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  • Small Business Loans

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  • Individuals who wish to expand their business or fund a business idea can opt for a business loan offered by a number of reputed financial lenders. Typically, most financial lenders offer business loans up to Rs.75 lakh for the purpose of business expansion with repayment tenures stretching to 84 months.

    Small Business loans offered by financial Banks

    Listed below are several financial lenders offering business loans and the key details of the small business loans:

    Financial Bank Interest Rate Loan Amount Loan Tenure
    HDFC Bank 15.65% p.a. - 21.20% p.a Up to Rs.50 lakh 12 months – 48 months
    Bajaj Finserv 18% p.a. onwards Up to Rs.30 lakh As per the terms and conditions set by Bajaj Finserv
    Capital Float 18% p.a. - 24% p.a. Rs.5 lakh – Rs.50 lakh 12 months – 36 months
    Capital First As per the terms and conditions set by Capital First Rs.3 lakh – Rs.75 lakh 12 months – 60 months
    RBL Bank As per the terms and conditions set by RBL Bank Up to Rs.20 lakh 12 months – 84 months
    IIFL Finance 16% p.a. - 26% p.a. Up to Rs.50 lakh 12 months – 48 months
    Bank of Baroda As per the terms and conditions set by Bank of Baroda Rs.1 lakh – Rs.10 lakh As per the terms and conditions set by Bank of Baroda
    Axis Bank As per the terms and conditions set by Axis Bank Rs.50,000 – Rs.50 lakh As per the terms and conditions set by Axis Bank

    *The interest rate will be set based on the income and work experience of the applicant and his/her ability to repay the loan.

    HDFC Bank Small Busines Loan

    Listed below are the key highlights of the HDFC Bank Small Business Loan:

    • Loan amount up to Rs.40 lakh generally and Rs.50 lakh in select areas.
    • Processing fee for the loan as low as 0.99% of the loan amount.
    • Overdraft facility up to Rs.15 lakh.
    • No requirement for a guarantor or collateral.
    • Added bonus of a free life insurance policy.
    Financial Bank Processing fee Pre-payment charges Penal interest
    HDFC Bank Up 2.5% of the loan amount Up to 4% of the outstanding balance 2% per month of the due amount

    Bajaj Finserv Small Business Loan

    Listed below are the key details of the Bajaj Finserv Small Business Loan:

    • Attractive interest rate for loans up to Rs.30 lakh.
    • Flexi-loan facility for payment of the interest and the principal amount.
    • No requirement for a collateral.
    • Loan approval within 24 hours.
    • Online business loan statements.
    Financial Bank Processing fee Pre-payment charges Penal interest
    Bajaj Finserv Up 3% of the loan amount Up to 4% of the outstanding balance 2% per month + GST of the due amount

    Capital Float Small Business Loan

    Listed below are the key details of the Capital Float Business Loan:

    • Attractive interest rate for loans up to Rs.50 lakh.
    • Flexible repayment tenures up to 36 months.
    • No hidden costs
    • Loan amount disbursal within 2-3 working days following approval.
    • Online application process.
    Financial Bank Processing fee Pre-payment charges Penal interest
    Capital Float Up 2% of the loan amount As per the terms and conditions set by the lender As per the terms and conditions set by the lender

    Capital First Small Business Loan

    Listed below are the key details of the Capital First Small Business Loan:

    • Attractive interest rates offered on loans up to Rs.75 lakh.
    • Flexible tenures between 1 – 5 years.
    • Online application and door-step banking services.
    • Top-up facility available.
    • Minimum documentation.
    Financial Bank Processing fee Pre-payment charges Penal interest
    Capital First Up to 3.5% of the loan amount 5% of the outstanding loan amount 2% per month of the due amount

    RBL Bank Small Business Loan

    Listed below are the key details of the RBL Small Business Loan:

    • Flexible loan tenures up to 84 months.
    • Choice of secured and unsecured business loans.
    • Quick and hassle-free documentation process.
    • Attractive interest rates for loans up to 20 lakh.
    • Residential or commercial properties can be used as collateral.
    Financial Bank Processing fee Pre-payment charges Penal interest
    RBL Bank As per the terms and conditions of the lender As per the terms and conditions of the lender As per the terms and conditions of the lender

    IIFL Finance Small Business Loan

    Listed below are the key highlights of the IIFL Finance Small Business Loan:

