India has over 6.3 crore MSMEs contributing nearly 30% of GDP — and most of them run on borrowed working capital. The business-loan ecosystem has exploded in the last five years, with dedicated NBFCs (Lendingkart, NeoGrowth, Indifi), bank-led MSME divisions, and government-backed schemes (Mudra, CGTMSE, Stand-Up India) all competing for the segment. Picking the right product, lender, and structure matters more than in retail lending because the ticket sizes are bigger and the tenures longer. Here's the comprehensive 2026 guide.
Types of business loans
1. Term loan
Fixed loan amount, fixed tenure (1-7 years), regular EMIs. Used for capex — buying machinery, expanding premises, acquiring equipment. Most traditional product.
2. Working capital loan / Cash Credit / Overdraft
Revolving credit facility, typically renewed annually. You pay interest only on utilised balance. Ideal for inventory purchase, invoice-to-receivable cycle funding. Available at every major bank — ask for CC/OD limit instead of term loan for routine operational needs.
3. Invoice discounting / Bill discounting
Lender advances 80-90% of your receivable invoices immediately; you get paid when client pays. Rate 10-15%. Excellent for B2B businesses with large corporate clients and 60-90 day payment terms.
4. Mudra loan (Pradhan Mantri Mudra Yojana)
Government-backed loans for micro-enterprises, three categories:
- Shishu: up to ₹50,000 — for entry-level entrepreneurs.
- Kishor: ₹50,000 - ₹5 lakh — for growing small businesses.
- Tarun: ₹5 lakh - ₹10 lakh — for established micro-enterprises.
- Tarun Plus: ₹10 lakh - ₹20 lakh (introduced 2024) — for high-growth micro-enterprises.
No collateral, no processing fee. Rate typically 8.5-12% at banks. Available at every public-sector bank, most private banks, and many NBFCs.
5. CGTMSE-backed loan
Credit Guarantee Fund Trust for Micro and Small Enterprises — government guarantees up to 85% of loan amount for MSMEs. Loan size up to ₹5 crore. Lenders lower rates by 0.5-1% because of the guarantee. Particularly useful for collateral-light businesses.
6. Stand-Up India
Loans of ₹10 lakh - ₹1 crore for Scheduled Caste / Scheduled Tribe / women entrepreneurs for greenfield ventures. Rate is base rate + 3%, 7-year tenure with 18-month moratorium.
Best lenders for 2026
Banks (traditional route)
- SBI Business Loan — SBI Asset Backed Loan, Simplified Small Business Loan, e-Mudra. Rate from 10.50%. India's largest MSME lender by volume.
- HDFC Bank Business Loan — rate from 11.50%. Best digital journey; 7-10 day turnaround on collateral-backed loans.
- ICICI Bank Business Loan — rate from 11.25%. Strong on invoice discounting and trade finance.
- Axis Bank Business Loan — rate from 12%. Specialises in medium-ticket unsecured business loans to established SMEs.
NBFCs (speed + flexibility)
- Bajaj Finance Business Loan — rate from 14%. Up to ₹80 lakh unsecured. Pre-approved offers for Bajaj Mall ecosystem sellers.
- Tata Capital Business Loan — rate from 12%. Good for medium-tier businesses with ₹1 crore+ turnover.
- Lendingkart Business Loan — rate from 12-27%. Digital-first, algorithm-driven underwriting using GST + bank statement data. Approvals in 3-7 days.
- NeoGrowth Business Loan — specialises in card-swipe-based lending for retailers. Rate 18-24%. Repayment auto-deducted from daily card sales.
Eligibility — what lenders actually check
| Criterion | Typical threshold |
|---|---|
| Business vintage | 2-3 years (1 year for Mudra) |
| Annual turnover | ₹10 lakh+ (varies by product) |
| Promoter CIBIL | 700+ (650+ for Mudra/CGTMSE) |
| GST registration | Mandatory for most lenders above ₹10L loan |
| Profitability | Positive EBITDA for last 2 years |
| Existing debt | Debt-service coverage ratio > 1.2-1.5x |
Documents you'll need
- PAN and Aadhaar of all proprietors / partners / directors.
- Business registration — Shop Act / Udyam / MSME / partnership deed / MoA + AoA.
