Small Business Loan in India: Types, Eligibility and How to Apply

Common business loan types

• Term loan: a fixed amount repaid in EMIs, used for equipment, expansion or renovation.
• Working capital loan: short-term funds for stock, salaries and bills. See working capital vs term loan.
• Overdraft or cash credit: a limit against which you draw as needed and pay interest on the amount used.
• MUDRA loans: government-backed loans for micro enterprises, with categories by loan size. Limits and rules are revised from time to time, so check the current scheme.
• Collateral-free credit: some micro and small enterprise loans can be covered by credit guarantee schemes such as CGTMSE, which reduces the need for security.

Eligibility basics

• Business running for typically one to three years (varies by lender).
• Minimum annual turnover, set by each lender.
• Owner’s credit score, usually 700 or more for unsecured loans.
• Business registration such as Udyam, GST or a shop licence.

Documents to keep ready

• KYC of owners and the business, plus address proof.
• Last two to three years of ITR and financial statements.
• 6 to 12 months of current-account statements and GST returns.
• Details of existing loans.

How to apply

1. Decide the amount and purpose, and estimate the EMI with the EMI calculator.
2. Check the owner’s credit report and fix errors first.
3. Compare offers on interest rate, processing fee and prepayment terms.
4. Apply with complete documents to avoid repeated requests.

Compare lenders on our business loan page.

This article is for general information only and is not financial, legal or tax advice. Interest rates, fees and rules change, so confirm current terms with the lender or the regulator before you decide. Examples use illustrative figures. Last reviewed: October 2026.