To get a business loan in India, most banks and NBFCs want 2-3 years of business vintage, a CIBIL score around 675 or higher, GST returns and 6-12 months of bank statements. Micro and new businesses can skip collateral through government schemes: Mudra lends up to Rs 20 lakh and CGTMSE guarantees loans up to Rs 10 crore, as of 2026.
The question that actually matters is not "what is a business loan" but "will I qualify, and for which one". This guide answers that first, then walks through documents, the application itself, and the rates and amounts you can realistically expect this year.
Who can get a business loan in India?
For an unsecured bank or NBFC business loan, the typical bar as of 2026 is 2-3 years of business vintage and an applicant aged between 21 and 65. Government schemes sit below that bar on purpose: Mudra loans are open to both existing and new units.
| Criterion | Typical requirement (as of 2026) |
|---|---|
| Business vintage | 2-3 years for unsecured loans (Tata Capital asks for 2 years, Kotak for 3); Mudra accepts new units |
| Applicant age | 21-65 depending on lender (Tata Capital: 21 at application, 65 at loan maturity; Kotak: 25-65) |
| Turnover and profit | Varies by lender; Kotak, for example, wants minimum Rs 40 lakh annual turnover and at least 1 year of profit |
| Credit score | CIBIL around 675+ expected (Tata Capital's stated cutoff); the lender pulls your report, you don't submit it |
| Entity type | Proprietorship, partnership, LLP and private limited all qualify, with entity-specific paperwork |
Two things get underwritten together: the proprietor's personal CIBIL and the business's cash flow as shown in GST returns and bank statements. A weak score raises your rate or gets the file rejected outright, so it is worth reading how to improve your CIBIL score a few months before you apply, not after a rejection.
If your business is brand new, mainstream unsecured loans are mostly out of reach; skip ahead to the new-business section, because the scheme route is built for exactly that gap.
What types of business loans can you choose from?
Business loans in India come in both secured and unsecured forms; the common belief that every business loan is collateral-free is simply wrong. What you qualify for depends on ticket size, vintage and what you can pledge.
| Type | What it is | Where it fits |
|---|---|---|
| Unsecured business loan | No collateral; priced on your score and cash flow | Kotak lends Rs 3 lakh-1 crore, Tata Capital up to Rs 1 crore (2026) |
| Secured loan | Loan against property, machinery or other assets | Larger tickets and longer tenures; SBI's SME menu lists these alongside its digital loans |
| Working capital / OD | A limit you draw and repay as stock and receivables move | Day-to-day cash gaps rather than one-time purchases |
| Invoice / supply-chain finance | Advance against unpaid invoices | Businesses selling to larger buyers on credit terms |
| Government-backed | Mudra, CGTMSE-covered loans, Stand-Up India | The collateral-free route for micro and small tickets |
The government-backed route has quietly become the strongest part of this menu. Mudra (PMMY) now has four tiers: Shishu up to Rs 50,000, Kishore up to Rs 5 lakh, Tarun up to Rs 10 lakh, and since October 2024 a Tarun Plus tier of Rs 10-20 lakh for borrowers who have repaid a Tarun loan. All tiers are collateral-free. Meanwhile CGTMSE raised its guarantee ceiling for collateral-free MSE loans from Rs 5 crore to Rs 10 crore, which changes the answer for growing businesses that used to hit a wall at Rs 5 crore. Our overview of government policies for small businesses covers these schemes in more depth.
Which documents do you need for a business loan?
As of 2026, lenders build the file around your GST returns and bank statements, not just KYC. Here is the working checklist:
| Document | Detail |
|---|---|
| KYC | PAN and Aadhaar of the applicant |
| Business proof | Registration certificate or GST registration certificate |
| GST returns | Now central to underwriting; recent filings expected |
| Income tax returns | Last 2-3 years, with profit and loss statements |
| Bank statements | 6-12 months of the business account |
| Entity documents | Partnership deed, or MOA/AOA for companies, where applicable |
You do not submit a credit report; the lender pulls CIBIL directly. If your GST or registration details are shaky, fix them first. You can check your MSME registration by name to confirm your Udyam record shows up correctly before a lender looks for it.
How do you apply for a business loan step by step?
Both online and branch applications are live in 2026, but online is now the default: SBI, for instance, offers pre-approved digital business loans and marketplace sourcing up to Rs 5 crore. The process runs like this:
- Check your own file first. Pull your CIBIL, confirm GST filings are current, and decide the ticket size your cash flow can actually service.
- Pick the lender class. Bank for the lowest rates, NBFC for speed and looser criteria, government scheme if you are new or small.
- Gather the documents from the checklist above; incomplete files are the most boring and most common reason for delay.