- Latest 2-3 years' ITR (business and promoters).
- Latest 12 months' business current account statements.
- GST registration certificate and last 6-12 months' GST returns.
- Audited financials (P&L + balance sheet) for last 2-3 years (mandatory above ₹10L).
- Ownership proof of business premises or rent agreement.
- For collateral-backed: property title + valuation.
Rate benchmarks — April 2026
| Product type | Rate range | Typical tenure |
|---|---|---|
| Mudra Shishu/Kishor | 8.5% - 12% | 3-5 years |
| CGTMSE-backed term loan | 9.5% - 13% | 5-7 years |
| Secured term loan (property) | 9% - 14% | 5-15 years |
| Unsecured business loan (bank) | 11% - 18% | 1-5 years |
| Unsecured business loan (NBFC) | 14% - 27% | 1-3 years |
| Working capital / CC / OD | 9% - 14% | Annual renewable |
| Invoice discounting | 10% - 16% | 30-90 days |
CGTMSE scheme — why every eligible MSME should use it
Under CGTMSE, the government (via SIDBI) guarantees up to 85% of your business loan against default. The lender's risk drops dramatically, so:
- Collateral-free loans up to ₹2 crore become feasible.
- Rates drop 0.5-1% compared to equivalent uncovered loans.
- CIBIL threshold softens (as low as 650 at some lenders).
Most public-sector banks automatically offer CGTMSE coverage on eligible MSME loans. Ask explicitly — it's free and improves terms.
Tips for first-time business borrowers
- Get GST registered and file returns consistently. GSTN turnover is the #1 data point lenders use for underwriting. 12 months of clean returns unlocks 3-5x more loan than 3 months.
- Route all business receipts through a current account. Cash business or personal-account collections kill your bank-statement underwriting.
- Build personal CIBIL to 750+. Promoter CIBIL matters as much as business financials on loans below ₹1 crore. See our credit score improvement guide.
- Start with a Mudra loan. Collateral-free, govt-backed, rates as low as 8.5%. A clean Mudra closure is the best "first credit" tradeline for business borrowers.
- Use invoice discounting for working capital, not term loan. Cheaper, purpose-matched, avoids piling up long-tenure debt.
Explore the options
Our business loans hub lists all 8 major business-loan products with real rates and fees. Run your numbers through the loan eligibility calculator to see which lenders pre-qualify you. If you're also evaluating personal lending as an alternative (for very small ticket sizes), try the AI loan finder.
Business borrowers should also read our best credit cards for self-employed — the right corporate or business-supplementary card can add 2-4% of working capital return.
Frequently Asked Questions
What is the minimum turnover for a business loan?
₹10 lakh annual turnover qualifies for most unsecured business loans. Mudra has no turnover minimum. Large-ticket loans (₹50 lakh+) typically want ₹1 crore+ turnover and 3+ years of audited financials.
Can I get a business loan without collateral?
Yes — Mudra (up to ₹20 lakh), CGTMSE-backed loans (up to ₹2 crore), and unsecured NBFC business loans (up to ₹80 lakh at Bajaj) are all collateral-free options. Rates are 1-3% higher than collateral-backed equivalents.
What is the interest rate for business loan in India 2026?
8.5-14% for secured/govt-backed loans, 11-18% for unsecured bank loans, 14-27% for NBFC unsecured loans. Mudra loans start at 8.5%. Your actual rate depends on product type, turnover, CIBIL, and collateral.
Is Mudra loan really available without collateral?
Yes — Mudra is statutorily collateral-free (CGFMU coverage). Banks cannot demand collateral on Mudra loans. If asked, escalate to the RBI Ombudsman or PMMY grievance portal.
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Loans Editor, OnePaisa Editorial
Prasanth writes on borrowing for OnePaisa — personal, home, car and business loans, and the credit-score questions that decide what a borrower is actually offered. Interest rates, processing fees and eligibility rules in his guides come from lender schedules of charges and official product pages, are cross-checked against OnePaisa's verified lender data, and are dated so readers can see how current they are. A rate that a lender publishes as a range is published here as a range, never as a single teaser number.
Work published under this byline follows OnePaisa’s editorial standards — how our guides are researched, fact-checked against primary sources, and corrected.