Business Loan Types & Interest Rates (2026)
Securing a business loan provides vital capital to expand manufacturing capacity, hire skilled staff, or manage inventory cycles. Calculating your exact monthly installments in advance ensures that debt servicing never chokes your operational cash flow.
Before taking commercial debt, verify your operating liquidity on our working capital calculator and verify that your lender quotes a true reducing rate using our flat vs reducing rate calculator. Test your credit capacity on our loan eligibility calculator, determine your minimum required revenue on our break-even calculator, keep debt leverage safe with our debt-to-income calculator, and optimize post-tax pricing on our GST profit calculator.
| Loan Type | Interest Rate Range | Collateral Requirement |
|---|---|---|
| Secured Business Loan | 8.5% - 12.0% p.a. | Property / Commercial Assets |
| Unsecured Business Loan | 13.0% - 22.0% p.a. | Nil (Collateral Free) |
| Mudra Loan (PMMY) | 8.5% - 11.5% p.a. | Nil (Govt Guarantee) |
Unsecured Business Loan EMI & Cashflow Planning
- Working Capital Management: Funds machinery expansion, inventory procurement, and commercial office upgrades without diluting equity.
- Tax Deductible Interest: Business loan interest payments are 100% tax-deductible as business operating expenses under Section 36(1)(iii).
DSCR (Debt Service Coverage Ratio) Eligibility
- Target DSCR > 1.5x: Lenders evaluate Net Operating Income divided by annual debt service (Principal + Interest). Maintain DSCR above 1.5x for easy approval.
- Tenure Selection: Choose 3-5 year tenures to keep monthly EMIs within 25% of gross monthly operational business revenue.
Business Financing Insight
Compare unsecured business loans (12-16% interest) against Secured OD/CC against property (8-10% interest) to save significant interest capital.