- Apply online or at a branch. One safety rule worth knowing: major Indian banks have moved to the RBI-backed .bank.in domain (sbi.bank.in, kotak.bank.in and so on), so apply only on a *.bank.in address, never through a link someone forwarded.
- Verification and sanction. The lender verifies KYC, banking and GST data, may call or visit, then issues a sanction letter. Read the fee schedule in it before accepting.
- Disbursal. Digital lenders sanction in 48-72 hours with funds credited within days; pre-approved bank digital loans are near-instant; traditional branch cases still take days to weeks, as of 2026.
If you borrow through a loan app instead, that space is now formally regulated: RBI's Digital Lending Directions (circular RBI/2025-26/36, May 2026) require regulated-entity backing, and grievances go to the RBI Integrated Ombudsman or Sachet portal. A lending app that cannot name its partner bank or NBFC is one to close immediately.
What interest rate and loan amount should you expect in 2026?
Bank MSME loans in 2026 are floating and linked to an external benchmark (EBLR), so they move with the RBI repo rate, which stands at 5.25% as of August 2026; NBFC unsecured loans start around 12% per annum and are usually fixed. The old assumption that a business loan rate is fixed for the full tenure no longer holds for banks: SBI prices even Mudra loans as EBLR-linked.
On amounts, be realistic about your bracket:
| Route | Amount (as of 2026) |
|---|---|
| Mudra (PMMY) | Rs 50,000 to Rs 20 lakh, collateral-free |
| Unsecured bank/NBFC loan | Roughly Rs 1 lakh to Rs 1 crore (Kotak: Rs 3 lakh-1 crore; Tata Capital: up to Rs 1 crore) |
| SBI digital MSME loans | Up to Rs 5 crore |
| CGTMSE-guaranteed collateral-free credit | Up to Rs 10 crore |
Tickets beyond these bands are secured SME products, priced against the pledged asset. Before signing anything, get the processing fee, prepayment and foreclosure charges in writing from the sanction letter; the rate alone never tells you the cost of the loan. Fixed suits you if you want a predictable EMI; floating is cheaper when rates fall, and bank credit is in an expansionary phase right now (loan growth of 18.3% year-on-year as of August 2026, per Trading Economics), which means lenders are competing for good MSME files.
Can you get a business loan for a new business?
Yes, but through named schemes rather than a mainstream unsecured loan. Mudra is explicitly open to new units (start with Shishu, up to Rs 50,000), Stand-Up India funds first-time SC/ST and women entrepreneurs, and banks run their own startup programs such as SBI MSME UDAAN. All of them will ask for a project report or business plan, so write one before you apply, not at the counter.
If you get rejected, treat it as information. Find out whether the issue was the score, the vintage or the ticket size, then fix that one thing: repair the CIBIL over a few months, ask for a smaller amount, or move down a lender class from bank to NBFC to scheme. Reapplying everywhere at once only stacks up hard inquiries on your report.
Two obligations come with the money. Funds are restricted to business end-use and lenders monitor utilisation, so routing a business loan into personal expenses can trigger recall. And on default, the consequences depend on the loan type: a secured lender can enforce the pledged collateral under the SARFAESI Act, 2002, while an unsecured lender has no asset to seize; what you face instead is recovery proceedings, invocation of any guarantee, and a damaged CIBIL score that shuts the next loan's door.
Whichever loan you land, disbursal is where the real work starts: the bank statements and receivables discipline that got you this loan will decide your next one. To track customer credit, a free khata app like OkCredit keeps every entry backed up and sends automatic payment reminders.
Business loan FAQs
Can I get a business loan without collateral?
Yes. As of 2026, Mudra lends up to Rs 20 lakh collateral-free, unsecured bank/NBFC loans run roughly Rs 1 lakh to Rs 1 crore, and CGTMSE guarantees collateral-free MSE credit up to Rs 10 crore.
What CIBIL score do I need for a business loan?
Around 675 or higher is the stated expectation at NBFCs like Tata Capital as of 2026. A higher score gets you a lower rate; the lender pulls the report directly, you do not submit it.
How long does it take to get a business loan?
Digital lenders sanction in 48-72 hours with funds credited within days, and pre-approved bank digital loans are near-instant. Traditional branch applications still take days to weeks, as of 2026.
Can I get a business loan for a brand-new business?
Yes, through government schemes: Mudra accepts new units (Shishu tier, up to Rs 50,000) and Stand-Up India funds first-time entrepreneurs. You will need a project report or business plan.
What happens if I default on a business loan?
On a secured loan, the lender can enforce the pledged collateral under the SARFAESI Act, 2002. On an unsecured loan there is no asset to seize; you face recovery proceedings, guarantee invocation and a damaged CIBIL score.