Business term loan: tenor, EMI and what lenders check
A business term loan is a lump sum a business repays in fixed instalments over an agreed tenor, used for one-time investments such as expansion or equipment. Lenders judge it mainly on repayment capacity, read through ratios such as the debt service coverage ratio defined by RBI. It suits a plan with a clear, one-time cost.
Capnix is not a lender and never lends its own capital. The lender sets the amount, tenor and rate. We build the case for your investment, share your file with lenders on our panel only after you give consent, and stay on it until the money is disbursed. Getting your loan through us costs you nothing: no joining fee, no file charge, no cut of your loan.
- Loan
- Term Loan
- Decided by
- The lender
- Cost to you
- ₹0
- Last checked
The facts that matter
| Fact | What it means | Source |
|---|---|---|
| DSCR | RBI's formula for a year: net cash accruals plus interest and finance charges, divided by the current portion of long-term debt plus interest and finance charges. |
RBI notification on financial ratios, 07-Sep-2020 Checked 02-Oct-2026 |
| Key Facts Statement | Required for new retail and MSME term loans sanctioned from 01-Oct-2024, with the annual percentage rate and all charges. |
RBI Key Facts Statement circular, 15-Apr-2024 Checked 02-Oct-2026 |
| Collateral | For loans sanctioned or renewed from 01-Apr-2026, banks may not ask micro and small enterprises for collateral on loans up to ₹20,00,000. |
RBI notification, 09-Feb-2026 Checked 02-Oct-2026 |
| CGTMSE cover | Up to ₹10,00,00,000 per borrower at public sector, private and foreign banks, for micro and small enterprises. | CGTMSE scheme document, updated 01-Apr-2026 Checked 02-Oct-2026 |
| Early repayment | No pre-payment charge on floating-rate business loans to individuals and micro and small enterprises at most banks and larger NBFCs, from 01-Jan-2026. |
RBI pre-payment directions, 02-Jul-2025 Checked 02-Oct-2026 |
How a business term loan works
A term loan is paid out once. You repay it in fixed instalments over an agreed tenor. It suits one-time spending that pays back over several years, such as a new line, a shed or a machine.
A working capital loan does a different job: it covers the repeating gap between paying suppliers and collecting from customers.
What lenders look at before they lend
Lenders read repayment capacity through a handful of ratios. These are the ratios, not thresholds. No rule sets one minimum for every lender.
| Ratio | What it tells a lender | RBI's definition | Source |
|---|---|---|---|
| Debt service coverage ratio (DSCR) | Whether the year's cash can cover loan repayments | (Net cash accruals + interest and finance charges) divided by (current portion of long-term debt + interest and finance charges) |
RBI notification on financial ratios, 07-Sep-2020 Checked 02-Oct-2026 |
| Current ratio | The short-term cushion | Current assets divided by current liabilities |
RBI notification on financial ratios, 07-Sep-2020 Checked 02-Oct-2026 |
| TOL/ATNW | How much the business owes outsiders against its own capital | Total outside liabilities divided by tangible net worth, net of investments and loans in group and outside entities |
RBI notification on financial ratios, 07-Sep-2020 Checked 02-Oct-2026 |
| Total debt to EBITDA | How many years of earnings the debt equals | (Short-term + long-term debt) divided by (profit before tax + interest and finance charges + depreciation and amortisation) |
RBI notification on financial ratios, 07-Sep-2020 Checked 02-Oct-2026 |
| Lender guidance on DSCR | One bank's view of a good level | Kotak Mahindra Bank says a DSCR of 1.5 or higher is ideal. That is one lender's guidance, not a rule. | Kotak Mahindra Bank guide to DSCR Checked 02-Oct-2026 |
Security and guarantees
A term loan does not always need property. Three routes can reduce or remove the need for collateral. You do not apply to CGTMSE yourself: the lender applies for cover after it sanctions the loan.
