Business loans are handy when you do not want to bootstrap for your new startup nor want to borrow money from angel investors who ask for shares in your business.
You can take business loan to start a new project, expand the current business to a new location, buy new equipment, purchase office space and assets.
Banks allow businesses to avail loans even for paying salaries and bring in fresh talents to the business.
To help you, we have analysed and created a list of 11 best banks/ financial institutions for business loans in India 2021
You will get an insight into business loans and other procedural formalities like documents required to approve business loans.
Best Banks For Business Loan in India 2021
#1. HDFC Bank Business Growth Loan
HDFC Bank offers business loans up to Rs. 40 Lakhs (Rs. 50 lakhs in select locations) without any collateral, guarantor, or requirement of security.
The business loan is for self-employed individuals, proprietors, partnership firms and companies involved in the business of manufacturing, services, or trading.
The HDFC business loan comes with special benefits such as overdraft facility and flexible tenure options of up to 48 months.
To avail the loan
- Your business has a minimum turnover of Rs. 40 lakhs
- Individuals need to be in the current business for a minimum of 3 years, with total business experience of 5 years.
- Your business should have been in profit for the previous 2 years
- The Minimal Annual Income as per ITR of the business should be Rs. 1.5 lakhs per annum
HDFC Bank charges a minimum of 11.90% and a maximum of 21.35% rate of interest on the business loan.
- 11.90% minimum rate of interest
- 60 minutes loan eligibility check
- Transfer loan balance option
- Loan offered without collateral, guarantor and security
- Lengthy due diligence and documentation process
- Maximum amount limited to Rs. 50 Lakhs
- Profit in the last 2 years
Best for – Existing businesses that require money for business expansion and working capital.
#2. ICICI Bank Business Loan
ICICI Bank offers business loans for purchasing a new plant and machinery or commercial assets, setting up a new industrial unit, or expanding/modernizing your existing unit.
The business loan can be availed as
- Working capital
- Term loans
- Composite loan (working capital + term loans)
The maximum tenure of the business loan is up to 7 years. ICICI Bank charges a repo rate based interest rate, which is repo rate + 6.0% / 7.10%. The present repo rate is 4% which means the rate of interest is 10% to 11.10%.
However, the interest rate for each loan is determined based on the assessment of the business, financials, loan amount and tenure.
Business loan requirements
- Last 1-year Income Tax returns
- Last 3 years Audited/Provisional Financials
- Latest Bank Statements for the last 6 months
- Current year performance and projected turnover
- Online portal, apps, telebanking services for loan and banking needs
- Repo based formula for interest rates charged
- 7 years tenure
- Requires last 3 years audited financial statements
- Quantum of the loan not specified
Best for – Existing customers of ICICI Bank.
#3. IDFC First Bank Business Loan
You can avail of business loans from IDFC First bank for existing business upgrades or equipment purchases or other business needs. IDFC First Bank terms the loan as “Business Installment Loans” (BIL) because you need to repay in equal installments at fixed monthly intervals.
The BIL loan is unsecured, requiring no collateral or security guarantee and is available for businesses, professionals and non-professionals.
The amount of loan varies depending on the kind of business, income and repayment capability. IDFC First Bank offers up to Rs. 40 Lakhs and in some cases up to Rs. 75 Lakhs of BIL loans. The interest rate is communicated by the bank at the time of loan processing.
For availing BIL loan from IDFC First Bank your business entity should be running for the last 3 years.
- Unsecured loan of up to Rs. 75 Lakhs
- Available for the business entity, professionals and non-professionals
- Associated mobile app for statements and alerts for next EMI dates
- Interest rates & processing fees, communicated at the time of processing
Best for – Professionals and non-professionals looking for unsecured business loans.
#4. Citi Bank Business Loan
You should take a CitiBank Business loan if your business requirements are related to foreign exchange and import/ export finance.
CitiBank has a network in over 100+ countries and offers INR and foreign currency-denominated rates on your business loan. You can also get short term LIBOR denominated rates for your working capital management that can be cheaper than the local interest rates.
CitiBank offers business loans as working capital loans, overdrafts, short-term & long-term loans and import/export finance.
