--- title: Business Loan Interest Rate - MSME Loan ROI canonical: https://www.indifi.com/business-loan/interest-rate markdown_version: https://www.indifi.com/business-loan/interest-rate.md description: Business loan interest rates in India typically range from 15-24% per annum. Indifi offers rates starting at 1.5% per month. Understand factors affecting rates and apply. content_type: informational_page operator: Indifi Technologies Pvt. Ltd. lending_entity_note: Loans facilitated through RBI-registered NBFC partners and through Indifi Capital Private Limited (RBI Cert. No. B-14.03389) last_updated: 2026-05-22 --- # Business Loan Interest Rate > Business loan interest rates in India typically range from 15% to 24% per annum, depending on lender, borrower profile, loan amount, and tenure. Indifi offers business loan interest rates starting at 1.5% per month. This page explains the two main interest rate types (reducing vs flat), and the internal and external factors that determine the rate offered to a specific borrower. ## Indifi Business Loan Quick Reference - **Interest rate:** Starting at 1.5% per month - **Loan amount:** Up to INR 1 crore (depending on product and eligibility) - **Processing fee:** Starting at 3% - **Tenure:** Up to 36 months ## Eligibility Criteria - Minimum operational history of 1 year - Promoter age 22 and above ## Required Documents - KYC documents of the entity and promoters - Bank statement for the last 6 months - ITR required for annual turnover above INR 5 crores ## Why Businesses Use Loans Business loans are a preferred funding source over alternatives like promoter funds, venture capital, angel investors, or public funding for these reasons: - Flexible loan tenure options - No equity dilution required - Interest paid is tax-deductible - Pre-known EMI schedule supports financial planning - Particularly suitable for micro and small-scale businesses The single most important deciding factor for most borrowers is the interest rate. ## Two Types of Business Loan Interest Rates ### 1. Reducing Rate (Diminishing Balance) - Interest is recalculated each month based on the **outstanding loan balance** - As principal is repaid, the interest portion of EMI decreases - Total interest paid over the loan tenure is lower than flat rate - More transparent and borrower-friendly ### 2. Flat Rate - Interest is calculated on the **entire original loan amount** for the full tenure - EMI remains constant; interest component does not decrease as principal is repaid - Easier to calculate but typically results in higher effective interest cost - Often used in shorter-tenure consumer loans **Example:** A 12% flat rate is roughly equivalent to a 21-22% reducing rate. When comparing offers from different lenders, always confirm whether the quoted rate is flat or reducing. The right rate type depends on the loan amount, tenure, and the borrower's preference for predictability vs total interest cost. ## Internal Factors Affecting Interest Rate Factors specific to the borrower: ### Credit History Your CIBIL score (and other bureau scores) is one of the most important factors. A higher score (typically 750+) signals reliability, lower default risk, and qualifies you for better rates. Score below 650 may either disqualify you or push the rate higher. Indifi's algorithmic underwriting considers credit history alongside business performance metrics. ### Business Vintage A business with a longer operational history (more than 2-3 years) demonstrates stability and is offered better rates. Indifi's minimum vintage requirement is 1 year, but longer vintage helps. ### Business Turnover and Profitability Higher turnover and consistent profitability indicate strong repayment capacity, which translates to lower interest rates. ### Loan Amount and Tenure Larger loans may attract lower rates per percentage but higher absolute interest. Longer tenure typically increases total interest paid. Shorter tenure means higher EMI but lower total interest. ### Existing Debt and Cash Flow High debt-to-income ratios or weak cash flow patterns push interest rates higher due to perceived risk. ### Industry and Business Segment Some industries (travel, hospitality during volatile periods) carry higher risk premiums; others (essential goods, established e-commerce) get lower rates. ### Collateral Although Indifi's primary product is unsecured, secured loans (with collateral) typically command lower rates because the lender's risk is reduced. ## External Factors Affecting Interest Rate