| Route | How it works | Source |
|---|---|---|
| Collateral-free bank loans | From 01-Apr-2026, a bank may not accept collateral on a loan of up to ₹20,00,000 to a micro or small enterprise, whether new or renewed. |
RBI notification, 09-Feb-2026 Checked 02-Oct-2026 |
| CGTMSE ceiling by lender type | ₹10,00,00,000 at public sector, private and foreign banks and select financial institutions. ₹2,00,00,000 at small finance banks, regional rural banks and some co-operative banks. ₹50,00,000 at microfinance institutions. | CGTMSE scheme document, updated 01-Apr-2026 Checked 02-Oct-2026 |
| CGTMSE tenor | For a term loan, the guarantee runs for the agreed tenor plus four months. | CGTMSE scheme document, updated 01-Apr-2026 Checked 02-Oct-2026 |
| CGTMSE annual fee, a year | 0.37% up to ₹10,00,000. 0.55% above ₹10,00,000 to ₹50,00,000. 0.60% to ₹1,00,00,000. 0.85% to ₹2,00,00,000. 1.00% to ₹5,00,00,000. 1.10% to ₹8,00,00,000. 1.20% to ₹10,00,00,000. A premium or discount applies by lender. | CGTMSE scheme document, updated 01-Apr-2026 Checked 02-Oct-2026 |
| Who pays the fee | The lender pays CGTMSE and may recover the amount from you. | CGTMSE scheme document, updated 01-Apr-2026 Checked 02-Oct-2026 |
| MCGS-MSME for machinery | 60% cover for lenders on machinery loans up to ₹1,00,00,00,000. |
PIB release on MCGS-MSME, 21-Mar-2026 Checked 02-Oct-2026 |
Term loan or working capital loan?
The two answer different needs. The rows below describe usual lender practice, not rules.
| Item | Term loan | Working capital loan |
|---|---|---|
| Purpose | A one-time investment | Day-to-day operating gaps |
| Repayment | Fixed instalments over a set tenor | Instalments, or a limit you draw and repay |
| Tenor logic | Matched to how long the investment pays back | Short, or renewed at the lender's cycle |
| Security lenders often ask for | The asset, cash flow, sometimes property | Stock, receivables or cash flow |
| Typical use | Expansion, a new line, equipment | Stock, salaries, supplier bills |
What lenders typically publish
Rate cards the lenders publish themselves, read on the date shown.
Published rate cards, as of 02-Oct-2026
| Lender | Rate a year | What else the page says | Source |
|---|---|---|---|
| Bank of Baroda, above ₹25,00,000 up to ₹7,50,00,000 | CMR 1: 8.20% to 9.65%. CMR 6: 10.35% to 15.60% | Priced by CIBIL MSME Rank (CMR) and security cover. | Bank of Baroda MSME loan rates Checked 02-Oct-2026 |
| HDFC Bank (private bank), business loans | 10.75% to 22.50% | Processing fee up to 2%. | HDFC Bank business loan rates and charges Checked 02-Oct-2026 |
| IDFC FIRST Bank (private bank), unsecured business loans | From 12.99% | Monthly reducing balance. The page's rate table is captioned August 2025. | IDFC FIRST Bank business loan rates Checked 02-Oct-2026 |
| Bandhan Bank (private bank), business loans | Secured 11.69% to 15.18%. Unsecured 13.00% to 25.91% | Processing fee up to 2% plus taxes. | Bandhan Bank business loan page Checked 02-Oct-2026 |
| Bajaj Finance (NBFC), business loans | 14% to 23% | Processing fee up to 4.72% including taxes. | Bajaj Finance business loan rates and charges Checked 02-Oct-2026 |
| FlexiLoans (NBFC), business loans | From 12% | 24 to 42 months, up to ₹50,00,000 without collateral. | FlexiLoans business loan page Checked 02-Oct-2026 |
| Lendingkart (NBFC), business loans | From 17.25% | Up to ₹50,00,000, for 1 to 3 years. | Lendingkart business loan rates Checked 02-Oct-2026 |
Each lender publishes these for business loans in general. They are not offers, none is a Capnix rate, and your rate is set by the lender. An NBFC is a non-bank finance company.
