Introduction to Business Loan
Looking to fund your startup and expand your existing business? Want to know how to get a loan for business in India?
Securing a loan in India is a structured process, and getting an approval quickly is not that easy. But with the proper preparation, you can boost your approval and get the funds quickly. There are various top finance companies in India funding multiple businesses to help them grow.
Here is the complete roadmap for your proper preparation. But before moving to the roadmap, let’s check what a business loan is.
What is a Business Loan?
A Business Loan is a financial instrument that allows businesses to borrow money from banks or other financial instituations with the promise or agreement to repay the loan over time, with interest.
Business loans may be secured or unsecured, depending on the borrower’s creditworthiness and the lender’s requirements. Interest rate, tenure and loan amount may vary depending on factors such as business vintage, financial health, credit history and the type of business. Good documentation and preparation can improve your chances of obtaining a loan and ensure that you receive favourable terms.
Why Do Businesses Need a Loan?
In a business, whether you are a startup in the IT industry or a growing digital marketing company, investing or funding is a common and well-known issue. So, in that case, most of the businesses are dependent on loans and finances.
It depends on the company whether they are looking for a loan to grow, survive, expand, etc. A number of govt. And private finance companies in Delhi NCR and various other cities are offering business loan facilities to support them. Business owners can apply for a loan based on their requirements.
If you do want to apply for a loan for your startup or growing business, then you need to know everything about the loan types available for business owners.
Types of Business Loans in India Available to Generate Funds for Business
There are many types of loans available, but the most preferred and beneficial ones are as follows:
- Working Capital Loan: A short-term capital loan for day-to-day operations that is repaid within a year. Any business from top industries like real estate, cryptocurrency, network marketing, etc. can take a working capital loan.
- Terms Loan: Terms Loan is typically taken for the expansion of the business, purchasing machinery, and launching new projects. While getting a term loan for business, the tenure for repayment is 1 year to 10 years. For example, new crypto exchanges in India are being launched very frequently, term loan can help them launch their project.
- Government Schemes: To get business loans in India, the government has implemented many schemes for needy people, such as Pradhan Mantri Mudra Yojana, Stand Up India (For women and SC/ST category people).
- MSME Business Loan: MSME Business Loan is a type of business loan that provides loans to micro-scale, small-scale, and medium-scale businesses to start up or to establish and expand their business. For instance, businesses like bakeries, education centres, etc., can get an MSME loan.
- Equipment Finance: Equipment Finance is a type of specialised loan taken for purchasing machinery, equipment, or technology updates or upgrades that are essential for business survival and business operations.
- Overdraft Facilities: Overdraft Facilities enable Businesses to access funds exceeding their current account balance, within an approved credit limit.
- Letter of Credit and Bill Discounting: A Letter of Credit is a short-term financing instrument provided by a bank to the beneficiary upon fulfilment of all required conditions. Bill Discounting, on the other hand, enables the seller to receive immediate funds by selling trade receivables to a financial institution at a discount, thereby improving cash flow before the actual payment date.
What are the Eligibility Criteria for Getting Business Loans in India?
It is essential to know which type of loan you can apply for with your eligibility. For any specific loan, it is important to see if you fall under the eligibility criteria or not. Below are the details on your eligibility for applying for a loan.
Who Can Apply for a Business Loan in India?
| Criteria | Typical Requirements |
|---|---|
| Age | 21–65 years (at loan maturity) |
| Nationality | Indian citizen |
| Business vintage | Minimum 1–3 years of business operations |
| Business Turnover | Minimum turnover (e.g., ₹40 lakhs for some banks) |
| Profitability | Business should be profit-making for the last 2 years |
| Credit Score (CIBIL) | 685–750 or above preferred |
| Work Status | Self-employed, proprietors, partnerships, companies, LLPs, MSMEs, startups, traders, manufacturers, retailers |
| Annual Income (ITR) | Minimum ₹1.5 lakhs per annum (varies by lender) |
| Other Requirements | Should not have defaulted on previous loans, must own a residence/office/shop/godown |
What Are the Documents Required for Getting a Business Loan in India?
