India’s public and private sector banks provide loans to eligible businesses and charge interest on equivalent monthly installments (EMI). Companies that maintain a credible balance sheet and a good credit rating have a high chance of qualifying for business loans, however, they must go through the documentation and verification process, and only then the loan is sanctioned.
Here is the interest rate charged by public and private sector banks in India and the appraisal process to help you prepare your business loan application.
– Public bank interest rates on corporate loans
– Private bank interest rates on business loans
– Check your eligibility criteria for a business loan
– Gather the required documents
– Key Features of Commercial Loan
– Frequently Asked Questions (FAQ)
Public bank interest rates on business loans
Private bank interest rates on business loans
The above interest rates and details on business loans by public and private sector banks are current as of October 11, 2022. While we update this information regularly, the interest rate and Loan details may have changed since the page was last updated.
Check your eligibility criteria for a business loan
Who can apply: All micro, small and medium-sized enterprises (MSMEs) and business units, corporations, trusts and corporations.
Commercial exploitation mandate: At least three years.
Turnover: Minimum 2.5 lakh and above (depending on bank policy).
Income tax: The company must have a certificate of last declaration of income (ITR) certified by CA, audited. Calculation of business income, balance sheet containing the profit and loss account for at least 2 years.
Borrower age criteria: 21 to 60 or 65 years old at maturity of the loan.
Gather the required documents
Key Features of Commercial Loan
Term loans: These are short-term loans offered to companies for the purchase of assets, such as land, buildings, factories and machinery. Term loans for businesses have a maximum repayment term of five years and EMI is paid with or without a moratorium period.
Project financing: These types of business loans are granted to medium and large companies to acquire large assets. Project financing has a repayment term of more than five years.
Balloon loans: Banks offer companies to pay interest on the loan during the year the loan matures, and the principal amount is paid in a lump sum at the end of the term.
Working capital loans: This is a short-term loan offered to companies to help them manage their operations, with a repayment period of at least one to three years.
Loan on property: As the name suggests, these loans are granted against the property (property or business).
Loan against securities: A borrower can get an attractive return on investment if a business loan is applied through existing securities such as fixed deposits, mutual funds, stocks, bonds, and an insurance policy.
Government programs: Government funded schemes such as PM Mudra Yojna offer eligible business loans up to INR 10 lakh.
CIBIL score: Minimum 700, with a good repayment history of previous consumer loans.
Tax benefit: Exemption from interest on business loans paid out of business profits is deductible under the Income Tax Act 1961.
Frequently Asked Questions (FAQs)
I recently started a business, can I still get a business loan?
No, financial institutions require your business to be operational for at least three years.
What are the other ways to obtain a business loan?
Are there concessions available for certain types of businesses?