Commercial Loans

Commercial loan is used to address capital expenditures and other immediate financial needs. These loans are usually recognised as short-term in nature, these loans facilitate inorganic growth in the early stages of a business.

Borrowers can utilise these short-term loans to fulfill their commercial needs. Business owners can use this sum of money to invest in their businesses. Commercial loans are a way to secure funds, but they involve debt. If you seek an unsecured commercial loan, you can access Buddy Loan for an instant loan.

As the name defines, these types of loans are also known as business loans. Also to know more about commercial loans and its features continue reading!

Understanding Commercial Loans

Commercial loans are provided to various businesses to support immediate financial needs like buying equipment or covering operational costs. They might also assist with basic expenses such as payroll or purchasing production supplies. Typically, these loans demand collateral, which can be property, equipment, or future accounts receivable, to secure the loan. Commercial real estate mortgages represent one type of these loans. If the borrower defaults or declares bankruptcy, the bank can claim the collateral as compensation.

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Fees & Charges of Commercial Loans

Commercial loans come with various fees and charges that borrowers should know before availing themselves of such financial assistance. Understanding these fees is important to avail loan under a seamless process:

Factors Charges
Interest Rate 11.99% p.a
Processing Fees ₹1000-75000
Pre-payment Charges Up to 4% on the balance

Purpose & Importance of Commercial Loans

Other than understanding the purpose and significance of these loans is essential for businesses aiming to expand, innovate, and navigate the complexities of modern markets

Business Expansion: Commercial loans facilitate business growth by providing funds for expanding operations, entering new markets, or increasing production capacity.

Capital Investment: Essential for acquiring equipment, machinery, or vehicles, commercial loans enable businesses to invest in assets crucial for their operations.

Working Capital Management: Vital for day-to-day operations, these loans help manage cash flow, cover expenses, pay suppliers, manage inventory, and handle unforeseen costs.

Real Estate Acquisition: Commercial mortgage loans aid in acquiring properties for offices, manufacturing units, or retail spaces, supporting business infrastructure development.

Funding Special Projects: Commercial loans provide financial backing for innovative initiatives, renovations, technological advancements, or product development, fostering competitiveness.

Navigating Cyclical Demands: Crucial in managing market fluctuations, these loans offer funds during slow periods, ensuring operational stability in industries with varying demands.User

Commercial Loan Interest Rates

Here are the different commercial loans that provide solutions understanding to diverse industries and financial requirements. Refer to the table to understand interest rates, tenure along with loan amounts provided by various major banks.

Lender Interest Rate Loan Amount Loan Tenure
HDFC Bank 10.00% p.a. - 22.50% p.a. Rs.50,000 to Rs.50 lakh 12 months to 48 months
IIFL 12.75% p.a. - 44% p.a. Rs.1 lakh to Rs.50 lakh 12 months to 60 months
Fullerton India 17% p.a. - 21% p.a. Up to Rs.50 lakh 12 months to 48 months
Piramal Capital and Housing Finance Limited 17% p.a. - 24% p.a. Up to Rs.25 lakh (without collateral) Up to 15 years
Poonawalla Fincorp 15% p.a. onwards Up to Rs.50 lakh Up to 36 months

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Types of Commercial Loans

1. Bank Overdraft Facility: Short-term funding allowing withdrawal of funds exceeding the company's account balance, to be repaid with subsequent deposits.

2. Letter of Credit (LC): Issued by a financial institution to a foreign party, ensuring payment upon presenting specified delivery-related documents.

3. Bank Guarantee: Assures payment to a third party if the customer cannot pay within the guarantee's validity period, differing from a letter of credit.

4. Lease Finance: Secured loan enabling asset use without forfeiting complete ownership, allowing the lessee access while the financier holds legal ownership.

5. SME Collateral Free Loan: Tailored for SMEs, offering collateral-free loans, excluding small retailers but accessible to start-up SMEs.

6. Construction Equipment Loan: Secured loans using the equipment itself as collateral, with repayment terms ranging from 12 to 60 months, typically used for machinery procurement.