Be ready with your documents if you have checked your eligibility for getting a loan. The document verification process plays a vital role in getting approval for a loan, so you have to prepare all the required documents while applying for one:
| Document Category | Examples |
|---|---|
| Identity and Address Proof | PAN Card (individual and business) Aadhaar Card Passport Driving License Voter ID Card |
| Business Registration Documents | Certificate of Incorporation Memorandum and Articles of Association GST Registration Certificate Trade License MSME/Udyam Registration |
| Financial Documents | Bank statements for the last 6-12 months Income Tax Returns for the past 2-3 years Audited financial statements (Balance Sheet, Profit & Loss Account) Cash flow statements |
| Photographs | Current passport-sized photographs of the applicant. |
| Business Plan and Projections | Comprehensive business plan Financial projections Loan utilization plan |
In the above section, we have learned about the necessary documents that are required for getting loan approval. After getting all the documents, you can simply move on to applying for a business loan.
What is the Step-by-Step Process for Applying for a Business Loan?
Since you are applying for a business loan for the first time, you need to know the process. The steps here are going to help you understand how to apply for a business loan in India for the first time.
Step-by-Step Guide to Applying for a Business Loan
Determine Requirements: Firstly, you have to decide how much money you will require for the startup or the business expansion.
Check Eligibility: After considering the Loan Amount, You Have to ensure that you are eligible to take a loan or not
Gather Documents: Collect all the documents that are written above
Choose and Compare Lender: After gathering all the required Documents, you have to choose from where you should borrow money as per your requirement, then compare bank offers, or other government schemes for a better interest rate or the best terms
Apply Online or Offline: In many banks, there will be an option of applying loan online, so that there is no need to roam here and there in the bank, but if your bank doesn’t have an option for applying online, you need to go to the bank and fill out the loan application form there
Submission of Loan Application Form: After filling out the application form, you have to submit your completed form with documents to the bank
Verification and approval of the loan application form: After submission of the loan application form, the bank will verify your application form, and if all the credentials are valid so your application will be approved.
Loan Disbursement: After approval of the loan application, sometimes the loan amount will be disbursed within 24 hours of Approval
Now, you must have clarity on how you can apply for a business loan in India, whether you are eligible or not, and what types of loans are available.
How to Get Collateral Free Business Loan in India
In India, an entrepreneur who wishes to secure a loan without pledging collateral must apply for unsecured business loan schemes offered by different banks, several NBFCs, and state-promoted schemes. This loan does not require any assets to be pledged, mainly depending upon the financial health of the business, credit score, and repayment ability. It starts with having good credit in the market (usually above 700) and then having a stable income, accordingly keeping proper financial records and filing tax returns under the business name.
Documents Required to Get Collateral Free Business Loan in India
Prepare all the basic documents like:
- Business Registration Certificates
- Bank Statements
- ITRs(Income Tax Returns)
- GST returns
- KYC(Know Your Customer)
Where Should Apply for Collateral Free Business Loan in India
Apply for Collateral Free Loan in Some those Popular Banks and Lending Institutions:
Banks
- HDFC Bank
- ICICI Bank
- Axis Bank
- Kotak Mahindra Bank
Non Banking Financial Institutions (NBFCs)
- Bajaj Finserv
- Lendingkart Finance
- FlexiLoans
- Indifi Technologies
What to Look for Before Applying for a Collateral-Free Loan
Take a comparative analysis of the interest rates, processing fees, and repayment options that the different lending institutions offer.
Want to know how to get fast approval?
4 Best Tips to Improve the Chances of Loan Approval
Initially, there are a few key points you have to remember always before applying for a loan application to avoid rejection and get quick approval:
- Maintain a High(above 700 recommended)and clear credit Score
- Amount Should be Repaid on Time
- Prepare an Accurate business Plan, especially for Startups
- Ensure that all your documents are up-to-date and correct. Ensure they are not faulty documents.
If you are following the whole process in the same manner described above in the blog, there is little to no chance that the lender will reject your loan application.
Secure Your Business Growth with the Right Loan Options
Capital needs to be unlocked for expansion purposes. If you understand why finance is the lifeblood of business, then you will be 100% prepared. Explore customized offerings from the top finance companies in Bangalore or from the top Noida providers to compare interest rates and services. Choose between public and private finance sector programs, or else take advantage of specialized solutions such as forex trading apps in India for currency management. You could also consult with an finance expert for guidance or find out about the which finance course is in demand in India to enhance your skills with the course of greater demand in the country. Planning properly, and along with a right partner, business loans will become a stepping stone toward your success.
