Need a loan for your business in India? Whether you’re starting out, expanding, or covering a cash flow gap — there are more options than ever in 2026. Banks, NBFCs, fintech lenders, and government schemes all compete for your business.
This guide covers every type of business loan available in India, current interest rates, eligibility criteria, and a step-by-step application process.
Types of Business Loans in India 2026
1. Term Loan
A lump sum amount repaid over a fixed tenure (1–10 years) in EMIs. Best for buying equipment, expanding space, or a large one-time investment.
- Amount: ₹1 lakh – ₹10 crore
- Interest rate: 10–18% per annum
- Tenure: 1–10 years
2. Working Capital Loan
For day-to-day business expenses — purchasing stock, paying salaries, managing seasonal cash flow. Short-term (6–12 months).
- Amount: ₹50,000 – ₹2 crore
- Interest rate: 12–22% per annum
- Tenure: 6 months – 3 years
3. Overdraft / Cash Credit
A revolving credit line against your business current account. Withdraw and repay as needed. Interest charged only on amount used.
- Amount: Based on business turnover and security
- Interest rate: 11–16% per annum
- Best for: Businesses with fluctuating cash flows
4. MUDRA Loan (Government Scheme)
Up to ₹20 lakh (extended to ₹20 lakh in 2024) with no collateral for micro and small businesses. Three categories: Shishu (₹50K), Kishor (₹5L), Tarun (₹20L).
- Interest rate: 8–12% per annum (varies by lender)
- Collateral: None required
- Apply at: Jan Samarth portal or any public sector bank
5. CGTMSE Loan (Collateral-Free)
Credit Guarantee Fund Trust for Micro and Small Enterprises. Loans up to ₹2 crore without collateral, backed by government guarantee. Banks are more willing to lend since the risk is covered.
- Amount: Up to ₹2 crore
- Interest rate: Bank’s MCLR + 1–3%
6. Invoice Discounting / Bill Financing
Use unpaid invoices as collateral. If a large company owes you ₹10 lakh (payment due in 60 days), an NBFC gives you ₹8.5–₹9.5 lakh now. You repay when the invoice is paid.
- Best for: B2B businesses with large clients but slow payment cycles
- Cost: 1–3% per month
7. Loan Against Property (LAP)
Mortgage residential or commercial property for a large loan at low interest. Typically 70–75% of property value.
- Amount: ₹10 lakh – ₹10 crore
- Interest rate: 9–13% per annum
8. Equipment Finance / Machinery Loan
Loan specifically for buying machinery or equipment. The equipment itself serves as collateral.
- Amount: ₹1 lakh – ₹5 crore
- Interest rate: 10–16% per annum
- Loan-to-value: 80–90% of equipment cost
Business Loan Interest Rate Comparison 2026
| Lender | Type | Interest Rate (p.a.) | Max Loan | Processing Time |
|---|---|---|---|---|
| SBI | Bank | 10.00–14.00% | ₹5 crore | 7–15 days |
| HDFC Bank | Bank | 10.75–22.50% | ₹75 lakh | 3–7 days |
| ICICI Bank | Bank | 10.85–19.00% | ₹2 crore | 3–7 days |
| Axis Bank | Bank | 11.25–21.00% | ₹75 lakh | 3–5 days |
| Kotak Mahindra | Bank | 16.00–26.00% | ₹75 lakh | 2–3 days |
| Lendingkart | NBFC/Fintech | 15.00–27.00% | ₹2 crore | 24–72 hours |
| Indifi | NBFC/Fintech | 18.00–30.00% | ₹1 crore | 24–48 hours |
| Flexiloans | NBFC/Fintech | 18.00–36.00% | ₹1 crore | 24 hours |
| MUDRA (via bank) | Govt. scheme | 8.00–12.00% | ₹20 lakh | 7–21 days |
Rule of thumb: Banks offer lower rates but slower approval + more paperwork. Fintech lenders are fast but expensive. Use banks for planned capital; fintech for emergencies.
Business Loan Eligibility Criteria
For Banks (Public/Private)
- Business vintage: minimum 2–3 years in operation
- Annual turnover: ₹10 lakh+ (varies by bank)
- CIBIL score: 700+ (750+ for best rates)
- Profitable for last 1–2 years
- GST registration and ITR filings for 2 years
- No existing NPA (Non-Performing Asset) with any lender
For NBFCs / Fintech Lenders
- Business vintage: 6 months+ (some accept 3 months)
- Monthly revenue: ₹50,000+ reflected in bank statements
- CIBIL score: 650+ (some go lower with higher interest)
- Active current account with regular transactions
Documents Required for Business Loan
| Document | Banks | NBFCs |
|---|---|---|
| PAN card (individual + business) | ✅ Required | ✅ Required |
| Aadhaar card | ✅ Required | ✅ Required |
| Business registration proof | ✅ Required | ✅ Required |
| Bank statements (12 months) | ✅ Required | ✅ Required |
| ITR (last 2 years) | ✅ Required | Sometimes |
| GST returns (last 12 months) | ✅ Required | Sometimes |
| Audited P&L and balance sheet | ✅ Required (above ₹25L) | Rarely |
| Property documents (for LAP) | If collateral loan | If collateral loan |
| Business plan / projections | New businesses only | Rarely |
How to Apply for a Business Loan in India: Step-by-Step
Step 1: Check Your CIBIL Score
Get your free credit report at cibil.com or through your bank app. Score above 750 = best rates. 700–750 = good rates. Below 700 = use NBFC or work on improving score first.
