A business loan is an excellent option if you are looking for funding for your startup. It can help finance all your business activities. Whether it’s better infrastructure or paying your employees’’ salaries, your business loan can be a saviour.
But what about the business loan interest rate in India? Is it too high? Well, the average interest rate for business loans is around 13-20% per annum.
Read on to learn about startup business loans and their interest rates.
Interest Rates and Other Details About Startup Business Loans
|Interest Rate||17 to 20% per annum|
|Service Charges||4% of the loan amount plus taxes|
|Minimum Loan amount||3 lakhs|
|Maximum Loan amount||10 lakhs or more|
|Tenure||3 years to 15 years, depending on the lender|
Eligibility to Apply for Business Loan
- You should be between 23 to 65 years of age.
- You can be a salaried or self-employed person.
- Both professionals like lawyers and doctors and non-professionals like entrepreneurs can apply for business loans.
- You should have a strong business plan.
- You must have a registered property under your name. It can be your house or a shop from where you are running your business.
Documents Needed to Apply for Business Loan
You must have a PAN card to get a startup business loan. Here are the documents that you will need.
- Proof of Identity (Voter ID card, Aadhar card, Driving license, or passport)
- Bank statement for the past six months
- Your latest Income Tax Returns
- Proof of residence (Utility bills or ID cards)
- Details of your co-applicant, if any
Factors Affecting Business Loan Interest Rates
How long has your business been in existence?
The years your business has been in operation affect your loan interest rate. The longer it has existed, the higher your chances of getting a low-interest loan.
Monthly Turnover of your business
The monthly turnover of your business also impacts your business loan interest rate. That’s because it shows your ability to repay the loan.
So, having a high turnover and making consistent profits can help you get a lower interest rate on your business loan.
Your credit score shows the creditworthiness of your business. The score depends on your past credit history. If you have a decent credit score, you can easily get a lower interest rate for your business loan.
Pro tip – Pay all your dues and EMIs on time to maintain a good credit score.
It is the security that you pledge to your lender in return for the loan. Giving collateral helps you get a higher loan amount and lower interest rate.
The higher the value of your collateral, the lower your interest rate will be.
Note – Don’t worry. Some lenders let you apply for a business loan even without collateral.
Tips to Get A Business Loan at Low-Interest Rates
Here are some practical tips to get startup business loans at lower interest rates.
- Maintain a decent credit score of 750 or above.
- Pay all your EMIs and credit card bills on time.
- Offer high-value collateral if possible.
- Apply at one of the top banks or NBFCs.
Advantages of Business Loans
Flexibility of usage
Imagine a renowned investor agreeing to invest in your business. They will take care of all your business expenses. However, it’s natural that they’ll also interfere with your business decisions.
But you won’t face that problem if you take a business loan. That’s because your lender won’t check where you are using the loan amount. You can use it to meet your business expenses according to your wishes.
Affordable interest rates
Business loan interest rates in India are quite affordable. That’s because of the competition among different lenders to grab the attention of the borrowers.
Easy and convenient
It’s super convenient to get a business loan. Other options for fundraising, like crowdfunding or borrowing from friends and relatives, aren’t reliable. Moreover, that might take a lot of time. But getting a business loan from a lending institution takes minutes.
No collateral required
A loan against property or gold loan will require you to offer collateral or security to your lender. If you fail to repay the loan, your lender might seize the collateral.
However, you can get a business loan even without collateral.
Who doesn’t love to save taxes? The interest you pay for business loans is tax-deductible. That means you can also save more.
Improved credit score
Taking a business loan can help you improve your business credit score. That will make you eligible for higher credit in the future.
When you repay your loan on time, it improves your credit score. That boosts your creditworthiness in the market.
Boost your business with a startup business loan
Apply for a business loan now if you plan to grow your business. Piramal Finance offers competitive interest rates. Moreover, there is minimum paperwork, and you don’t need any collateral.
- How to get the lowest interest rate business loan?
Compare the rates offered by different financial institutes. That will help you get the lowest interest rate on your business loan. You can also watch for offers during festivals when some lenders lower their interest rates.
- Do I need collateral to apply for business loans?
Some lenders might ask for collateral while applying for business loans. However, Piramal Finance doesn’t require any collateral; for granting business loans.
- How to repay my business loan?
You can repay your business loan by any method of your choice. You may give post-dated cheques or opt for electronic transfer.
- Is the business loan interest rate fixed or floating?
It depends on the lender you are borrowing from. Some lenders let you choose if you want a fixed or floating interest rate.
- Are there any pre-closure charges for business loans?
Yes, the preclosure charges of your business loan can range from 0 to 5% of your loan amount.