Corporate Loans in India – Complete Guide for Businesses (2025)
Are you an entrepreneur interested in raising capital to expand, for working capital, or to purchase equipment? A corporate loan can be the wisest financial decision for your enterprise.
Here in this comprehensive guide, we will tell you everything that you would like to know about corporate loans in India, from types and features to eligibility, documentation, interest rates, and how to apply effectively.
What is a Corporate Loan?
A corporate loan is a banking and NBFC (Non-Banking Financial Company) product for financing businesses of any size — small and medium enterprises, small startups, or large business houses. It enables businesses to raise funds to take care of working capital requirements, fund new ventures, acquire machinery, or conduct business.
These can be secured (collateral against property or equipment, etc.) or unsecured (on business cash flows and credit rating).
Benefits of Corporate Loans for Indian Businesses
Here are the most important reasons why companies in India opt for corporate loans:
✅ Flexible use – Use for working capital, expansion, purchase of machinery, etc.
✅ High loan amounts – Financing from ₹50,000 to ₹50 crores and above.
✅ Variety of tenures – Vary from 12 months to 7 years.
✅ Disbursal within no time – Some offer instant approval within 48 hours.
✅ Tax benefit – Interest repayment is tax-exempt under business expenses.
✅ No dilution of equity – You own it completely.
1. Term Loan
Take an amount in lump sum for a specific period (short, medium, or long term). Best for:
Purchasing property or land
Establishing a new unit
Refreshing machinery or technology
2. Working Capital Loan
Apply to settle day-to-day operational expenses such as rent, salaries, and bills to vendors. Maintains cash flow even during lean months.
3. Overdraft Facility
Draw money above your current balance, up to a limit. Interest is charged only on the borrowed amount.
4. Equipment Finance
Avail funds for buying or renting new/old equipment. The equipment itself serves as collateral.
5. Bill Discounting
Avail prepayment against outstanding customer bills. Enhances liquidity without availing a new loan.
6. Letter of Credit (LC)
Applied in foreign trade. Ensures payment to vendors on your behalf.
7. Loan Against Property (LAP)
Avail a high-value loan against commercial properties. Ideal for big expansion plans.
8. Vendor & Channel Finance
Short-term loan for industry, wholesalers, and retailers to keep the supply chain running smoothly.
9. POS (Point-of-Sale) Loans
For traders and service providers. Loan is tied to POS sales, with auto-deductions on daily collections.
10. Government-Backed Business Loan
Mudra Loans
Stand-Up India Scheme
CGTMSE
Startup India
Secured vs. Unsecured Corporate Loans
| Feature | Secured Loan | Unsecured Loan |
|---|---|---|
| Collateral Needed | Yes (property, machinery, etc.) | No |
| Interest Rate | Lower | Higher |
| Loan Amount | Higher limits | Moderate limit |
| Approval Time | Longer (document-heavy) | Faster |
| Ideal For | Asset-rich businesses | Service-based or new businesses |
Eligibility Criteria for Corporate Loans
Every lender has different criteria, but here are some common points:
✅ Age of applicant: 21 to 65 years
✅ Business vintage: Minimum 1–3 years
✅ Minimum turnover: ₹10 lakhs to ₹1 crore+
✅ Credit Score (CIBIL): 650 or higher
✅ Legal entity: Proprietorship, Partnership, LLP, Pvt Ltd, or Ltd company
Required Documents for Corporate Loan Application
Keep the following documents ready:
PAN & Aadhaar of owner/directors
Business registration certificate / GST
Address proof (utility bill or rent agreement)
Last 6–12 months’ bank statements
2–3 years’ financials (ITR, P&L, Balance Sheet)
Loan purpose document / Business plan
Collateral documents (if applicable)
Corporate Loan Interest Rates in India (2025)
Interest rates vary based on your creditworthiness and loan type. As of 2025:
Secured Loans: 8% to 12% p.a.
Unsecured Loans: 12% to 21% p.a.
Government-backed: From 7% onwards
Factors affecting interest rates:
Credit score (CIBIL)
Business cash flow & profitability
Collateral offered
Loan tenure & amount
Lender’s internal risk rating
How to Apply for a Corporate Loan in India
Step-by-Step Process:
Check Eligibility: Use online tools or consult a CA or financial advisor.
Compare Lenders: Evaluate banks, NBFCs, and fintechs.
Collect Documents: Prepare KYC, financials, and business proof.
Fill Application: Either online or offline.
Await Approval: Lenders may conduct due diligence.
Loan Disbursement: After agreement signing, funds are credited.
Tip: Choose a lender offering flexible EMIs, part-prepayment, and minimal processing fees.
Tips to Improve Loan Approval Chances
Maintain a healthy credit score (above 700)
File ITRs regularly
Avoid cheque bounces or EMI defaults
Register under GST
Maintain a strong business plan with projections
Avoid multiple loan inquiries in a short span
Loan Repayment – Smart Practices
Set up auto-debit to avoid missed EMIs
Prepay when you have extra profits
Avoid taking new loans till the current one is repaid
Keep lender communication transparent in case of cash flow issues
Real-Life Example
Case Study – Small Manufacturer in Gurugram
Ravi owns a textile unit in Sector 37, Gurugram. He applied for a ₹30 lakh working capital loan using GST returns and 3 years of ITR. With steady turnover and good CIBIL, he secured funds at 11.5% interest within 5 days from a leading NBFC — without collateral.
He used the loan to bulk-buy raw materials at discounted prices and increased his production. The loan helped him boost profits by 30% in 8 months.
Frequently Asked Questions (FAQs)
Q. Can a startup get a corporate loan?
Yes, especially under government schemes like Startup India or MUDRA loans.
Q. Is GST registration mandatory?
For some loan types like GST-based loans, yes. It also improves credibility.
Q. What’s the max amount I can borrow?
Depends on your business size, income, and lender policy. Ranges from ₹50,000 to ₹50 Cr+.
Q. Can I get a loan without collateral?
Yes, many lenders offer unsecured business loans based on credit profile.
Q. Are corporate loans tax deductible?
Yes, the interest paid is tax deductible as a business expense.
Final Thoughts
A corporate loan can be a powerful tool for business growth — if used smartly. Whether you’re expanding operations, upgrading technology, or managing cash flow, choosing the right loan product and lender is key.
Always compare loan offers, read the fine print, and consult a CA or financial advisor before making a final decision.
