When it comes to running a business, having access to timely funds is essential for growth and survival. Whether you need money for expansion, purchasing equipment, or managing working capital, business loans are often the go-to solution. However, the interest rate on a business loan can make a significant difference in the total repayment amount. That’s why comparing business loan interest rates before applying is crucial.
In this guide, we’ll explore everything about business loan interest rate comparison—from the types of loans, factors influencing rates, to a detailed comparison table of leading lenders in India for 2025.
Why Business Loan Interest Rate Matters
The interest rate directly affects the total cost of borrowing. A slight difference of 1–2% can save or cost a business lakhs of rupees over the loan tenure. For example, if you borrow ₹50 lakh for 5 years, an interest rate difference of just 1% could mean an extra ₹1–1.5 lakh in total repayment.
Thus, understanding and comparing interest rates helps entrepreneurs:
- Reduce EMI burden
- Improve cash flow
- Choose the right lender based on affordability
- Make better financial planning decisions
Types of Business Loan Interest Rates
Business loans usually come with two types of interest rates:
1. Fixed Interest Rate
- Remains constant throughout the loan tenure.
- Easier to plan EMIs since there are no fluctuations.
- Usually higher than floating rates.
2. Floating (Variable) Interest Rate
- Changes based on the lender’s benchmark rates (like MCLR, Repo-linked rates).
- Can be lower initially but may increase during the tenure.
- Suitable for businesses that can take on a little risk.
Factors That Influence Business Loan Interest Rates
Different lenders use different criteria to determine the rate offered. Key factors include:
- Business Vintage – Companies with a proven track record get better rates.
- Credit Score – A high personal and business credit score (750+) ensures lower interest rates.
- Annual Turnover & Profitability – Strong financials reduce lender risk.
- Collateral – Secured loans generally come at lower rates than unsecured loans.
- Loan Amount & Tenure – Larger amounts and longer tenures may influence the rate.
- Lender Type – Banks usually offer lower rates compared to NBFCs or fintech lenders.
Business Loan Interest Rate Comparison – India 2025
Here’s a comparison table of business loan interest rates from top Indian banks and NBFCs (indicative figures as of 2025):
| Lender | Interest Rate (p.a.) | Loan Amount | Tenure | Processing Fee |
|---|---|---|---|---|
| State Bank of India (SBI) | 8.40% – 12.35% | ₹50,000 – ₹20 crore | Up to 7 years | Up to 2% |
| HDFC Bank | 10.00% – 22.00% | ₹1 lakh – ₹50 lakh | 1 – 5 years | 0.99% – 2% |
| ICICI Bank | 9.75% – 18.50% | ₹50,000 – ₹40 lakh | 1 – 7 years | Up to 2% |
| Axis Bank | 10.49% – 19.20% | ₹50,000 – ₹50 lakh | 1 – 7 years | 1.5% – 2% |
| Kotak Mahindra Bank | 10.99% – 20.00% | ₹3 lakh – ₹75 lakh | Up to 5 years | Up to 2% |
| Bajaj Finserv (NBFC) | 12.00% – 28.00% | ₹1 lakh – ₹45 lakh | 1 – 7 years | 2% – 3% |
| Tata Capital (NBFC) | 12.00% – 24.00% | ₹50,000 – ₹75 lakh | 1 – 6 years | 2% – 2.5% |
Fixed vs Floating Rates: Which Is Better?
| Feature | Fixed Rate | Floating Rate |
|---|---|---|
| Predictability | EMIs remain the same | EMIs fluctuate with market changes |
| Risk | Low risk, stable payments | Higher risk, can increase/decrease |
| Initial Cost | Usually higher than floating | Usually lower than fixed |
| Best For | Small businesses seeking stability | Businesses expecting falling rates |
Conclusion: If you prefer stability in EMIs, go with fixed rates. If you can take market risks, floating rates may save you money.
How to Get the Lowest Business Loan Interest Rate
- Improve Credit Score – Keep both personal and business CIBIL score above 750.
- Maintain Strong Financial Records – File ITRs regularly, maintain audited balance sheets.
- Offer Collateral – Secured loans usually have lower rates.
- Compare Across Lenders – Use online loan comparison tools before applying.
- Negotiate with Banks – Long-term customers may get preferential rates.
- Choose Shorter Tenures – Lower risk for lenders means better interest rates.
Hidden Charges to Watch Out For
While comparing interest rates, also keep an eye on additional costs:
- Processing Fees (1% – 3%)
- Prepayment/Foreclosure Charges (0% – 4%)
- Late Payment Penalties
- Documentation Charges
Sometimes, a loan with a lower interest rate but higher hidden charges may end up being more expensive.
Business Loan EMI Calculation Example
Suppose you borrow ₹20 lakh for 5 years:
| Interest Rate | EMI (approx.) | Total Interest Payable |
|---|---|---|
| 10% | ₹42,494 | ₹5,49,640 |
| 12% | ₹44,489 | ₹6,69,340 |
| 15% | ₹47,593 | ₹8,55,580 |
👉 A difference of just 2–3% can lead to lakhs in extra payments.
Business Loan Interest Rate Trends in 2025
- Repo-linked lending continues to dominate, making loans more transparent.
- Fintech NBFCs are offering faster approvals but at higher rates.
- Green Business Loans with concessional rates are gaining popularity.
- Government Schemes (CGTMSE, Mudra, SIDBI) still provide cheaper funding for MSMEs.
Government Schemes Offering Low-Interest Business Loans
| Scheme | Interest Rate | Eligibility |
|---|---|---|
| PM Mudra Yojana | 8% – 12% | MSMEs, startups, small businesses |
| CGTMSE Scheme | 7% – 11% | Collateral-free loans for MSMEs |
| SIDBI Loans | 7.5% onwards | Startups, women entrepreneurs |
| Stand-Up India | 7% – 9% | SC/ST/Women entrepreneurs |
Final Thoughts
Choosing the right business loan is not just about getting funds—it’s about ensuring affordability and sustainability for your business. By carefully comparing business loan interest rates, understanding additional charges, and selecting the right lender, you can save significantly over time.
Always remember:
- A lower rate today can save lakhs tomorrow.
- Don’t just look at the headline rate; check hidden fees too.
- Consider both banks and NBFCs depending on your urgency and requirements.
If you’re planning to take a loan in 2025, compare thoroughly, negotiate well, and choose the option that strengthens your business finances in the long run.