Business Loan Interest Rates Overview
Business loan interest rates in India range from 8% (government schemes) to 24%+ (unsecured NBFC loans). Your actual rate depends on business profile, collateral, and loan type.
Public Sector Bank Rates
| Bank | Secured Loan | Unsecured Loan | Processing Fee |
|---|---|---|---|
| State Bank of India | 9.75% - 13.50% | 14.00% - 17.50% | 0.50% - 1% |
| Bank of Baroda | 9.85% - 14.00% | 14.50% - 18.00% | 0.50% - 1% |
| Punjab National Bank | 10.00% - 14.25% | 14.75% - 18.50% | 0.75% |
| Canara Bank | 9.90% - 13.75% | 14.25% - 17.75% | 0.50% |
| Union Bank | 10.00% - 14.50% | 15.00% - 18.00% | 0.75% |
Best PSU Bank Rate
SBI offers the lowest PSU bank rates starting at 9.75% for secured business loans. Maintain good relationship with bank and provide collateral to get best rates.
Private Bank Rates
| Bank | Secured Loan | Unsecured Loan | Processing Fee |
|---|---|---|---|
| HDFC Bank | 11.00% - 15.50% | 15.00% - 21.00% | 1% - 2% |
| ICICI Bank | 11.25% - 16.00% | 15.50% - 22.00% | 1% - 2% |
| Axis Bank | 11.50% - 16.50% | 16.00% - 22.50% | 1% - 2% |
| Kotak Mahindra | 12.00% - 17.00% | 16.00% - 24.00% | 1% - 2.5% |
| Yes Bank | 12.50% - 17.50% | 17.00% - 23.00% | 1.5% - 2% |
NBFC Business Loan Rates
| NBFC | Interest Rate | Loan Amount | Processing Fee |
|---|---|---|---|
| Bajaj Finserv | 14% - 26% | Up to Rs. 50L | 2% - 3% |
| Tata Capital | 15% - 24% | Up to Rs. 75L | 2% |
| Lendingkart | 18% - 27% | Up to Rs. 2 Cr | 2% - 3% |
| Capital Float | 17% - 25% | Up to Rs. 50L | 2% |
| FlexiLoans | 16% - 28% | Up to Rs. 1 Cr | 2% - 4% |
Government Scheme Rates
| Scheme | Interest Rate | Loan Amount | Subsidy |
|---|---|---|---|
| Mudra - Shishu | 8% - 12% | Up to Rs. 50K | Nil |
| Mudra - Kishor | 8.5% - 12% | Rs. 50K - 5L | Nil |
| Mudra - Tarun | 9% - 12% | Rs. 5L - 10L | Nil |
| Stand-Up India | MCLR + 3% | Rs. 10L - 1 Cr | 25% for SC/ST |
| CGTMSE | Bank rate | Up to Rs. 5 Cr | Guarantee cover |
Factors That Determine Your Rate
- Business Vintage: Older businesses (3+ years) get 1-2% lower rates
- Annual Turnover: Higher turnover = better rates
- Profitability: Consistent profits improve rates
- Collateral: Secured loans are 3-5% cheaper
- Credit Score: 750+ CIBIL for best rates
- Industry Type: Manufacturing preferred over trading
- Banking Relationship: Existing customers get discounts
Interest Cost Comparison
For Rs. 25 lakhs loan, 5-year tenure:
| Lender Type | Rate | EMI | Total Interest |
|---|---|---|---|
| PSU Bank (secured) | 11% | Rs. 54,369 | Rs. 7,62,140 |
| Private Bank | 14% | Rs. 58,189 | Rs. 9,91,340 |
| NBFC | 18% | Rs. 63,559 | Rs. 13,13,540 |
| Mudra Loan | 9% | Rs. 51,887 | Rs. 6,13,220 |
Choosing Mudra over NBFC saves Rs. 7 lakhs in interest!
Tips to Get Lowest Business Loan Rate
- Apply for government schemes first (Mudra, Stand-Up India)
- Provide collateral to reduce rate by 3-5%
- Maintain 3+ year banking relationship with one bank
- Keep ITR filed and updated for past 3 years
- Maintain personal CIBIL score above 750
- Show consistent turnover growth
- Compare at least 5 lenders before finalizing
- Negotiate processing fee waiver
Frequently Asked Questions
NBFCs have higher cost of funds (they borrow from banks) and take higher risks with faster approval and less documentation. They serve businesses that may not qualify for bank loans. The premium covers risk and convenience.
Yes, especially for larger loans (Rs. 25 lakhs+). Show competing offers from other lenders, offer additional collateral, or commit to long-term banking relationship. Banks have flexibility of 0.5-1% for good customers.
Yes, interest paid on business loan is 100% tax deductible as business expense under Income Tax Act. This effectively reduces your interest cost by your tax bracket percentage. A 30% tax payer saves 30% on interest cost.
Most business loans are floating rate linked to MCLR/RLLR. In falling rate scenario, floating is better. Fixed rate provides payment certainty for budgeting. For short tenures (1-3 years), floating rate is generally preferred.
Conclusion
Business loan rates in 2026 range from 8% (government schemes) to 28% (high-risk NBFCs). PSU banks offer best rates but have stricter eligibility. Always explore government schemes first, provide collateral when possible, and compare multiple lenders to get the lowest rate for your business profile.
Use our Business Loan EMI Calculator to compare interest costs!