Types of business loans in India
Business loans are not one-size-fits-all. Picking the right structure means lower interest cost, better cash-flow match, and easier renewal. Here are the main types Indian banks and NBFCs offer.
Last updated: 15 June 2025
Term loan
A lump-sum loan repaid in fixed EMIs over 1 to 7 years. Used for one-off needs like buying machinery, renovation, or expansion. Best when the return on the invested asset exceeds the interest cost.
Cash credit / overdraft
A revolving credit limit against inventory, receivables, or property. You pay interest only on the amount used and can dip in and repay as often as you like. Ideal for businesses with cyclical working-capital needs.
Invoice discounting / TReDS
You sell approved-buyer invoices to a lender at a small discount and get immediate cash. Great for small suppliers whose large customers pay in 60-90 days. Government TReDS platforms give MSMEs auction-based competitive rates.
Machinery / equipment loan
A term loan specifically for buying equipment. The equipment itself is the security. Rates are typically lower than general term loans because of asset-backing.
Loan against property (LAP)
A secured loan against commercial or residential property owned by the business or promoter. Lowest rates among business loans (9-12%) with tenures up to 15 years.