However, CitiBank does not disclose the loan amount, rate of interest and the tenure upfront on its website. You will get to know at the time of loan application processing.
You need to pay a 2% processing fee on the loan amount sanctioned. Also, there are loan pre-closure charges (2%) and renewal fees (2%) associated with the business loan.
- Business loans in foreign currency
- LIBOR denominated rates
- Dedicated service support and forex trade experts
- Does not discloses the quantum of loan and interest rate upfront
- 2% loan pre-closure charges
Best for – Businesses having overseas operations or regular forex transactions.
#5. Axis Bank Business Loan
Axis Bank offers business loans to professionals like doctors, engineers and CAs to purchase equipment, office space and expand their practice.
The business loan amount offered is up to Rs. 50 Lakhs with no requirement of collateral.
To be eligible for Axis Bank loan your business should
- Be at least 3 years old and running
- Have a minimum annual turnover of Rs. 30 Lakhs
- You are in the age group of 21 to 65 years
Axis Bank determines interest rates based on your business profile, financial assessment, past track record, loan amount and tenure. The indicative rates for business loans disbursed in the past were in the range of 10.75% to 21%.
- Collateral free loan
- Minimum loan amount of Rs. 50,000
- Minimal documentation
- Need 3 years of business ownership
- Interest rate up to 21%
Best for – Professionals who have a 3-year-old running business with at least 30 Lakhs of turnover.
#6. Fullerton India Business Loan
Fullerton India provides business loans up to Rs. 50 Lakhs for various capital requirements like
- Working capital needs
- Buying or replenishing inventory
- Purchasing equipment
- Business marketing
- Office expansion, and even
- Paying for additional staff
The business loan is tailor-made to suit your requirement, the loan is unsecured and you have the flexibility to repay the loan within 12 to 60 months. Fullerton India charges an interest rate of 17% to 21%.
The eligibility criteria for Fullerton India business loan are
- Engaged in current business for at least three years and a total of five years of business experience
- Minimum turnover of Rs. 10 Lakhs
- Profits for the past two years and
- Minimal Annual Income as per ITR of Rs. 2 Lakhs per year
- Easy online application and document upload
- Tailor-made loans with the flexibility to repay within 60 months
- Processing fee of 6% of the loan amount
- High-interest rate ranging from 17% to 21%
Best for – Self-employed, professionals, small business & individuals having a profitable business.
#7. Tata Capital Business Loan
Tata Capital offers custom-built business loans for an amount as low as Rs. 5 Lakhs and up to Rs. 75 Lakhs on the higher side. The business loans are fully unsecured with no security requirements.
The loan carries an interest rate starting at 19% and has a repayment period of 12 to 36 months.
You can avail of business loans from Tata Capital as working capital loans, machinery loans and MSME & SME loans. All the loans can be customized as per the business needs with structured EMI options. This helps you to plan repayments as per the cash flows.
- Structures EMI repayment option
- Simple online application & document upload
- Unsecured loan
- Maximum repayment period of 36 months
- Cibil score of 700 and above
- Requirement of the balance sheet to be audited by a registered CA
Best for – Businesses having 700+ Cibil score and short term money requirements.
#8. IIFL Finance Business Loan
For availing business loans from IIFL Finance you need to have a minimum 3 years of business existence, positive net worth and good repayment history on existing loans.
IIFL Finance offers business loans starting at Rs. 1 Lakh to Rs. 50 Lakh at a fixed interest rate ranging from 16% to 30% p.a. You do not need to provide any collateral and the repayment tenure ranges from 12 months to 48 months.
There is a loan processing charge of 3% of the sanctioned loan amount.
- Up to Rs. 50 Lakhs of collateral-free loan
- Flexible repayment option up to 48 months
- Interest rate of up to 30%
Best for – Small businesses with a positive net worth
Best Bank For MSME Loan in India 2021
#9. SBI Simplified Small Business Loan
Simplified small business loan from SBI is for MSME business to help them build current assets and fixed assets. The minimum loan amount is Rs. 10 Lakh and the maximum amount that you can avail are Rs. 25 Lakhs.