Step 2: Determine How Much You Need
Use our free Business Cost Calculator to estimate your capital requirement accurately. Over-borrowing means unnecessary interest costs. Under-borrowing means running out mid-project.
Step 3: Choose the Right Loan Type
- Buying equipment → Equipment finance or term loan
- Stock/inventory → Working capital loan or overdraft
- Business expansion → Term loan (3–7 years)
- New business, no collateral → MUDRA or CGTMSE loan
- Cash crunch → Invoice discounting or overdraft
Step 4: Compare Lenders
Use loan comparison platforms like BankBazaar, PaisaBazaar, or Lendingkart to compare offers. Always compare:
- Effective interest rate (APR, not just nominal rate)
- Processing fee (0.5–3% of loan amount)
- Prepayment penalty (2–5% if you repay early)
- Hidden charges (documentation, insurance, legal fees)
Step 5: Apply Online
Most lenders have online applications. Upload documents, fill KYC, and wait for approval. Banks take 7–15 days; fintech lenders can approve in 24 hours.
Step 6: Loan Agreement Review
Before signing, check: exact interest rate, EMI amount, tenure, prepayment conditions, and what happens on default. Don’t rush this step.
Step 7: Receive Funds
Funds are typically disbursed via NEFT/RTGS to your current account within 1–3 days of approval.
How to Improve Your Chances of Loan Approval
- Maintain a current account with regular, growing deposits — this is your business’s financial history
- File GST returns on time — lenders check your GST portal activity
- File ITR every year even if income is below taxable limit — shows business seriousness
- Keep personal CIBIL above 750 — pay credit card bills on time, maintain low credit utilization
- Register under Udyam — MSME certification makes you eligible for priority sector lending
- Don’t apply to many lenders simultaneously — each inquiry reduces your CIBIL score by 5–10 points
Government Loan Schemes for Businesses in India 2026
| Scheme | Max Amount | Who It’s For | Collateral |
|---|---|---|---|
| MUDRA Loan | ₹20 lakh | Micro/small businesses | None |
| CGTMSE | ₹2 crore | MSMEs | None (govt guarantee) |
| PMEGP | ₹50 lakh | New businesses (subsidy) | Varies |
| Standup India | ₹1 crore | Women, SC/ST entrepreneurs | Primary collateral |
| SIDBI SMILE | ₹25 lakh | Equipment, service MSMEs | Low margin |
| SISFS | ₹20 lakh | Startups (non-dilutive) | None |
Find the scheme you qualify for with our free Government Scheme Finder. If you’re exploring equity funding beyond loans, our Funding Database lists 50+ investors and schemes.
Business Loan EMI Calculator
To calculate your EMI: EMI = P × r × (1+r)^n / [(1+r)^n – 1] where P = principal, r = monthly interest rate, n = tenure in months.
Example: ₹10 lakh at 14% for 3 years → EMI ≈ ₹34,178/month. Total interest paid = ₹2.3 lakh.
Always check if you can afford the EMI before applying. A good rule: loan EMI should not exceed 40% of your monthly net income.
Frequently Asked Questions
Can I get a business loan as a new business (0–1 year old)?
Yes, but options are limited. MUDRA Shishu (up to ₹50,000), some fintech lenders (Lendingkart, Indifi accept 6+ months businesses), or if you have collateral. Most banks require 2+ years vintage.
What CIBIL score do I need for a business loan?
700+ for most banks, 650+ for NBFCs. Below 650, focus on improving your score before applying — missed payments stay on your record for 3 years.
Is business loan interest tax-deductible?
Yes — interest paid on business loans is fully deductible as a business expense under Section 36(1)(iii) of the Income Tax Act. This effectively reduces your tax burden.
Can I get a business loan without GST registration?
Yes for small loans (under ₹10 lakh) from some NBFCs. But most banks and government scheme loans require GST returns for proof of business activity.
Final Checklist Before Applying
- ☑ CIBIL score checked and above 700
- ☑ 12 months bank statements ready
- ☑ GST returns filed (last 6–12 months)
- ☑ ITR filed for last 2 years
- ☑ Business registration documents ready
- ☑ Compared at least 3 lenders on rate + fees
- ☑ EMI fits within 40% of monthly income
- ☑ Checked government scheme eligibility first (they’re cheaper)