Details of Business Loan Interest Rate in 2022
Many people want to start their own businesses. Those who already have one, want to expand it and make it bigger and more prosperous. Money is needed, whether it is for small and medium-sized enterprises (SMEs) or Multinational Companies (MNCs). These days, startups are cropping up in every part of India, and they need business loans to operate efficiently. Banks offer loans for businesses specifically for this use.
Types of Business Loans
1. Secured loans: Individuals and business owners offer collateral like inventory, real estate, machinery, etc. to get a secured loan. They have longer terms, and the rate of interest is low.
2. Unsecured loans and small business loans: No collateral is required to borrow money for unsecured loans. The tenure of this loan is short, and interest rates are high.
Private and public sector banks, NBFCs, small finance banks, microfinance institutions, regional rural banks, etc. offer business loans. Under the unsecured category, a smaller loan is granted with a repayment term of up to 5 years. In a secured loan, the amount is high, and the tenure to repay is between 15 and 30 years.
Factors Influencing Interest Rates
- Type of Business
The lender divides the loan into priority and non-priority sectors. The rate of interest on loans for the non-priority sector is higher than the rate of interest on loans for the priority sector. As a result, the type of business you have or intend to create will determine the interest rate of your loan.
- Monthly Income and Ongoing Debts
Your company’s monthly income shows whether it is profitable or not. It plays a big role in evaluating whether you qualify for a loan or not. The turnover can fluctuate from time to time. Being consistent is very important because it helps your lender figure out how much you owe and when you have to pay it back.
- Credit Rating and CIBIL Score
Your credit score is based on your credit history and shows your creditworthiness. You will have a good credit score if you have paid a loan on time in the past. Paying credit card bills on time also counts. If you have a good credit score (750 or above), it will work in your favor when you apply for a loan. It will help you have a good CIBIL score. If you have a good credit rating and CIBIL score, you are more likely to get loans from banks and NBFCs. A good credit score helps in getting more perks, less lending rates, and variable tenure or payback options.
- Collateral/Security
Collateral is the security offered as a loan guarantee to the lender. The perks will rise with the value of the collateral. If the bank is given security over highly valued assets like real estate, machinery, equipment, deposits, or home equity. You may get a larger loan amount after looking at the collateral because the risk is low.
Business Loan Interest Rates (2022)
| Name of Bank | Interest Rates (per anum) |
| HDB Financial Services Ltd. | 12 to 60 |
| Axis Bank | 12 to 36 |
| IDFC First Bank | 10.75% p.a. and upwards |
| Fullerton Finance | 12-48 |
| Union Bank of India | 8.90% onwards |
| RBL Bank | 14% p.a. and upwards |
| ICICI Bank | 11.25% p.a. |
| Indifi Finance | 12 to 36 |
| Lendingkart Finance | 3 to 36 |
| Tata Capital Finance | 12 to 36 |
| NeoGrowth Finance | 6 to 24 |
| Hero FinCorp | 12 to 36 |
Startup Business Loans
There are many startups in India, and they have access to various loan and private equity investment sources. The Indian government has introduced starting business lending programs for startups and MSMEs. The Small Industries Development Bank of India (SIDBI) gives loans directly to MSMEs and startups, without banks’ involvement. Startup Business Loans have lower interest rates compared to loans given by banks.
- Bank Credit Facilitation Scheme
Headed by: National Small Industries Corporation (NSIC)
Target: Credit needs of the MSME units
Description: Helps MSME organize the papers that banks want.It enables a large number of MSMEs to obtain credit.
- Pradhan Mantri Mudra Yojana (PMMY)
Headed by: The Micro Units Development and Refinance Agency (MUDRA)
Target: It offers loans to small enterprises, non-farm and non-corporate firms. RRBs, commercial banks, MFIs, etc. offer this loan.
Details: The program gives loans in three ways of Shishu, Kishor, and Tarun, ranging from 50,000 to 10 lakh rupees.
- Standup India Scheme for SC, ST, and Women Entrepreneurs
Headed by: SIDBI
Target: Manufacturing, Agribusiness, or Service Businesses
Details: Under this scheme, you can apply for a loan amount between Rs. 10 lakh and Rs. 1 crore. Loans availed through this program can be repaid in seven years. The maximum moratorium period is 18 months.
Conclusion
We hope this article has explained to you the business loan rates that are offered by the various banks, as well as the schemes offered by the Government of India. Make sure to adjust your loan amount, as per the nature, size, and turnover of your business. Conduct thorough research and select the right plan, keeping these factors in mind. Visit the official website of Piramal Finance to get clarity on different loan types and secure the best startup business loans for your business. Find real, personalized information about a wide range of financial products and services, such as personal loans and different financial calculators, here.