    • Loans up to Rs.50 lakh.
    • Flexible repayment tenures.
    • No requirement for collateral.
    • Quick loan approval process.
    • Minimum documentation and transparent loan process.
    Financial Bank Processing fee Pre-payment charges Penal interest
    IIFL Finance 3% of the loan amount Up to 7% of the loan amount + GST 2% per month

    Bank of Baroda Small Business Loan

    Listed below are the key highlights of the Bank of Baroda Small Business Loan:

    • Loans up to Rs. 10 lakh.
    • Flexible repayment tenures on offer.
    • No requirement for collateral.
    • Minimum documentation.
    • Quick loan processing.
    Financial Bank Processing fee Pre-payment charges Penal interest
    Bank of Baroda As per the terms and conditions of the lender As per the terms and conditions of the lender As per the terms and conditions of the lender

    Axis Bank Small Business Loan

    Listed below are the key highlights of the Axis Bank Small Business Loan:

    • Collateral-free loans.
    • Loans up to Rs.50 lakh at attractive interest rates.
    • Option of balance transfer from another financial lender.
    • Online application process.
    • Minimum documentation.
    Financial Bank Processing fee Pre-payment charges Penal interest
    Axis Bank Up to 1.25% of the loan amount + GST 2% of the outstanding balance 2% p.a. of the due amount

    Eligibility for Small Business Loan

    Listed below are the general conditions for eligibility for a Small Business Loan set by financial lenders”

    • The applicant should be a resident of India.
    • The applicant should be a self-employed individual with at least 3 years business experience.
    • Should be a minimum of 21 years.
    • Should provide proof of business turnover and IT returns of the last 2-3 financial years.
    • Balance sheet of the business should show profitability.

    Documents Required for Small Business Loan

    Listed below are the documents that Small Business loan applicants will have to submit for verification:

    • Proof of identity – Aadhaar card, Passport, Voter ID Card, etc.
    • Proof of address – Passport, Utility bill, Voter ID card, etc.
    • 6 months’ bank statements.
    • Business Income Tax Certificate, Balance sheet showing profits and loss of the last 2 yeats that has been certified by a Chartered Accountant.
    • Proof of business – establishment license, trade license, etc.
    • Sole proprietor deed, partnership deed, etc.
    • House property or commercial property documents – for secured business loans.

    Benefits of Small Business Loans

    • Easily accessible

    Since many lenders including banks and non-banking financing companies (NBFCs) offer small business loans to their customers, it is easy for companies to receive financial aid for their business needs using this scheme. With multiple online EMI calculators available, borrowers can also plan their loans better beforehand to avoid loan rejections and manage their finances better. Additionally, most of the banks and NBFCs offering this kind of a loan provide online applications to allow their customers to keep a track of their loans after the amount is disbursed. Borrowers can remotely check details such as interest certificate, payment schedule, repayment history, etc. through these applications.

    • Multiple repayment options

    When an entrepreneur opts for this financing plan to fund his or her business venture, he/she has the option to repay the loan using a repayment method that is convenient to him/her. Since lenders understand the difficulties and underlying complexities involved in running a business, they might devise a personalised repayment plan before sanctioning the loan. This not only helps the borrower manage the business cash flow better, but also make timely loan repayments. Under this scheme, customers can also choose to increase/reduce the EMI amount or opt for the bullet payment method as per the financial condition of the business.

    • Hassle-free application process

    Due to minimal documentation and simple application process, this scheme is preferred by many entrepreneurs to fund their business requirements. Many banks and NBFCs provide online application method to the borrowers so that they can easily apply for this scheme without having to step out of their houses.

    • Quick fund disbursal

    When a businessman applies for a loan under this scheme looking to start a new venture or expand his or her current company, he/she can be assured that the funds will be quickly disbursed to his/her account. Owing to the fast loan application and approval process, borrowers can get access to quick funds when applying for a small business loan.

    • Customisable solutions

    Whether you are planning to start a new business or looking to expand/upgrade your current one, you will have the flexibility to opt from a wide range of customised solutions to suit your specific business need. This will help you choose a plan that suits the fund requirements of your unique business.