The small business loan requires 40% of collateral security and the interest rate is linked to MCLR. The repayment period is up to 60 months.
SBI does not ask for financial statements for loan processing but the loan is assessed based on the balance in the existing current account.
The eligibility criteria for SBI simplified small business loan include
- 5 years of business existence
- Current account at any bank for the last 2 years
- Minimum average monthly balance of Rs. 1 Lakh
- PAN India presence
- Rs. 7,500 processing fees
- MCLR based low-interest rates
- Loan processing may take time
- Average monthly balance of Rs. 1 Lakhs in the current account
- 40% collateral security
- Maximum loan amount of Rs. 25 Lakhs
Best for – Small MSME businesses that require nearby banking facilities.
#10. Bajaj Finserv MSME Loan
Bajaj Finserv offers MSME loans to growing businesses for their financial needs like
- Meeting working capital requirements
- Investing in infrastructure
- Installing machinery and
- Paying overheads
The maximum loan amount you get is up to Rs. 20 Lakhs without collateral or pledging any assets. You have the facility to apply online and processing takes around 24 hours at Bajaj Finserv.
The loan tenure ranges from 12 months to 60 months and carries an interest rate starting from 18% and up.
To avail MSME loan from Bajaj Finserv your existing business needs to have a cibil score of 750 with no defaults.
Other eligibility criteria include
- 3 years of business existence
- IT returns filed for at least past 1 year
- Online application and document upload
- 24 hours of loan processing time
- Required higher CIBIL score of 750
Best for – Existing MSME units with cibil score of over 750
Best Loan For Startup Business in India 2021
#11. Lendingkart Start-Up Business Loan
Lendingkart offers business loans up to Rs. 2 cores to kick-off your new start-up business. The minimum loan amount is Rs. 50,000.
You need to apply online for a start-up loan and attach all the necessary documents while applying. Lendingkart usually takes around 3 days to complete sanction.
The start-up loan at Lendingkart comes with a tenure of 2 years which can be extended up to 4 years depending on your start-up performance. The interest rate charged is between 15% to 27% and the repayments can be scheduled as a bi-weekly or monthly installments.
- Rs. 0 pre-closure fees
- Loan amount up to Rs. 2 crores
- Online application and 3 days sanction
- Bi-weekly repayment option
- Last 2 years bank and financial statement required
- Up to 27% interest rate
Best for – Start-ups with 2 years of running a business
Compare Best Business Loan Interest Rates in India
|Financial Institution||Business Loan Interest Rates|
|HDFC Bank||11.90% to 21.35%|
|ICICI Bank||10% to 11.10%|
|IDFC First Bank||Interest rate is communicated while processing|
|Citi Bank||Does not disclose|
|Axis Bank||10.75% to 21%|
|Fullerton India||17% to 21%|
|Tata Capital||Starting at 19%|
|IIFL Finance||16% to 30%|
|SBI||Linked to MCLR (approx 9.60% to 11.60%)|
|Bajaj Finserv||Starting from 18%|
|Lendingkart||Between 15% and 27%|
Procedure to Get the Business Loan in India
#1. Business Loan Application (Online / Offline)
You can apply for a business loan online or offline.
For online application, you need to visit the financing institution’s website and fill up the basic details about your business and about yourself.
For an offline application, you need to visit the nearest branch office to get the business loan application form.
#2. Document Submission
After knowing your business loan eligibility, you are required to upload the required documents and finish the online application process.
For offline application, you need to attach all the documents along with the loan application and submit it to the branch.
#3. Business Loan Processing
Your business loan application will undergo processing once all the required documents are received by the bank.
The processing may involve a personal discussion, requirement of additional documents, or a small visit to your business place and residence.
#4. Approval & Sanction
Once the bank authorities are assured and all the documents are in place, your business loan will be approved and communicated to you.
Post-approval, the loan is sanctioned and you need to execute the loan agreements and sign the terms of business loan.
Once all the documentation is formally over the money is credited to your business account. The disbursal can happen in phases or as per the sanctioned terms.
Factors Banks Consider Before Granting a Business Loan
#1. Purpose of Business Loan
Banks and financial institutions ask you for the primary purpose of availing the business loan. Here banks look for objectives for which you are going to spend the loan money.
