Business Loan in India

Best 7 Business Loan in India 2020: Lowest Interest Rate

If you want to start your own business or want to expand your business and looking for Business loan in India than congrats you are at right place.

Business loans are one of the best ways of dealing with a financial problem which every individual or business face in their difficult time.

In 2017 I also started my own Business. For that, I have taken some loan from the bank. As I love to read about Banking terms, funds and, I started researching Best Business Loan available in India.

After one week of research, I ended finding the Top 5 Best Banks for Business Loan.

You can check List Of all 5 Banks and their Key Highlights Below:

LanderInterest RateLoan Amount TenureType of LoanSuitable for
HDFC Bank11.90% to 21.35% P.A.Up to 50 Lakhs12-48 MonthsUnsecured LoanAll type of Business
Kotak Mahindra Bank13% onwards3 lakhs - 75 LakhsUp to 48 MonthsUnsecured LoanAll type of Business
SBI7.8% onwards10 Lakhs – 25 LakhsUp to 60 MonthsSecured LoanSmall and Medium Business
Federal Bank10.35% onwardsUp to 5 Crore Up to 120 months Secured LoansAll type of Business
Karnataka Bank9.35% onwardsUp to 2 croresUp to 120 MonthsSecured LoansSmall and Medium Business

I will also share “How I saved more than 1 Lakh of Rupee on Interest Rate” by using simple Trick. Make sure you read this post till the end.

So, let’s get started:

Everything you should know about Business Loan in India

Here in this section, we are going to see some terms which you should know to compare different banks and their loan with each other.

Below are the terms which we should check and compare during taking any type of loans.

  • Interest Rate
  • Minimum Loan Amount
  • Maximum Loan Amount
  • Minimum Loan tenure
  • Maximum Loan tenure
  • Processing fee and other charges
  • Guarantor or Co-applicant require or not?
  • Time of Loan Approval

To Calculate EMI and interest rate of the different bank we are going to use the following variables throughout in this post:

  • Principal Amount (P): 5 Lakh
  • Tenure (n): 2 Years
  • Interest Rate (r): Different for all Bank

Some of the bank from Giving list take Collateral as security or higher interest rate if they feel the insecurity of losing their money( Loan Amount).

The Best Practice for business always starts with what you have. Gain some experience and then implement on a high scale. If you have past expertise in business for which you are taking a loan then chances of Loan approval will be high.

Cautions:
Never fill any personal data in 3rd party website during Loan Searching online. Many of the websites on the internet sell your personal information to Fraud banks which end with too many calls.

Always enter your data on the official website of banks from which you want a loan. All the links given in this post are genuine and will take you to official websites of lander. You can also visit the local branch of the bank for more information about the Business loan they provide.  

Now let’s understand what are the type of business loan available in India and how they are different form each other?

Type of Business Loans

Mainly there is 2 type of loans available in the market.

  • Commercial
  • Business Loans

Commercial Loans includes Personal loans, Home Loans, Education loan etc. also the interest rate of each Commercial loan very from each other.

Another type of loan is business loans for which you are here. Mainly all Business loans have identical Personal rate. The requirement and eligibility criteria of business loan are different as compare to commercial loans.

There are multiple types of Business Loan Available in india. Like business line of credit, SBA Loan, Business Term Loan, Invoice Factoring. All loans are different from each other based on Loan Amount and interest rate.

There are many other factors on which these loans are divided into different types. One of the famous Factor is collateral. Based on this we are dividing business loans in 2 types:

  1. Secured Loans
  2. Unsecured Loans

#1. Secured Loans:

In secured loan, banks take some collateral against the loan as security. If you are unable to pay loan amount than the bank will recover money from this collateral. Many time Bank also asks for Guarantor or Co-applicant to increase the Loan amount Eligibilty.

#2. Unsecured Loans:

When you take loan for short tenure or loan amount is very small than bank never ask for collateral. Mostly Loan with unsecured loans has high-interest rate as compared to secured loans. Also, the loan amount limit is less in unsecured loan as compare to secured loan.

Best Business Loan in India

Now you know what are the type of business loans available in india. You also have prior knowledge of banking terms which are going to compare for each lander.

HDFC Bank (Business Growth Loan)

Whenever it comes about finical service, HDFC is the number one bank in India. The Best part of HDFC Business loan is they don’t ask for collateral or Guarantor in most of the cases.