    • Affordable interest rates

    The interest rate of small business loans depends on various factors such as the loan tenure, market dynamics, the credentials of the applicant, the financial condition of the business, etc. Most government-backed financing schemes offered by banks and NBFCs offer loans at low interest rates to help business owners repay their debts on time, thereby, reducing the chances of a bad loan. Usually, these loans also have nominal processing fees and other one-time charges with no hidden fees.

    • Helps manage business finances better

    Since a healthy amount of cash flow is required to keep a business running, these loans are a great way to gain access to funds in order to gain a competitive edge while increasing the amount of revenue generated. The funds from this loan can be used to start a new business branch, launch a marketing campaign, or upgrade an inventory to deal with the sudden demands of a seasonal business. Then, the profit earned from these routes can be used to repay the debt and for further reinvestment. Furthermore, most of the lenders do not specify how the funds should be invested. Therefore, the business owners have the complete flexibility to use it as per their business requirements.

    • Tax relief for businesses

    Under the Income Tax Act, 1961, small business loans also offer tax benefits to the borrowers. Therefore, the interest paid on such small business loans are eligible for tax deductions.

    • No collateral required

    Many banks offer small business loans to their customers without any collateral. Therefore, availing such loans means there are less chances of businesses losing their assets in case they default during the repayment of their loans. In such cases, the business is assessed based on its expected receivables and cash flow. Before applying for this loan, it is advisable that the entrepreneur consults the lender regarding the requirement for collateral to avoid any future conundrum.

    Types of Small Business Loans in India

    Government: As mentioned above, the government has mooted special schemes to boost the capacity of small business units across the country. Loans are provided to the elderly, minorities, factory equipment or office expenditures among many others.

    Micro loans: The maximum repayment term is six years. Microloans are offered provided there is a robust business plan and a profitable venture.

    Business organizations: Large business conglomerates can offer financial assistance to small business units provided the latter show potential for growth and are lucrative in terms, turnover to repay the loan amount. Some examples include franchise loans and export financing. Documents required include a sound business plan, financial status report, credit ratings, and cash flow projections among many others.

    Personal loans: Several banks offer personal loans anywhere from Rs. 10 to 25 lakh which are typically unsecured at 18 to 24%. The loans are repaid through installments.

    Professional loans: These are unsecured loans provided to self-employed professionals such as chartered accountants, company secretary, doctors and so forth. It does not encompass manufacturing and processing units. The loan amount varies from Rs. 25,000 to Rs. 25 lakh depending on the financial status of the applicant, loan tenure and repayment capacity at a rate of interest which depends on the prime lending rate.

    Project Finance: Provided for new long-term infrastructure or industrial projects with flexible repayment terms on the basis of the project assessment report.

    Equipment Finance: Provided to buy new equipment or lease equipment for business units.

    Working Capital Loans: Provided for daily business needs for smooth functioning of the units.

    Bill discounting: Provided to ensure that your unit discounts bills before the maturity date.

    Lease rental: Provides term loan against lease contracts to facilitate business requirements.

    Financial advisory: Provided for assistance by financial experts.

    Insurance: Provides finance for insurance solutions for better safety.

    Trade loans: Provided to traders for starting a new business enterprise or expand the current business unit. The loan is repaid through Equated Monthly Installments or EMIs. The rate of interest is based on the prime lending rate (fixed and fluctuating). Some banks ask customers to submit collaterals such as land, National Savings Certificates, life insurance policies, etc. In addition, shares and bonds are also accepted as collaterals against which loans could be provided.

    Steps to apply for a Small Business Loan

    Listed below are the online and offline steps to apply for a business loan:

    • Online process:
    • If the financial lender has the online application facility, visit the website.
    • Under the loans section, choose business loans or small business loans.
    • Download the application form and fill in the required details.
    • Submit the application form.
    • Once intimated by the customer service team of the lender, submit the required for verification.
    • If eligible, the loan will be approved, and the loan amount will be disbursed within a few days.
    • Offline process:
    • Visit the branch of the financial lender and procure the business loan application for,.
    • Fill in the required details, attest the form and submit all the required documents.
    • The lender will then verify the submitted documents.
    • If found eligible, the bank will disburse the loan amount.

    Things to consider before applying for a Small Business Loan

    Before applying for a Small Business Loan, individuals should keep the points listed below in mind:

    • Shop around for the right business loan

    Since a lot of lenders now offer business loans online, make a comparative analysis between lenders keeping in mind the tenure of the loan, the loan amount, interest rates, fees and charges, etc. Choose one that suits your finances and business goals.