The purpose should be aligned with your existing business or for a new project. Banks check whether the loan is being taken for a cash-generating business activity or for normal day to day operations.
#2. Repayment Capacity & Cash Flows
At the time of processing loan banks look for your existing cash flows and assess whether with the additional EMI burden your business is in the position to repay the loan or not.
If you can show that your present business has sufficient cash flows to cover your existing and future EMI payments then the bank may consider your loan application favorably.
#3. Personal & Business CIBIL Score
CIBIL score tells about you and your business’s credit history. Scores tell about your borrowing and repayment habits.
Any score above 700 shows a disciplined credit/ finance management and gives confidence to the lending institution. On the other hand, a lower score can lead to higher interest rates, additional collateral requirements, or rejection of the loan application.
#4. Outstanding Loans, if Any
Banks check extensively about the existing loans the business and the owners have. The existing loan EMI’s are taken into consideration to arrive at the repayment capacity.
If your business does not have any existing EMI payments then you are eligible for a higher loan amount whereas existing loans reduce your business loan amount.
#5. Years of Business Existence and Performance
The more the number of profitable years your business has the better are the chances of a bank sanctioning a higher business loan amount on favorable terms.
Banks look for a growing business with 2-3 years in existence. The minimum they look for whether the business is in existence for at least a year.
Factors You Should Know While Taking the Business Loan
#1. Rate of Interest & Tenure
The more the interest rate the more will be the EMI of your business loan. The interest rate and tenure directly impact the amount you are repaying.
You need to negotiate on the interest rate with the financing institution. A better Cibil score, track business performance and repayment capacity will help you in bargaining for a favorable interest rate.
#2. Margin Amount
Bank and financial institutions will not finance 100% of your business loan needs. They look for margins that vary from 10% to 30% of the total business money needed.
You need to fund the margin amount of 10% to 30% upfront from your pocket. Whereas, the rest 70% to 90% of the amount will be provided as business loans.
You need to look for a financial institution that asks for a lower margin amount.
#3. Quantum of Loan
Different financial institutions have varying limits of business loan amounts to offer.
Before finalizing the bank you should know – for what business activities you require money and the amount of money needed.
#4. Processing Charges & Other Charges
Banks and financial institutions levy business loan processing charges which range from 2% to as high as 6% of the sanctioned amount. Some may even charge a fixed amount as a processing charge.
Lower the processing charges the more money is available for your business purpose. Apart from that, you need to know about the fore-closure charges and renewal charges.
#5. Application & Approval Process
You need to check the business loan application and sanction process followed by the financing institutions.
Online application reduces time and effort which you will find most with the private lenders. The government banks follow a physical documentation process that can be time-consuming.
#6. Collateral or Collateral-free Loan
With collateral, you will be eligible for a higher amount of loan, in comparison to a collateral-free business loan which will be on a lower side.
The business loan taken to purchase equipment, machinery and fixed assets will necessarily have the newly financed assets as collateral.
Documents Required for Business Loan in India 2021
To avail of business loans, you need to keep the following documents ready.
#1. Business Identity Document
The documents include PAN Card, GST Number of the business and constitution documents like –
For Sole Proprietorship & Individuals – Trade License
For Partnership Firm – Partnership Deed
For Companies – Memorandum of Association and Articles of Association and board resolution for availing a business loan.
#2. KYC Documents of Proprietor, Professional, Partners or Directors
The identity documents will include a copy of any of the following documents
- Aadhar Card
- PAN Card
- Voter’s ID card
- Driving License
The address proof documents include copy of
- Electricity bill
- Aadhar Card
- Voter’s ID card
- Municipal property tax receipt
#3. Business Loan Related Documents
Loan-related documents will include
- Latest IT Returns of the business showing income
- Balance Sheet, Profit & Loss Account
- Bank statement of the previous 6 months
- Invoices/ quotations in respect of equipment, office space, furniture and machinery purchase.
Getting a business loan becomes easy when you know the loan process, document requirements and are informed beforehand.
Depending on your eligibility & loan amount you can pick the bank that offers the best interest rates and matches your business financing needs.