assets to pledge as collateral.
- Existing Loans: Lenders may be hesitant to extend loans to businesses with multiple outstanding debts, as it raises concerns about repayment capacity. This may lead to higher interest rates or loan rejection.
Business Loan Eligibility Criteria
- Basic Prerequisites: Streamlined to speed up loan processing, avoiding extensive documents and paperwork.
- Operational Duration: Must have been operational for over 12 months.
- Revenue Threshold: > ₹ 75,000 turnover in the three months preceding the loan application.
- Exclusion Parameters: Cannot be on the blacklisted/excluded list for SBA finance or located in a negatively listed location.
- Entity Limitations: Trusts, NGOs, and charitable institutions are ineligible.
- Validation Process: Contact for eligibility confirmation if unsure about restricted categories or locations.
For more detailed information check business loan eligibility criteria.
Business Loan Interest Rate Calculator
Calculate your business loan repayment details with our easy-to-use business loan EMI calculator. Simply enter the loan amount, tenure, and interest rate, then click “Calculate” to get instant results. You’ll receive information on the principal amount, interest amount, monthly EMI, and the total amount payable. Plan your business finances efficiently with accurate loan repayment projections on small business loan interest rates.
How to Get a Business Loan at a Lower Interest Rate
Businesses can improve their chances of securing a lower business loan interest rate by following these best practices:
- Maintain a credit score of 700 or above.
- Ensure timely repayment of existing loans and credit facilities.
- Keep business financial records updated and accurate.
- Demonstrate stable revenue and healthy cash flow.
- Reduce outstanding debt before applying for a new loan.
- Compare business loan rates offered by multiple lenders.
- Choose an appropriate loan amount based on actual business requirements.
- Maintain GST filings and Income Tax Returns regularly.
A strong financial profile not only improves loan approval chances but also helps businesses qualify for more competitive interest rates and better repayment terms.
Frequently Asked Questions:
- What is the business loan interest rate for small businesses?
Business loan interest rates vary based on credit score, business turnover, loan amount, and lender policies. At Lendingkart, rates start from 13.5% per annum, subject to eligibility.
2. How do lenders decide the business loan interest rate?
Lenders assess factors such as credit score, business vintage, turnover, profitability, repayment history, and existing liabilities before determining the interest rate.
3. How can I get a low-interest business loan?
Maintaining a good credit score, reducing existing debt, showing consistent business revenue, and comparing lenders can help you secure lower business loan rates.
4. How do I use a business loan EMI calculator?
Enter the loan amount, interest rate, and tenure into the EMI calculator to estimate your monthly EMI, total interest payable, and repayment amount.
5. Is the business loan interest rate fixed or floating?
Business loans may be offered at fixed or floating interest rates. Fixed rates remain constant, while floating rates may change based on market conditions.
6. Is collateral required for a business loan?
No, many lenders offer unsecured business loans without collateral. However, secured loans may sometimes attract lower interest rates.
7. What is the minimum and maximum business loan amount available?
The loan amount depends on the lender and eligibility criteria. At Lendingkart, businesses can apply for loans ranging from ₹1 lakh to ₹50 lakh.
