A business loan is a perfect way to increase financial aid for business needs. Many banks provide pre-approved deals for loans without collateral. You can use a business loan to finance a new project, extend an existing business to a new location, buy new equipment, office space, and other properties.
Interest rates, loan tenure, processing fee, and product features such as loan number, minimum ITR conditions, company turnover, and overdraft facility are all factors that must be considered when applying for a loan. Comparing such criteria through numerous business loan lenders can assist one in securing the best business loan. Businesses can take out a small loan to boost their credit score. When your company is new and has no background, taking out a small loan and repaying it on a regular basis will help you establish a credit profile. This way, if you do need a larger loan, you'll have some debt experience to compare yourself to.
Factors Affecting Business Loan Interest Rates
In India, it is used as a qualification criterion for obtaining business loans. If the business owner's credit score is above 700, the loan application is more likely to be accepted. Small business loans with a weak credit history, on the other hand, appear to cost more in the form of higher interest rates.
Your professional experience matters when you're trying to advance in your career and your business experience matters when you're planning to start a new company or extend an existing one.
The average earning potential of a small business is measured by its annual profits. Banks and lenders typically conduct financial statement research by reviewing the company's sales details over a period of several years. The average revenue of a small business is measured using the same data.
The interest rate for a business loan varies depending on whether the borrower is opting for secured or unsecured loans.
Type of Lender
Different types of lending institutions, such as banks, NBFCs, and institutions similar to NBFCs, will charge different rates of interest.
Business Loan Requirement
Applicants must be between the ages of 25 and 55 to be considered. Below are basic documents required for a business loan to be sanctioned. However, the list of documents varies with a bank and type of business loan.
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
Sole Proprietorship Declaration or certified copy of Partnership Deed
A certified true copy of Memorandum and Articles of Association
PAN Card for company, firm or individual
Proof of ID
Proof of address
Important Things to Know About Business Loan
- Individuals and businesses that take out secured loans have collateral such as inventory, property, equipment, and so on. The interest rate will be lower here.
- Unsecured loans allow companies to borrow money without having to put up any collateral. The interest rates are high because the banks' risk is high.
- Business loan processing fees can vary from 2% to 6% of the sanctioned amount, depending
- on the bank or financial institution. Some companies may also charge a set fee as a processing fee.
- The interest rate, processing fee, preclosure fee, paperwork costs, part-payment fee, default fee, and other fees are all imposed on business loans.
- Banks and other financial firms will not fund 100% of your business loan requirements. They seek margins ranging from 10% to 30% of the total amount of money required for the company.
List of Banks offering lowest business loan interest rates
|Name of Bank||Interest Rates|
|SBI||11.20%- 16.30( Linked to MCLR)|
|Bank of Maharashtra||14.50% onwards|
|HDFC Bank||15 % - 21.35%|
|Axis Bank||15.5% onwards|
|ICICI Bank||16% onwards|
|Corporation Bank||13.55% onwards|
|Dhan Laxmi Bank||12.90% onwards|
|RBL Bank Business Loan Rates||16.25%|
The interest rate on a business loan is determined by your company, the loan amount requested, and your previous relationship with the bank. Most banks charge a minimum processing fee of 2% to 3% on loans. Since many business loans are unsecured, it is a smart option to get an insurance policy in the borrower's name. Banks usually impose prepayment or foreclosure charges, which can be as high as 5%. Check and see whether the low rate of interest you're receiving is followed by heavy prepayment or foreclosure penalties. It's worth noting that certain business loans can't be repaid on time.