Fees, Key Facts Statement and early repayment
| Charge | What to expect | Source |
|---|---|---|
| Key Facts Statement | A standard statement with the annual percentage rate, all charges and the repayment schedule, before you sign. |
RBI Key Facts Statement circular, 15-Apr-2024 Checked 02-Oct-2026 |
| Charges outside the statement | Any fee left out of the Key Facts Statement needs your explicit agreement before it can be charged. |
RBI Key Facts Statement circular, 15-Apr-2024 Checked 02-Oct-2026 |
| Processing fee, one bank | HDFC Bank: up to 2%, and nil up to ₹5,00,000 for micro and small enterprises that submit the Udyam certificate before disbursal. | HDFC Bank business loan rates and charges Checked 02-Oct-2026 |
| Processing fee, one NBFC | Bajaj Finance: up to 4.72% including taxes. | Bajaj Finance business loan rates and charges Checked 02-Oct-2026 |
| Documentation charge | Kotak Mahindra Bank: ₹3,500 plus GST under ₹10,00,000, and ₹6,000 plus GST above. | Kotak Mahindra Bank business loan fees and charges Checked 02-Oct-2026 |
| Penal charges | A penal charge, not extra interest. It cannot be added to the loan to earn more interest. |
RBI penal charges circular, 18-Aug-2023 Checked 02-Oct-2026 |
| Early repayment, RBI rule | None on floating-rate business loans to individuals and micro and small enterprises at most banks and larger NBFCs, from 01-Jan-2026. |
RBI pre-payment directions, 02-Jul-2025 Checked 02-Oct-2026 |
| Early repayment, one lender's schedule | HDFC Bank lists 4% of principal outstanding up to 24 EMIs, 3% after 24 to 36, 2% after 36, and nil for fixed-rate loans up to ₹50,00,000 to micro and small enterprises. | HDFC Bank business loan rates and charges Checked 02-Oct-2026 |
Worked example: ₹10,00,000 over 36 or 60 months
A business borrows ₹10,00,000 at 14% a year, the lower end of the range Bajaj Finance publishes for business loans. It is an example, not an offer. Your rate is set by the lender. A longer tenor lowers the instalment and raises the interest you pay.
| Item | 36 months | 60 months |
|---|---|---|
| Loan amount | ₹10,00,000 | ₹10,00,000 |
| Monthly instalment | ₹34,178 | ₹23,268 |
| Total interest | ₹2,30,395 | ₹3,96,095 |
| Total repaid | ₹12,30,395 | ₹13,96,095 |
The formula is P x r x (1+r)^n / ((1+r)^n minus 1), with r as the monthly rate and n as the months. Fees are left out.
Source: Bajaj Finance business loan rates and charges, checked 02-Oct-2026.
Who it suits and who it does not
A strong fit if
- You have a clear, one-time investment in mind
- You prefer fixed, predictable repayments
- The investment pays back over several years
Not a fit if
- You need cash for a repeating gap (see a working capital loan)
- Your cash flow cannot carry the new instalment on top of existing ones
Documents lenders usually ask for
One bank's own guide lists the records below. For a term loan, a lender may add papers about the asset or project.
- Bank statements for the last 6 to 12 months
- GST returns for the last 6 to 12 months
- One to three years of tax returns and financial statements
- Business proof, such as a GST certificate or Udyam certificate
- Constitution documents: a partnership deed for a firm, or the MOA and AOA for a company
- KYC of the business and its promoters
Source: Bank of Baroda guide to business loan documents, 29-Apr-2026, checked 02-Oct-2026.
Business loan documents checklistHow Capnix fits
- Start with your free Capnix score. It reads turnover, banking, credit history and a clear purpose, the repayment signals a term lender reads.
- Your file reaches a lender or a Lender Partner only once you give consent, and you can withdraw that consent in your Capnix account.
- The lender pays Capnix a fee after disbursal. It is never added to your loan or your rate.
More than a loan. A team that gets you there
A loan sized to the plan
We help you put a clear case behind the expansion or purchase, so the amount and tenor match what the investment needs.
Lenders suited to long-term growth
We approach lenders comfortable with multi-year repayment, so your instalments sit sensibly against your cash flow.
Where this helps
- Fund a new branch, unit or location
- Invest in machinery or major equipment
- Finance a long-term growth project
- Plan repayments over a fixed, predictable tenor
What happens after you start
We work out your Capnix score first, then work the lender applications with you until the money is disbursed.
See how it worksLoan products, rates, and eligibility are determined by the lenders on our panel. Capnix is not a lender and does not lend its own capital. We run your loan journey end to end.
Have a question?
Find answers here
Whether you are scaling up, smoothing cash flow, or buying new equipment, we take your file to the right lender and stay with it through to disbursal.
Weigh the investment. Matched to the right lender
A term loan should fit the plan, not the other way round. We read the investment you are making and your ability to repay, then build a case for an amount and tenure that actually suit it.
From there we approach lenders comfortable backing multi-year plans like yours, so your instalments sit sensibly against your cash flow, and getting your loan costs you nothing.
Real people,
start to disbursal.
No hand-offs and no generic replies. A dedicated team
works the lenders while you keep running your business.