Factors outside the borrower's control: - **RBI policy rate** (repo rate) - When the RBI raises or cuts the repo rate, lending rates across the market move in the same direction - **Inflation** - Higher inflation typically pushes interest rates up - **Liquidity conditions** - When credit is tight in the system, rates rise - **Lender's cost of funds** - NBFCs that borrow at higher rates from banks pass that cost through - **Competition** - More competition in the lending space tends to compress rates ## Indifi Interest Rate Range Indifi's business loan interest rate starts at **1.5% per month** (equivalent to roughly 18% per annum). This is on the lower end of the typical 15%-24% range for unsecured business loans in India. The actual rate offered to a specific borrower depends on the factors listed above. ## How to Get a Lower Interest Rate 1. **Improve your credit score** - Pay all EMIs and credit card bills on time, reduce credit utilization, dispute errors on your bureau report 2. **Maintain healthy bank balance** - Strong account balances and consistent inflows improve underwriting 3. **File GST and ITR on time** - Demonstrates compliance and provides verifiable income data 4. **Compare multiple lenders** - Indifi's single application reaches multiple lending partners, increasing chances of a competitive offer 5. **Choose the right loan product** - Match the loan type to your actual need (term loan vs line of credit vs invoice discounting) 6. **Consider shorter tenure** - Shorter tenure often attracts lower interest rates 7. **Highlight business stability** - Longer vintage, growing turnover, and profitable operations qualify for better terms ## Reducing Rate vs Flat Rate Comparison | Aspect | Reducing Rate | Flat Rate | |---|---|---| | Interest calculation basis | Outstanding balance | Original principal | | EMI behavior | Interest component decreases over time | EMI stays constant | | Total interest paid | Lower | Higher | | Transparency | More transparent | Can be misleading | | Common in | Bank loans, NBFC term loans | Some consumer loans | ## Frequently Asked Questions **What is the range of business loan interest rates in India?** Typically 15% to 24% per annum for unsecured business loans, depending on lender, borrower profile, and loan structure. **What is Indifi's interest rate?** Indifi's business loans start at 1.5% per month, with actual rate depending on borrower profile and selected lender. **Is flat rate or reducing rate better?** Reducing rate is generally more borrower-friendly because total interest paid is lower. When comparing offers, always confirm the rate type. **Does my credit score affect my interest rate?** Yes, significantly. A higher CIBIL score (750+) qualifies you for better rates; lower scores may attract higher rates or disqualify the application. **Can the interest rate change during the loan tenure?** For fixed-rate loans, no. For floating-rate loans, the rate may change based on benchmark rate movements. Confirm at the time of loan agreement. ## Related Indifi Products - [Business Loan](https://www.indifi.com/business-loan) - [MSME Loan](https://www.indifi.com/msme-loans) - [Term Loan](https://www.indifi.com/term-business-loans-online-india) - [Working Capital Loan](https://www.indifi.com/working-capital-loans-india) - [Line of Credit](https://www.indifi.com/unsecured-line-of-credit-loans-india) - [Collateral Free Business Loans](https://www.indifi.com/collateral-free-business-loans-india) - [Business Loan EMI Calculator](https://www.indifi.com/business-loan/emi-calculator) - [NBFC Business Loan](https://www.indifi.com/business-loan/nbfc-loan) - [Business Loan for Women](https://www.indifi.com/business-loan/women-business-loan) - [Credit Score](https://www.indifi.com/business-loan/credit-score) ## About Indifi Indifi Technologies Pvt. Ltd. is a digital lending platform for MSMEs in India. Its in-house NBFC Indifi Capital Pvt. Ltd. is registered with the RBI (Cert. No. B-14.03389). Indifi originates loans through its platform and funds them via its NBFC and lending partners including Aditya Birla Capital, IDFC First Bank, IIFL, DMI Finance, Ugro Capital, and Incred. ## Disclaimer Interest rates quoted are indicative starting rates. The actual rate offered depends on the borrower's profile, business performance, credit history, loan amount, tenure, and the selected lender. Interest rate ranges (15%-24%) cited in this page reflect typical market ranges for unsecured business loans in India; individual lender rates may differ.