Business Loan interest rate

Business Loan In India

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Business Loan Interest Rate

Business loan is taken by businessmen or entrepreneurs to meet with their business related needs. Business loan is an unsecured type of loan and the funds from this loan are used for business purposes only. The funds from this loan can be used for working capital, business expansion, for buying machinery or equipment, for developing infrastructure etc. Many banks and NBFCs around India offer exciting business loan with nominal eligibility criteria. The list of documents required and eligibility criteria to avail a business loan differs from bank to bank as per their policy terms.

Banks and NBFCs offer mainly two types of interest rates when it comes to business loan: Fixed Interest Rate & Floating Interest Rate.

Fixed Interest Rate for Business Loan:

In this type of interest rate, the interest rate on the principal loan amount doesn't change throughout the tenure. It isn't affected by the fluctuating market interest rates. Businessmen, who have a fixed monthly budget to pay for EMI, choose this type of interest rate.

Why should I take a Business Loan in Mumbai?

Mumbai with a population over 18 million is the finance capital of India. Mumbai is host to almost all types of industries like Banking, Finance, IT, Entertainment industry, Wedding planning, Medicine & Hospitals, Transport, Construction and many more. Be it a first time Entrepreneur or a Company that's older than a century, everyone needs a loan for their respective businesses at some point of time. Running a business in an extremely competitive city like Mumbai is not so easy. So whenever you find yourself in need of credit to expand or fund your business for multiple reasons, you have an option to choose a business loan. Getting a business loan via Ruloans is the best option in Mumbai as we help you borrow right as per your needs.

Banks and NBFCs in Mumbai also offer special loans for women entrepreneurs. They are customized business loan plans for women to cater their needs and give them a chance to build a competitive business in the market.

Businessmen or entrepreneurs take Quick business loan to meet with their various business related needs. We have listed a few of them below:

Business loan for working capital:

Even in an ongoing business in Mumbai, businessmen require ample amount of funds to sustain and fund for their daily operations. These loans help them to be sustainable soon and it can be paid off once the business starts to grow. This type of loan comes handy in a situation when the business earnings are not adequate.

Business loan for business expansion

Every entrepreneur wants his or her business to flourish beyond the boundaries of Mumbai. This thought comes to their mind when business starts to grow in Mumbai and there is a positive flow of profit. Businessmen understand the need and urge to expand their own business in order to succeed and make profits. But expanding the business beyond Mumbai's borders is not easy, financially speaking. It surely needs a strong monetary backing to meet with the needs of expanding the business. Whether its location, equipments, new recruitments or paying for new communication channel, businessmen need a bucket full of finance. Thus they should opt for business expansion loan. By taking this loan, businessmen can make sure that their respective business touches new heights of success.

Business loan for buying machinery or equipment

Almost all types of businesses in Mumbai need specific machinery or equipments for smooth functioning. Many times these equipments are higher in price. Thus businessmen should opt for this type of loan to buy such equipments and pay it off with profits which will come from the use of these equipments or by putting them out on lease later.

Business loan for developing infrastructure

Having a well built exquisite infrastructure is one of the key points of a business in Mumbai. Your clients many times judge you from the infrastructure you work within. Also it is easier for many businesses to have a well sorted customized infrastructure so they can work smoothly with their day to day affairs. Obviously having any kind of infrastructure whether small or large, does not come at cheap costs in a city like Mumbai. Thus businessmen must opt for this type of loan.

Advantages of Fixed Interest Rate for Business Loan:

  • 1. Fixed rate in fluctuating market conditions
  • The businessmen doesn't have to worry of fluctuating changes in the market rates. Even if the interest rates for business loans increase, the businessmen will continue to pay the fixed amount of EMI he has to pay. The businessmen can save an ample amount of money when market rates are higher than his fixed rate of interest.
  • 2. A boon for those businessmen with a strict budget:
  • Many times the businessmen, who have taken a loan, have strict financial budget to pay EMIs and other monthly requirements. Such kind of businessmen can't risk the market fluctuation. With fixed interest rate, they get a notion of security. They can plan their finances in the future as their EMI amount will be rigid due to fixed interest rate.

Disadvantages of Fixed Interest Rate for Business Loan:

  • 1. Higher interest rate amount:
  • In fixed interest rate, the businessmen have to pay nearly 1% to 2.5% higher than the ongoing interest rate. This additional payment results as loss for the borrower. This exact interest rate amount is decided by the banks and NBFCs.
  • 2. Zero benefits of decreasing interest rate:
  • Change 2nd sentence: The businessman has to pay the previously decided EMI amount whereas other borrowers who have opted for floating interest rates can enjoy paying much lower EMIs when market rates fall.

