Business loans can be defined as “financial solutions” provided to entrepreneurs/businesses to assist them in managing their business expenditures/how they are growing. Yet, there are many different purposes for which business loans can be used (working capital; buying equipment; expanding the operation; hiring staff; cash flow management). You may find secured as well as unsecured business loans, depending on the lender and borrower’s profile.

In India - Business loan interest rate/charges vary widely due to a number of different factors however, on average business loans will typically have interest rates ranging from 10% - 24% (annualized). Additionally, various factors such as the credit score of the borrower (generally a minimum of 650), as well as annual turnover; profitability; alternative sources of income etc. is used to determine the lending rate for any given business loan. In addition, lenders might charge borrowers various fees, processing fees (1% - 3%); prepayment fees and late payment fees.

To qualify for a business loan the applicant must be an entrepreneur/business owner individual, partnership or company. Additionally, the applicant must also have a minimum 1 to 3 years of business operating history “business vintage”. Finally, in evaluating whether or not the applicant qualifies for a business loan, lenders will review a variety of criteria including; annual turnover; profit history; banking transaction history either business account or personal account depending on how the entrepreneur/business owner owns and operates their business and the applicant’s credit score again, typically a score of 650 or more.

Based on revenue, cash flow, and repayment history of the business, typical lenders will approve loans between ₹50,000 and ₹5 crores. Loan sizes will be determined using documentation, including ITR returns, balance sheet account reports, tax account confirmations through profit and loss (P&L) statement summaries, as well as bank statements with 6–12 months average balance..