Key Features of HDFC Business Loans:

  • You can apply for a loan without any security which helps every business for expansions and fulfil their business needs in early stages of their business.
  • You can avail Loan up to 40 Lakhs. In selected locations, you can apply for Loan up to 50 Lakhs.
  • If you have already had a loan and want to transfer your Loan to HDFC than Bank will offer Lower Interest rate up to 15.75%. Also, you have to pay a lower process fee of 0.99%.
  • Dropline Overdraft Facility is available up to 5 Lakh to 15 Lakh.
  • Loan tenure Range starts from 12 Month to 48 Months.
  • Any Individual with no business background can easily apply for Business Loan. You can check your eligibility easily within a minute from the nearest bank branch. According to the official website of HDFC, they will check your eligibility within 60 seconds.

Eligibility for HDFC Business Loans:

People satisfying the following points are eligible to apply for HDFC Business Loan.

  • Any self-employed Individuals, Proprietors, Private Ltd. Co. and Partnership Firms who are involved in business manufacturing, Trading or service is eligible for a loan.
  • A business should have a minimum turnover of 40 Lakhs.
  • Individuals should have 3 years of Experience in current business, with 5 Years of total Business experience.
  • Those who are making a profit from last 2 year from Business. A business should also have a Minimum Annual income of 1.5 Lakh per annum as a profit.
  • The Age of the applicant should lie in between 21-65 Year.

Fees and Charges of HDFC Business Loans:

  • Interest rate: 11.90%(Min) To 21.35%(Max)
  • Loan Processing charges: Up to 2.5% of the total loan amount. (Minimum 2359 Rs. To Maximum 88500 Rs).
  • Prepayment: No pre-payment permitted until repayment of 6 EMIs
  • Cheque swapping charges: Rs 500/-
  • Amortization Schedule charges: Rs 200/-
  • Cheque Bounce Charges: Rs 550/- per cheque bounce
  • Overdue EMI Interest: 2% per month on EMI / Principal overdue subject to a minimum amount of Rs. 200/-

EMI Calculation

So,I have covered everything about HDFC business loan. Let’s calculate what will be EMI if we take 5 Lakh with 2 Year of Tenure.

HDFC Bank have dynamic interest rate for each client based on many factors. We will take average interest rate taken by HDFC Bank in last quarter of our calculation i.e 17.16%.

  • Principal Amount: 5 Lakhs.
  • Interest rate: 17.16%

By using the EMI Calculator, we have calculated,

  • Interest Amount: 94,461 R.s
  • Total Amount payable after 2 years: 5, 94,461 R.s

Let’s see other Banks also.

Kotak Mahindra Bank

Need More Loan?

Kotak Mahindra Bank offers a Business loan which is perfect of all type of business. Like HDFC Bank, Kotak Mahindra Bank also offers Unsecured loan which is perfect for the small or medium type of business.

Key Features of Kotak Mahindra Bank Business Loans:

  • Kotak Mahindra Bank Offer Loan from 3 Lakhs to 75 Lakh, which is perfect for small, medium or large Business.
  • If you are just starting than chances of not having collateral for the loan is high. Kotak Mahindra Bank doesn’t take any securities or collateral for business loans.
  • The best thing which I like about Kotak Mahindra Bank is speed. They approve loan amount with 72 Hours. You can fill Online Business Loan Application to apply for a loan.
  • Kotak Mahindra Bank also offers 48 Months of tenure to make repayment easy.
  • You can ask for doorstep service also for loan related query. Minimal paperwork makes the process speedier.

Eligibility criteria for Kotak Mahindra Bank Business Loan:

  • An applicant has to be in current business for more than 3 Years.
  • The business should have a turnover of 40 Lakhs.
  • Business for which Loan is applied should be profitable for 1 year.
  • The age of the applicant should lie in between 25 Years to 65 Years.
  • The applicant should be a Sole Proprietor / Partnership firm / Private Ltd Co. / Trust / LLP involved in the business of Manufacturing, Trading or Services.

Fees and Charges for Kotak Mahindra Bank Business Loan:

  • Processing fee: Maximum 2% of loan Plus GST applicable.
  • Documentation charges: 3,500 Rs (Loan less than 10.5 Lakhs) + GST, 6,000 Rs. (Loan more than 10.5 Lakhs) + GST
  • Cheque Dishonor charges: 750 Rs.
  • Charge for any copy of the document: 500 Rs.
  • Repayment/ Account Swap Charges: 500 Rs.
  • Substitute Interest (Penal Interest): 3% p.m. plus GST
  • Collection Charges (in Case of Dishonor): 30% of amount plus GST

For other charges, you can check official Kotak Mahindra Bank Website.

