Business loans are priced very differently from personal loans — lenders are assessing a business's viability, not just an individual's salary and credit score, which means the preparation required is genuinely different too.
What actually drives your interest rate
Rates for business term loans commonly range from around 9% for well-established businesses with strong financials and collateral, up to 20%+ for newer or unsecured loans. The gap is driven mainly by business vintage (most lenders want to see 2-3 years of operations), consistent revenue and profitability, and whether the loan is secured against business or personal assets.
Secured vs unsecured — the trade-off
Unsecured business loans (no collateral) are faster to get and don't put an asset at risk, but come at a meaningfully higher rate. Secured loans, backed by property or business assets, typically unlock better rates and larger loan amounts, at the cost of putting that asset on the line if repayment falls behind.
Documents that speed up approval
- Last 2-3 years of business financial statements and ITR
- Bank statements (typically last 12 months)
- GST returns, if registered
- A clear statement of loan purpose (equipment, working capital, expansion)
Term loan vs working capital — know which you actually need
A term loan is a fixed amount repaid via EMI over a set period, suited to one-time needs like equipment purchase or expansion. Working capital loans function more like a revolving credit line for managing day-to-day cash flow gaps, and don't follow a fixed EMI structure the way term loans do — applying for the wrong type is a common early mistake that leads to mismatched repayment expectations.
A practical tip before applying anywhere
Lenders respond better to a clear, specific purpose ("₹8 lakh for two new machines to increase production capacity") than a vague one ("business expansion") — having your numbers and purpose tightly defined before applying tends to speed up both approval and the rate you're offered.