Floating Interest Rate for Business Loan

Change 1st sentence - Here the interest rate on the principal loan amount changes as per the fluctuating market rates throughout the loan tenure.

Change last sentence - If the businessmen opt for floating interest rates, he or she gets to pay a lower/higher EMI amount as compared to businessmen that opted for fixed interest rates.

Advantages of Floating Interest Rate for Business Loan:

  • 1. Benefits of decreasing interest rate:
  • When the interest rate in the market falls, the businessmen enjoy a decrease in the EMI amount. Many times financial leaders predict increase and decreases in the future interest rate. So if the prediction is of decrease then the businessmen should definitely opt for this type. The variety of interest rate helps the businessmen to pay less.
  • 2. Cheaper than fixed interest rate:
  • Floating interest rates are cheaper when compared with fixed interest rates as the former changes from time to time as per market fluctuations. As mentioned above, fixed interest rates are 1% to 2.5% higher than floating interest rates. So the businessmen can surely benefit out of this difference.
  • 3. Saves funds:
  • If the market rate goes up, it surely decreases after a specific period and gives the businessmen a chance to recover the loss in higher interest rate. So it basically helps the borrower to save more by helping to pay less.

Disadvantages of Floating Interest Rate for Business Loan:

  • 1. Unpredictable EMIs:
  • With floating interest rate, the amount of EMI depends on the market fluctuations and changes from month to month. So sometimes the businessmen have to pay double or triple amount of EMI he or she paid a month before. This way the businessmen spend a lot of unnecessary funds every now and then. This EMI amount can't be predicted by anyone as the market changes from time to time. This can shake the businessmen's financial planning every month.
  • 2. Not suitable for fixed income businessmen:
  • As mentioned above, the nature of EMI amounts remains unpredictable in floating interest rate. Thus it is not suitable for those with a fixed income and a fixed monthly budget. An increase in the market rate can lead for such businessmen to flush down more than half of their monthly income. This can send them in financial jeopardy. If they fail to pay their EMI due to this unpredictability, Banks charge them with a late fee that is just like another financial setback.

Credit Score

To get a business loan with easy terms, one needs to have a strong credit score. The credit score is calculated on the basis of loan borrower's earlier financial activities. It basically is a numeric account of the loan borrower's financial profile. Banks and NBFCs consider 750 as an ideal credit score. But some of these lenders offer business loans for credit score as low as 700 too with some level of negotiation.

Business loan amount

The business loan amount which a businessmen will take is one of the main factors that also determine the interest rate for the loan. With loan amount fluctuations, interest rate on the loan will also experience changes.

Following is a list of business loan interest rates offered by various banks and NBFCs in India:

Bank/NBFC Name Interest Rate* Bank/NBFC Name Interest Rate*
HDFC Bank Ltd. 15.50% onwards ICICI Bank Ltd. 12.90% onwards
Kotak Mahindra Bank 15.5% onwards Edelweiss Retail Finance Limited18.25% onwards 18.25% onwards
IndusInd Bank Ltd. 18% to onwards Axis Bank Ltd.14.25% onwards 14.25% onwards
Bajaj Finance Ltd. 16% onwards IntelleCash Microfinance Pvt. Ltd. 18% onwards
Capital First Ltd. 12% onwards IIFL (India Infoline Finance Ltd.) 18% onwards 18% onwards
Capital Float 10% onwards Lending Kraft 18% onwards
Magma Fincorp Ltd. 17.50% onwards DHFL 17% onwards
Clix Capital 18% onwards Yes Bank 13% onwards
Tata Capital Financial Services Ltd. 18% onwards NeoGrowth Credit Pvt. Ltd. 16% onwards
Ratnakar Bank Ltd. 10.65% onwards InCred 18% onwards
Aditya Birla Finance Ltd. 18.5% onwards Shriram City Union Finance Ltd. 11.49% onwards
Equitas Small Bank 22% onwards Essel Finance 17% onwards
IDFC Bank Ltd. 18% onwards Fullerton India Credit Co. Ltd. 22% onwards
HDB Financial Services Ltd. 18% onwards

*The above mentioned statistics are as of December 2017. These can change as per the bank/NBFCs policy terms and the loan borrower's profile.

Business Loan In Mumbai

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