EMI Calculation:

The interest rate taken by Kotak Mahindra Bank is not mentioned on their official website. But they charge more than 13% of the interest rate. Also, the other charges are high as compare to other banks.

We will take 18.3% as IRR for our calculation.

  • Principal Amount: 5 Lakhs.
  • Interest Rate: 18.3%

By using the EMI Calculator, we have calculated,

  • Interest Amount: 1,00,830 R.s
  • Total Amount payable after 2 years: 6,00,830 R.s

Let’s see other Banks also.

SBI Business Loans

Whenever it comes about loan how we can neglect one of the best banks in India.

Yes, it is SBI Bank.

State Bank of India which is also known as SBI bank charges lowest interest rate among all. Also, they have many types of business loan suitable for all type of small and medium business. SBI offer many types of extra benefits and flexibility for Business during repayment.

We can simply say SBI is best among all. But it is not easy to take a loan from SBI bank. Also, they offer an unsecured type of loan.

Feature of SBI Business Loans:

  • You can apply for business loan starting from 10 lakhs to 25 Lakhs.
  • They also offer other types of business loan where you apply for more loan amount. It is suitable for big business. One of the famous business loan of SBI is Asset-backed loan where you can avail maximum 20 crores of the loan amount.
  • The lowest interest rate in the market starting from 7.80 %.
  • Tenure for loan repayment is also high as compared to other banks. You can apply for a maximum 7 year of tenure which changes with a different type of loans.
  • All Business units engaged in manufacturing, services activities along with self-employed and professional individuals, wholesale/retail trade are eligible for SBI Business loans.
  • SBI banks offer secured type of business loan. Bank takes Collateral worth of 40% of the loan amount.

Eligibility criteria for SBI Business Loans:

  • Business for which you are taking loan should have 5 years of location history on same locality or area.
  • If the business is running on rented place than business should have a tenant agreement with the owner of the shop.
  • Applicant should have a current account in ay bank for more than 2 years.
  • The average monthly balance amount should be 1 lakhs for last 12 months, with monthly threshold balance of 10,000.

Fees and Charges for SBI Business Loan:

The fees and charges for SBI business loan differ from the type of loan you are applying. You can visit the nearest local branch for more information.

EMI Calculation:

SBI offer lowest interest rate in the banking sector. If you are eligible for SBI bank loan than you should only go with SBI Bank.

We have taken an average of 8.7% Of interest rate for our calculation, let check calculated EMI.

  • Principal Amount: 5 Lakhs.
  • Interest Rate: 8.7%

By using the EMI Calculator, we have calculated,

  • Interest Amount: 46,566 R.s
  • Total Amount payable after 2 years: 5, 46,566 R.s

Let’s see the next Banks.

Federal Bank Business Loans

Federal Bank is also one of the best bank for business loans in the market with a lower interest rate. The tenure of the loan is high as compare to HDFC and Kotak Mahindra Bank.

Key Feature of Federal Bank Business Loan

  • You can Take Business Loans again property i.e. it is a secured type of loan. Bank takes any type of Collateral or securities like Gold, Deposit, Liquid Funds.
  • The Fast and seamless Loan processing and approval capability make Unique as compare to others.
  • The Federal Bank offers 120 Month of higher tenure limit i.e. near to 10 years.
  • The interest rate of the Federal Bank starts from 10.35%.
  • Federal Bank has many types of business loan. You can also easily transfer your loan in Federal Bank from other banks if you already have any business loan based on yout repayment track.
  • Federal Bank offers business loan upto 5 crores.

Eligibility criteria for Federal Bank Business loans

There are no special criteria which will be followed by the Federal Bank. The eligibility criteria for business loans changes from the type of business loan you are taking.  

Following people can apply for Federal Bank Business loans:

  1. Individual self-employed professional
  2. Firms- Proprietorship /Partnership/LLP/Companies
  3. Any other legal entity engaged in manufacturing / Service /Trading, excluding NBFCs/Chit Companies/Real estate/Export Credit

For more information, you can visit a local branch or call the executive centre.

Fess and charges of Federal Bank Business loans:

Federal Bank has not mentioned any type of charges or fee structure, which they charged for a business loan. For more information, you can contact the local branch.

EMI Calculation

As I already said, Interest rate charge of Federal Bank is very low as compare to other banks. Federal Bank Interest rate start from 10.35%.

For our calculation, we will take an average 14% rate of the interest rate.

