Business Loan Interest Rates

Starting a business includes numerous factors such as planning, organising, staffing, etc. Attaining an ideal business loan is the most critical factor in adequately funding the business, which depends highly on the business loan interest rate. IIFL Finance’s business loan products are designed to offer attractive and affordable business loan interest rates to assist you in achieving your business goals, without creating a financial burden. When you take a business loan from IIFL Finance, you get the best business loan interest rate in India customised as per your desired loan amount, the loan tenure and your financial situation.

IIFL Finance Business Loan Interest Rates

IIFL Finance ensures that your finance needs are met promptly and that you can focus on business growth without worrying about day-to-day business expenses.
IIFL business loan is available at attractive rates and reasonable charges.

Rate of Interest:

12.75% - 44% p.a.

Loan Processing Charges:

2% - 9% + GST

Nach / e-mandate bounce Charges (In Rupees):

Upto Rs. 2500/ + GST (if applicable)

PENAL / DEFAULT CHARGES: (To be charged in case of any failure to make timely payments)

24% p.a. +GST (if applicable)

Document Charges + GST (in Rupees)

Upto Rs.4000 + GST

Bank Swapping Charges

Rs.500 + GST (If applicable)

Other Charges (NESL Reporting)

As Applicable*

These charges shall be charged annually in accordance with the fee schedule provided by NESL and are subject to change by NESL.
Within 6 months from the date of first drawdown
7% of the outstanding loan amount together with applicable taxes
On and from the 7th month and up till 24th month from the date of first drawdown
5% of the outstanding loan amount together with applicable taxes
After 24 month from date of first drawdown
4% of the outstanding loan amount together with applicable taxes

Calculation of Business Loan Interest Rate

At the time of availing of a business loan, the lender offers the principal amount with a business loan interest rate which is the extra amount borne by the borrower at the time of loan repayment. Hence, you must determine the business loan interest rate for the desired loan amount beforehand to understand your financial obligations.

The basic formula to calculate EMI and interest rates on business loans is:

P * r * (1+r) ^n / ((1+r) ^n-1).

You can understand how to calculate the loan interest rate on business loans from the below example:

Let’s say that you want to take a business loan of Rs 1 lakh (P), with an interest rate (r) of 15% and a loan tenure (n) of 1 year. Knowing these factors, you can calculate the MSME loan interest rate by putting the figures in the above formula:

EMI = [P x R x (1+R) ^N]/ [(1+R) ^ (N-1)]

EMI Equated Monthly payment
P Principal Amount
R Rate of Interest
N Tenure

Your total payment of ₹1,08,310 includes an interest payable amount of ₹8,310 with an EMI amount of ₹9,026/month.

The above method of manually calculating the payable interest can be complex. IIFL Finance has designed an online business loan EMI calculator to let you calculate the SME loan interest rate aspect along with the overall due interest on the loan.

You can head over to the IIFL website to use the business loan EMI calculator by entering some basic information such as the desired loan amount, the loan tenure and the applicable interest rate. Afterwards, IIFL Finance’s business loan EMI calculator will show the total payable interest, total payment including the principal and interest amount and your monthly EMI.

Tips to Avail Business Loans at Low Interest Rates

Every entrepreneur who wants to start a business, such as an MSME, wants to avail of a business loan at the lowest interest rate a lender has to offer. However, numerous factors can affect the MSME interest rate, some of which can be managed to lower the interest rate. Here are some tips to lower the business loan rates:

  1. Maintain a good credit score, preferably above 750 out of 900.

  2. Try not to default on any interest payments to maintain a good credit history.

  3. Ensure that you have a consistent source of income with a financial blueprint.

  4. Avail of a business loan only from a reputed and experienced financial entity.

  5. Use online tools and calculators to ensure the interest rate is affordable.

Factors that affect Business Loan Interest Rates

Business loan interest rates differ from lender to lender and borrower to borrower. The fluctuations in the interest rate occur due to various personal and external factors that can affect the borrower and the capital-raising capability. Here are some of the main factors that can affect the interest rates on a business loan:

  1. Nature of Business: As a business loan funds the activities and operations of the business, the nature of the business affects the commercial loan interest rates. Every lender classifies the business loan based on priority and non-priority sectors.
    Priority sectors contribute highly to the GDP but face challenges in obtaining a business loan. Non-priority sectors are those which are always ready to lend credit. Loans that fall under the priority sector have a lower interest rate than loans associated with the non-priority sector.

  2. Business Existence: Every business goes through ups and downs, and lenders analyse a business based on its sustenance. The longer your business has been operating, the lower the interest rate offered by the lender. However, a business must exist for a minimum of two years.

  3. Business Turnover: Similar to lenders analysing your monthly income before offering a personal loan, lenders analyse the business turnover to determine the loan repayment capacity of your business.
    If your business is consistent and profitable, there is a high possibility that the business loan interest rate will be lower than for a business making constant losses.

  4. Credit Score: A credit score determines your creditworthiness and provides a way for the lender to ascertain your ability to repay the business loan. If you have taken any type of loan in the past and repaid the interest and the principal amount without defaulting, you will have a good credit score. A good credit score (750 and above) is a key factor affecting business loan interest rates. The higher the credit score, the better your chances of loan approval.

Business Loan Interest Rate FAQs

The rate of interest on business loans is the amount levied by the lender over the principal amount. Such rates range between 12.75% - 44% per annum.

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The processing fee is the amount borne by the lender while processing and sanctioning the business loan. IIFL Finance charges processing of 2%-9% +GST.

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The EMI bounce charge is levied on the borrower by the lender for missing an EMI payment during the loan tenure. Generally, such a charge is up to Rs 1,200.

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A foreclosure charge is levied on the borrower by the lender for repaying the loan before the loan tenure. A foreclosure charge of 7%+GST is levied if the business loan is prepaid within 1-6 months of EMI repayment.

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You can take an instant business loan with IIFL Finance for a minimum loan tenure of 1 year and maximum loan tenure of 3 years.

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Yes, pledging an asset as collateral or security is mandatory to avail of a business loan. The higher the value of the pledged asset, the higher the business loan amount.

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