Smart Business Financing in India: Unlock Growth with Digital Marketing & Real Estate Strategy
Finding the correct business loan in India is an initial step to grow; a mix of land funds with a sound marketing strategy weigh for success. Holding onto the Gryphon charm of what is digital marketing to draw online clients while having a look at customized finance options can go a long way. Equip your team with best digital marketing tools for lead generation also, understand artificial intelligence in digital marketing along with the AI in digital marketing to simplify your campaigns. Be on the front foot, studying the future of network marketing in India while availing the consulting services of digital marketing companies or even an individual digital marketer. Alongside supreme social media marketing firms or hiring them via digital marketing jobs, make sure to get the green signal from the best digital marketing agency in Uttam Nagar and success shall surely come alive!
Best Ways to Get a Business Loan in India Using Real Estate as Collateral
A loan is truly the lifeblood of growing a business in India, with respect to funding operational costs or even to procure real estate. Start by getting a perception of Noida property rates sector-wise for gauging the collateral value, and then look up top real estate companies near top real estate companies near Jewar Airport for construction financing. Identify credible counterparts through real estate businesses and compare offerings of top leading Gurgaon developers or Greater Noida’s best firms. Use inputs on best cities for best cities for real estate investment to plan out the loan tenure, keeping market trends in mind. With clear eligibility, documentation, and real estate insights, you have your funds, while settling in the best society in Dwarka or best places to live in Noida, driving your business forward.
Interest Rates and Charges For Business Loans in India
Business loan interest rates refer to the annual charges payable by an individual or business who takes out a loan. These rates apply to the outstanding amount and are typically expressed as a percentage. These interest rates can differ depending on the policies of different lending institutions in India.
Below are the names of various financial institutions in India, along with their interest rates offer in India:
Bank Rates
| Bank Name | Interest Rate |
|---|---|
| HDFC Bank | 10.50% – 15% p.a. |
| Axis Bank | 11.50% – 19% p.a. |
| Kotak Mahindra Bank | 11.75% – 13% p.a. |
| ICICI Bank | 16% p.a |
| SBI | Starting from 8.50% p.a. |
Non-Banking Financial Corporation(NBFCs)
| NBFC Name | Interest Rate |
|---|---|
| Bajaj Finserv | 14% – 25% p.a. |
| Tata Capital | 13.50% – 26% p.a. |
| Shriram Finance | 21% – 22% p.a. |
Additional Charges
Government Schemes and Support
1. Pradhan Mantri Mudra Yojana (PMMY)
PMMY provides collateral-free loans up to ₹10 Lakhs under three categories:
1. Shishu Mudra Loan: offers a loan of up to ₹50,000
2 . Kishore Mudra Loan: offers loans from ₹50,001 to ₹5 lakhs
3 . Tarun Mudra Loan: Offers loans from ₹5 lakhs to ₹10 lakhs.
| Government Schemes | Interest Rate |
|---|---|
| PMMY Shishu Mudra Loan | 1% – 12% p.a. |
| PMMY Kishore Mudra Loan | 8% – 12% p.a. |
| PMMY Tarun Mudra Loan | 11% – 20% p.a. |
2. Prime Minister Employment Generation Programme (PMEGP)
PMEGP offers loans up to ₹25 lakhs for manufacturing and ₹10 lakhs for services, and it provides subsidy benefits of 15-35%.
| Government Schemes | Interest Rate |
|---|---|
| PMEGP | 11% – 12% p.a. |
3. Credit Guarantee Fund Trust for Micro & Small Enterprises (CGTMSE)
CGTMSE provides collateral-free loans up to one crore with guarantee coverage of 75-85%.
| Government Schemes | Interest Rate |
|---|---|
| CGTMSE | Standard Rate- 1% |
4. Start-up India Scheme
Start-up India Scheme supporting innovative startups with funding between ₹10 lakhs and to 1 crore, particularly for SC/ST and women entrepreneurs
There is no fixed Interest rate under this scheme, but under this scheme, banks offer the lowest interest rates.