  • Principal Amount: 5 Lakhs.
  • Interest Rate: 14%

By using the EMI Calculator, we have calculated,

  • Interest Amount: 76,155 R.s
  • Total Amount payable after 2 years: 5, 76,155 R.s

Let’s see our final Bank which offers Best Business loan in India.

Karnataka Bank Business Loan

Karnataka Bank is one of the small finance banks in India which offer business loans at very attractive offers.

Bank offers 5 Different Type of business loans which are suitable for all type of business.

You can find key features of all this of loans in Below section.

MSME LOAN

  • Purpose: Working Capital requirements. Like Cost for Establishing machinery or place for business.
  • Eligibility criteria: Micro, Small and Medium enterprises
  • Amount of Finance: Maximum up to ₹1500 lakh.
  • Tenure: 120 months.
  • Security: 60% of the exposure
  • Rate of Interest: 7%-10.77%

KBL Commodity Pledge

  • Purpose: agricultural commodities purchased/processing
  • Eligibility criteria: Applicant should be Engaged in trading/processing of agricultural commodities for at least 3 years
  • Amount of Finance: ₹200 lakh & Minimum loan – ₹10 lakh.
  • Tenure: Based on the shelf life of commodity as decided by the holder of the commodity.
  • Security: Pledge of the agricultural goods by way of deposit of original Storage Receipts, evidencing the stock of specified produce, issued by the empanelled Collateral Managers.
  • Rate of Interest: 6%-13.52%

KBL Contractor Mitra

  • Purpose: Purchase of new vehicles/second-hand vehicles (including JCB, tractors which are registered with RTA).
  • Eligibility criteria: Individuals, Company, Partnership, LLP engaged in civil contract activities.
  • Amount of Finance: Maximum loan – ₹ 1000 lakh.
  • Tenure: 48 Vehicle For used, 84 Months for new Vehicle
  • Security: Hypothecation of vehicle/machinery to be purchased
  • Rate of Interest: 8.5% -12.65%

KBL Mortgage OD

  • Purpose: For meeting business/ professional/Working capital needs.
  • Eligibility criteria: Customers/units eligible to be classified under Priority Sector (MSE) only.
  • Amount of Finance: Minimum of ₹11 lakh and a maximum of ₹100 lakh.
  • Tenure: 12 months.
  • Security: Mortgage of properties.
  • Rate of Interest: 45-12.30

KBL Mahila Udyog

  • Purpose: For meeting the credit requirement for any income-generating activity for mainly womens.
  • Eligibility criteria: Individuals (Women).
  • Amount of Finance: maximum of ₹10 lakh
  • Tenure: 12 -120 months.
  • Security: Hypothecation of assets created with Bank finance.
  • Rate of Interest: 47

EMI Calculation

The Karnataka Bank has 10.30% as a base rate for the interest rate in the last quarter.

So, our calculation will be,

  • Principal Amount: 5 Lakhs.
  • Interest Rate: 10.30 %

By using the EMI Calculator, we have calculated,

  • Interest Amount: 55,402 R.s
  • Total Amount payable after 2 years: 5, 55,402 R.s

So, we can Summarize our overall calculation for all type of business loan in the below table.

LanderInterest RateMonthly EMITotal Interest AmountTotal Payable EMI
HDFC Bank0.171624769944615,94,461
Kotak Mahindra Bank0.183250341,00,8306,00,830
SBI0.08722773465665,46,566
Federal Bank0.1424006761545,76,154
Karnataka Bank0.10323141554025,55,402
Also, see:  Step by Step Guide to Start a Blog and Make Money in 2020 ?

 Important: All Above Calculation is done based on Estimated IRR, which may defer from actual Bank interest rate. 

Government Subsidy Loan for Business

According to a recent survey done by the Indian government, 83% of young people of India want to start their own business. Most of them have many award-winning ideas which can be converted in most profitable business but due to lack of money they are not able to execute their Business plan.

According to the Indian government, the small and medium enterprises of the Indian country contribute more than 40% of Indian GDP every year.  This small and medium business has lots of potentials and they can help our GDP to grow exponentially.

By addressing the following problem, the Indian government start many government schemes for business which can help you to start your own business. You can find a list of these schemes below:

How to apply for Business Loan in India?

The Biggest issue which I think many people face is the process of applying for a business loan.

Maybe during loan search, you find a broker who is asking for lots of commission for loan approval.

I Think going with a broker should be the last option to avoid any comission. First, you need to follow a standardized process to avail business loans with any banks. Almost all bank has an identical step for loan application.

