Businesses borrow for different reasons — buying equipment, funding operations, or expanding. India offers a range of loan products, some backed by government guarantee schemes.
This guide explains the main types of business loans.
What is Types of Business Loans in India?
Broadly, loans are either term loans (a lump sum repaid over time, for assets/expansion) or working-capital facilities (revolving credit for operations). Government schemes like Mudra and CGTMSE make collateral-free lending easier for small businesses.
The right loan depends on purpose, tenure and security available.
Common business loan types
| Loan | Best for |
|---|---|
| Term loan | Equipment, expansion, long-term assets |
| Working capital / CC-OD | Day-to-day operations |
| Mudra loan | Micro units up to the scheme limit, collateral-free |
| CGTMSE-backed loan | Collateral-free MSME loans |
| Invoice discounting | Unlocking cash from receivables |
| Loan against property | Large funds against real estate |
Frequently asked questions
Which loan is collateral-free for small businesses?
Mudra loans and CGTMSE-backed loans are designed to be collateral-free for eligible micro and small enterprises.
What is a term loan used for?
Financing long-term needs like equipment, machinery or business expansion, repaid in EMIs over a fixed tenure.