7. SME Credit Card: Offers cash credit or term loans up to 10 lakhs, with repayment periods of 5 to 10 years, designed for smaller retailers, businesses, industries, and transport enterprises.

8. Commercial Vehicle Loans: Available to businesses operating for over 2 years, owning at least 2 commercial vehicles, catering to enterprises in transportation with established customer bases.

Commercial Loan Eligibility

Business partnership firms, sole proprietorships, public and private limited companies, along with self-employed professionals and non-professionals, are eligible to seek commercial or business loans in India.

The applying business should show a satisfactory turnover, varying among different lenders.

The firm needs to meet the minimum annual income criteria.

It should have a track record of profitability for a specified period, as determined by the lender.

The company seeking the loan should have a certain operational history, as specified by the lender.

For individuals representing their firms, the typical age requirement ranges between 21 to 65 years (subject to variations among lenders).

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Documents Required For Commercial Loans

Age Criteria: Minimum 21 years and Maximum 65 years

Minimum Annual Turnover: To be defined by the lender

Business vintage: Minimum 5 years (in profit)

Startups need to provide projections of income for the next 5 years

Business should not be listed in a negative area or location

NGOs, Trusts, Co-operative Societies, and Charitable organizations are not eligible for commercial loans

Features & Benefits For Commercial Loans

Commercial loans offer businesses financial support, flexibility, and tailored solutions, enabling them to thrive, expand, and achieve their long-term goals in a competitive market.

1. Flexible Usage: Allows businesses to utilize funds for diverse purposes such as expansion, equipment purchase, inventory management, or real estate acquisition.

2. Financing Solutions: Offers customized loan structures based on business needs, ensuring suitable repayment terms and interest rates.

3. Various Loan Types: Provides a range of loan options like secured, unsecured, overdraft facilities, or specific industry-related loans catering to diverse business requirements.

4. Financial Stability: Assists in maintaining stable cash flow, managing working capital, and navigating financial fluctuations for sustained operations.

5. Competitive Interest Rates: Provides competitive interest rates, especially for secured loans, supporting cost-effective borrowing for long-term investments.

6. Flexible Repayment Methods: Allows diverse repayment options, including monthly installments, bullet repayments, or structured payments aligned with business cash flows.

7. Enhanced Business Opportunities: Facilitates growth opportunities by providing necessary funds for expansion, innovation, or capital-intensive projects.

8. Builds Credit History: Helps in establishing a positive credit history for the business by maintaining an excellent repayment record, potentially unlocking future borrowing opportunities at favorable terms.

9. Supports Diverse Sectors: Tailored loan products cater to various sectors like manufacturing, retail, services, or real estate, fostering industry-specific growth.

10. Professional Guidance: Often comes with expert advice from financial institutions, assisting businesses in making informed financial decisions and optimizing loan usage.

How to Apply for Commercial Loans?

Steps To Apply For a Commercial Loan with Buddy Loan:

Step 1: Login to or download & install the Buddy Loan app.

Step 2: Open the business loan application page.

Step 3: Enter your mobile number and OTP.

Step 4: Specify the desired loan amount and email.

Step 5: Choose if you have a Business Proof (Yes/ No)

- If ‘Yes’ (If you have a business proof), enter your business and personal details.


- If ‘No’ (If you do not have a business proof), choose the profession type and enter your personal details.

Step 6: Provide income details and click the ‘Submit’ button.

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Frequently Asked Questions

Commercial loans are financial products specifically designed to provide funding to businesses for various purposes, such as expansion, operational needs, or investment in assets.

Commercial loans involve borrowing a specific amount from a financial institution, which is then repaid over time with interest based on agreed-upon terms and conditions.

Partnership firms, sole proprietorships, corporations (both public and private), and self-employed professionals may qualify for commercial loans.

To apply, submit necessary business and financial documents to a lender, detailing the purpose of the loan, financial history, and projections.

Maximum loan amounts vary based on factors like business size, creditworthiness, collateral, and the lender's policies.

Start-ups may qualify for commercial loans, although they might face stricter criteria and higher interest rates because of limited financial history.

Yes, commercial loans can be used for various purposes, including expansion, renovation, purchasing assets, or covering operational costs.

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