Step 1: There is 2 options for applying loan from bank. The best way of applying for a loan in the online application method. First research and finalize 3,4 banks which you like most and they have attractive offers for you.

Step 2: Go to the official website of that bank and click on Business loan page. The option for application may be available on menu or footer of the page.

Step 3: it will redirect you to a business loan offer and eligibility page. Read all details carefully. If you are satisfied with T&C then you can processed further by clicking the ‘Apply Now’ button.

Step 4: Enter your all personal details on this page. Enter the amount of loan you are expecting, the reason for loan etc. Make sure you are entering details on the official website to avoid any confusion further.

Step 5: you can also visit the nearest local branch for more information. Offline process is faster as compared to the online process.

Step 6: once you are eligible and lander verifies your document, you will get approval for loan amount from bank within a week.

How to Increase the Chances of Getting a Business Loan?

Many people believe if they have high cibil score than the chance of getting Loan will be high, which Is half-truth. Other than Cibil score there are many other things which we have a major impact on your chance of getting a business loan.

We are going to discuss all points one by one below:

  1. Credit Score: first thing which bank will check is your credit score. If you have a bad credit score than the chance of getting loan approval will be low. Almost All bank check credit score before giving any type of loan. Make sure you check your credit score before applying for any type of loan. Score more than 750 is considered as Good for loan approval.
  2. Research lander for best fit: even you have bad credit score but you find the lander who is best fit for you, then chance of getting a loan will be high. Researching and taking a recommendation from your family and friends who already taken a loan from any lender will help you to understand Bank profile and Loan eligibility criteria.
  3. Debt to Income Ratio: debt to income ration defines how much capable you are for taking a new loan. High debt to income ratio is not good for whose type of people who are looking for a big amount of money. Always try to keep this ratio as low as possible, as this will help you in your personal finance life also.
  4. Collateral or security: Bank who give secure loan have less interest rate as compare to banks giving an unsecured loan. If you have many items which you can keep as collateral or security than chances of getting a business loan will be high. This will also help you to pay less EMI per month as compared to without collateral loan.
  5. Pay down Existing Debt: Paying down your exiting loan will increase your chances of getting a new loan. This will also increase your credit score.

Who is Eligible for Business Loan in India?

We already shared Eligibility criteria for all banks section wise above. If you skipped that part, I will advise you to go and read that first.

In this section, we are going to share some basic eligibility criteria which are identical for almost all Lenders who give loan.

  • The applicant should be self-employed professional or non-professional. Here self-employed professional includes doctors, Charted Accountant, Engineers etc. traders, manufacturers and many other applicants can be considered as non-professional.
  • Business is making a profit from last year is eligible for business.
  • The Business should have 40 Lakh of turn over (Not in many cases).
  • Applicant age should in between 25 to 65 years. In some cases, an applicant from 21 years is also eligible for a loan.
  • The most important and major role Play IT return file. If you have IT Return file for at least last one year then chances of getting a loan will be high.
  • Applicant should have 3 years of current business expertise or 5 years of experience of doing business.

How Much Loan you should take?

One of the most important things which you have to decide before applying any type of loan is the amount of loan you will take.

Many businesses apply for a loan without calculating real need of amount which they actually have. After approving Loan, they don’t use whole loan amount and keep some unused amount in bank. In return, they pay a high amount of Interest rate every month.

Before applying for any type of loan you should seat with your business partners and should find why you need money?

After finding a reason, check what will be the cost for full fill that reason. Maybe you need money for Machines, Setup, Up-gradation of machines or expedition of business.

By calculating total cost, you will get a rough estimation of the Loan amount. Now check how much amount you already have or you can borrow with your family or friends without any interest rate.  

This calculation will surely help to find the final amount for which you apply as a business loan. Make sure you always take 10-15% extra Money which you have calculated. This amount will be used as Emergencies fund to avoid any type of failure.

Conclusion

Now You have 5 Best Banks who give Business Loans. If you are looking for the best Bank who can give less IRR than SBI is the best option. But getting approval from SBI bank is not an easy task.

If you have a business in agriculture or inland sector than Karnataka bank is the best option. They have Best Business loans with a lower interest rate. If you can’t give any collateral to bank or you just starting off than HDFC is best for you.

You should also check, other option for expanding your business. You can take your business online by Creating Your own website. We provide such type of service. You can check my Website building service for Business.

If you already applied for any Bank loan or you want to share your experience with that bank than make sure you use the comment box. Share this post with your family, friends and ask for help with your business.

Cheers!!

 

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