    • Know the loan amount you are eligible for

    Financial lenders will take into consideration the eligibility of the candidate which is based on his/her business turnover, ITR certificate, experience and so on. Ensure that you are eligible for the loan amount that you are applying. You can do this using eligibility calculators.

    • Have your documents in place

    Ensure that you have all the required documentation when applying for the loan and there are no discrepancies between the documents.

    • Calculate the EMI

    Based on the loan amount, interest rate and processing fee, calculate the EMI using a calculator to plan your finances accordingly.

    FAQs

    1. Which is the best way to pay my EMIs of the Small Business Loan?

    Ans: You can pay your EMIs via standing instructions with the lender for an auto debit or through your net banking account. You can also give the lender postdated cheques for the EMIs.

    2. Is my individual CIBIL score important to avail a business loan?

    Ans: The turnover of the business is important, and your individual credit score will not be taken into consideration.

    3. How will I know if my small business loan is approved?

    Ans: Using the application reference number, you can check the status of the loan using your net bankig account. In addition, when the loan is approved, the lender will get in touch with your via SMS or email before the disbursement of the loan amount.

    4. Is it possible to cancel my application though the loan has been approved?

    Ans: Yes, you have the option of cancelling the loan before the disbursement of the loan amount. You will not be charged a fee for cancellation at this point.

    5. Are the interest rates fixed by lenders offering small business loans?

    Ans: No, the interest rate will change based on the lender and the applicant. It is not standard or fixed.

    6. I have an idea for a startup. Can I apply for a business loan?

    Answer: It can be really challenging to get a small business loan for a business idea as most banks prefer lending to businesses that have been running for at least 6 months. However, there are some NBFCs that may offer you loans based on your business idea. Remember to explore all the options available before you pick a specific lender for a business loan. If in worst cases, you are unable to find a lender to fund your business idea, you can always avail a personal loan and use it to fund your business idea.

    7. How can I repay the small business loan I have availed?

    Answer: You can repay the business loan availed in 3 ways – Post Dated Cheques (PDCs), Direct Debit, and Electronic Clearing Service (ECS). The last 2 ways are the preferred mode of repayment by most borrowers and lenders alike.

    8. What is the maximum amount of loan that can be availed as a small business loan?

    Answer: The maximum amount of loan that can be availed as business loan will vary according to a lot of factors such as type of business, the lender, credit score of the applicant, etc. The maximum loan amount can go up to Rs.2 crore based on the mentioned factors.

    9. Do I have to provide any security or collateral to apply for a small business loan?

    Answer: There are many lenders who will not ask you to provide a collateral or security for small business loans but there are also a few who might. Collaterals may, however, help borrowers get a higher loan amount as this will give confidence to the lenders that in case of defaults, they can sell the asset provided and recover the loan amount.

    10. What is the EMI that I need to pay on the small business loan?

    Answer: The amount of EMI will depend on the amount of loan you avail and also the repayment tenure you choose. You can use the EMI Calculator available on the website of BankBazaar under the ‘Finance Tools’ section to calculate the EMI on your business loan.

    11. Is the interest rate on a small business loan floating or fixed?

    Answers: Most lenders will offer a fixed rate of interest on small business loans which means that there will be no fluctuation in the interest rate during the chosen repayment tenure. A fixed rate of interest allows the borrower to predict his/her future payments.

    12. What can the loan availed as small business loans be used for?

    Answer: Small business loans can be used for a variety of purposes such as expansion of business to another town or city, increase the cash flow of the business, office renovation, purchase of raw materials, lease bigger office spaces, scale up the operations of the business, etc.

    13. If I am engaged in khadi activity, am I eligible to avail the Mudra loan offered by the government?

    Answer: Yes, khadi activities are eligible for Mudra loans. In fact, any activity that generates income in the areas related to manufacturing, trading, or services is eligible for availing Mudra loans.

    14. What is the maximum repayment tenure offered on small business loans?

    Answer: The maximum repayment tenure on small business loans will depend on the lender and the amount of loan taken. However, the maximum tenure offered by lenders is 60 months.

    15. Is opening a fashion boutique eligible for a small business loan?

    Answer: Yes. Since a fashion boutique will generate income, it is eligible for a small business loan.

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