Which Loan is the Best for Business: You often require extra money to grow your business, whether that is a small shop, a new company, or a mature corporation. This might be to expand operations, add additional employees, purchase new equipment, purchase inventory, or streamline procedures generally. Generally speaking, all of these require additional cash.
One great way to bring that kind of money on board is by getting in touch with a lending company to get a business loan. Now, before you jump to the conclusion about what type of business loan you want or which company is best to approach, you should enquire if you meet the business loan eligibility requirements or not. And, the business loan interest rate you are eligible for.
Applying for an MSME Business loan is one of the best ways to meet your financial needs and Business loan by Government schemes are some of the best options for small and medium businesses. However, other banks and lending companies like HDFC Business loan are taking over the market by storm with their lower business loan interest rate and high return on investments.
This analysis and exploration of different types of loans is the first investment you make in your business expansion. In this article, we will give you a thorough analysis of Business loan by Government, and Business loan eligibility.
Business Loan by Government
Business loan by Government comes with favourable terms for small and medium businesses such as a lower business loan interest rate, and lower collateral.
The Pradhan Mantri Mudra Yojana (PMMY) scheme offers monetary assistance targeted to bring micro businesses to new heights. In India, you will find banks and lending partners such offering business loans with suitable interest rates.
These loans are categorized into 3 different types:
- Shishu – loans up to ₹50,000
- Kishore – loans from ₹50,001 to ₹5 lakh
- Tarun – loans from ₹5 lakh to ₹10 lakh
Loan seekers can get an MSME Business loan of up to 2 crore without collateral by different lending partners and Indian banks under this scheme sanctioned and guaranteed by Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
Other Government schemes and plans to provide customized MSME business loans to business owners are Stand-Up India, PSB Loans in 59 Minutes, and National Small Industries Corporation (NSIC) subsidies.
Benefits of Business Loan by Government:
- Reduced interest rates as a result of government assistance
- Very little collateral is needed.
- Supports new and small enterprises.
Drawbacks of Business Loan by Government:
- Funding is restricted according to certain standards.
- The application procedure could take a long time.
- Frequently impacted by changes in politics or the economy.
Business Loan Eligibility
The following are the parameters of the business loan eligibility:
- Self-employed people, business owners, private limited companies, and partnership firms engaged in trading, manufacturing, or providing services.
- The company should make at least 40 lakhs of rupees a year.
- People with five years of overall business experience who have worked for the current company for at least three years.
- Those whose company has made money over the last two years
- The minimum annual revenue (ITR) of the company should be ₹1.5 lakhs annually.
- When applying for a loan, the applicant must be at least 21 years old, and when the loan matures, they must not be older than 65.
MSME Business Loan Eligibility
Below is a table classifying the MSME Business loan into 3 sections. The MSMED Act of 2006 (as amended from time to time) defines MSMEs. The type of a business under Small, Micro, and medium categories is determined by various aspects including yearly turnover, and investment in plant and machinery determine.
| Classification | Micro | Small | Medium |
| Manufacturing Enterprises and Enterprises rendering Services | Investment in Plant and Machinery or Equipment: Not more than Rs.1 crore and Annual Turnover ; not more than Rs. 5 crore |
Investment in Plant and Machinery or Equipment: Not more than Rs.10 crore and Annual Turnover ; not more than Rs. 50 crore |
Investment in Plant and Machinery or Equipment: Not more than Rs.50 crore and Annual Turnover ; not more than Rs. 250 crore |
HDFC Business Loan Interest Rate
| Fee | Charges |
| Rack Interest Rate Range | Minimum 10.75% and maximum 22.50% |
| Loan Processing Charges | Up to 2.00%* of the loan amount
*NIL Processing Fees for loan facility up to ₹5 Lakhs availed |
| Stamp Duty and other statutory charges |
As per applicable laws of the state |
Final Take
In this article, we have discussed Business loan interest rates, MSME Business loan, and Business loan eligibility criteria, along with their key advantages and potential drawbacks. By now, you should have a clear picture of what type of business loans are available according to your needs. From Business loan by Government to HDFC Business Loan, there are plenty of options to choose from. With the help of this guide, you can make an informed decision.
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