5 Common Mistakes to Avoid When Taking a Business Loan
1. Borrowing More Money Than Your Business Needs
Many entrepreneurs take loans more than their business needs, which can lead to:
- Higher Interest and EMIs
- Additional Pressure on Cash Flows
- Unutilized Funds
How to Avoid: carefully build your business plans, having business requirements, and prepare a detailed draft budget based on your current situation and needs.
2. Not Comparing Lenders and Loan Offers.
Not comparing lenders and loan offers is a common mistake that business owners make. It’s important not to rely on the first lender you come across. Always seek a second or even third opinion until you’re delighted with the lender’s terms and offers.
Taking Multiple opinions is necessary because:
- Banks, NBFCs, Fintechs, and government schemes offer different features and Benefits.
- Processing Fees, Customer Service, and Documentation Requirements also differ.
How to avoid: You can try online loan comparison tools to review interest rates, tenures, processing charges, documentation requirements, bank information and customer reviews.This helps you to pick the lender that offers the best value and terms for your business.
3. Choosing the Wrong Type of Loan for Your Business
Every business loan product offers different features, interest rates, and levels of customer service. It’s essential to understand the type of loan you need before applying. Every business loan product is designed to solve a specific problem.
For example:
- Working capital loans, term loans, and machinery loans.
- Choosing the wrong type of loan can lead to unnecessary expenses, reduced financial flexibility, and a mismatch between the funding and your business goals.
How to Avoid: Match your requirements, like growth capital, operational expenses, equipment purchase, etc, with the most suitable loan option. Always consult with a financial advisor to choose the best business loan type that fits your business objectives.
4. Not Checking or Improving Your Credit Score Before Applying
Your credit score is the vital factor in the business loan application process. Ignoring your credit score and report can lead to loan rejections or higher interest rates on loan offers.
How to Avoid: Always check your credit report before applying for a loan. Fix issues like late payments, outstanding debts, or any inaccuracies on the credit report well in advance. Maintain a credit score above 700, which significantly boosts your chances of loan approval and better loan interest rates. 5.
5. Applying Without a Solid Business Plan
Submitting a loan application without a clear and detailed business plan can reduce the chances of loan approval. Lenders like banks and NBFCs want clarity on how your business will make money, grow, and how you can repay the loan.
How to avoid: Prepare a complete professional business plan, market analysis, detailed financial structure,and precise projections. The best is that you must highlight your business’s unique strength, innovation, and complete growth roadmap to boost the lender’s confidence.
Final Verdict on How to Get a Loan for Business in India
Loans play a vital role in the survival, growth, and existence of businesses because, without funding, no business can survive. Because funding is the backbone of companies, it is vital to have a strong reputation for clearing loans. There are a few factors that you can check for and ensure are correctly followed to get quick loan approvals. To get a business loan in India requires you to follow specific eligibility criteria to be able to apply for it.
Frequently Asked Questions About Business Loan In India(FAQ)
Q1. What is the Definition of a Business Loan?
Ans. Business loan refers to financing or funding any kind of business; it includes small-scale, medium-scale scale or large-scale businesses for their growth and expansion.
Q2. What are the Advantages of Getting Business Loans for Startups?
Ans. The advantages of getting a business loan for startups include:
- Startups get access to capital to help grow and manage operations.
- They can also build their creditworthiness by returning the amount timely.
- With a business loan, startups get financial flexibility and control
- Moreover, they get tax benefits along with cost-effectiveness
Q3. Which Bank Gives Loans Easily to Businesses in India?
Ans. State Bank of India (SBI) more often approves business loans quite easily to small business owners, manufacturers, wholesalers, or retailers in India.
Q4. How much Loan Amount can one get for their Business in India?
Ans. Businesses can get up to Rs. 75 lakhs of loan amount with a flexible tenure of up to 5 years at a minimal processing fee.
Q5. Who can apply for an MSME loan?
Ans. There are various factors included when applying for a loan, such as business type, turnover, age, business vintage, credit score, etc. A lot of the lenders prefer a credit score of 700 or above.
Livanshu Syal
I'm a content writer with a passion for crafting clear, engaging, and SEO-optimized content that drives results. From travel blogs and product descriptions to thought leadership articles, I specialize in creating content that connects with audiences and supports business goals. With a strong understanding of digital trends and storytelling, I bring ideas to life through the power of words.
