Before you sign a business loan, see what it really asks of you.
Upload a business loan agreement or sanction letter from a bank, NBFC or fintech lender and get the deductions, interest terms, prepayment charges, guarantees, events of default and arbitration clause checked against Indian law.
What people are surprised to learn
A sole arbitrator appointed by the lender alone is open to challenge.
Section 12(5) of the Arbitration and Conciliation Act, read with the Seventh Schedule, makes certain persons ineligible to act as arbitrator, and a party ineligible to act is equally ineligible to appoint. Loan agreements often let the lender pick the arbitrator; we flag the clause and the provision it engages.
What this review checks
- What is deducted before disbursal and what you repay
- Fixed or floating interest, and unilateral rate changes
- Prepayment, foreclosure and penal charges (s.73–74)
- Personal guarantees, hypothecation and cross-default
- Events of default and recall on demand
- Loans or guarantees involving directors (Companies Act s.185–186)
- Arbitration by a lender-appointed sole arbitrator (s.12(5))
- Whether an all-in annual cost statement is referred to
Quick answer
What should I check in a business loan agreement in India?
Check what is deducted before the money reaches you (processing fee, insurance, GST) and what you repay in total; whether the interest is fixed or floating and whether the lender can change it; prepayment, foreclosure and penal charges; personal guarantees and security; events of default that let the lender recall the loan; and whether the lender alone appoints the arbitrator.
Who this review is for
- Small businesses taking a term or working-capital loan from a bank or NBFC
- Founders offered a fintech business loan, credit line or invoice financing
- Directors and partners asked to sign a personal guarantee
- Businesses refinancing or consolidating existing loans
How it works
- 1
Upload the agreement
PDF, Word, a photo or pasted text, with its schedules and annexures.
- 2
Choose your state
Stamp duty, registration practice and tenancy law vary by state, so the report tells you exactly what to confirm locally.
- 3
Read the report
Deductions, repayment, charges, security, default and arbitration terms, explained plainly with the clause quoted.
- 4
Ask the lender
Questions to put to the lender in writing, including a statement of the all-in annual cost.
6 red flags to look for
Large deductions before disbursal
You receive less than the sanctioned amount but repay the whole of it.
The lender may change the rate or spread at will
Your repayment can rise without your agreement.
Heavy prepayment or foreclosure charges
Refinancing to a cheaper loan becomes expensive; stipulated sums are read down to actual loss under Sections 73–74.
Events of default drawn very widely
A “material adverse change in the lender’s opinion” can let the lender recall the loan at any time.
A sole arbitrator appointed by the lender alone
Open to challenge under Arbitration Act s.12(5) read with the Seventh Schedule.
Personal guarantees with cross-default across other loans
A problem on one facility can make every guarantee callable.
Terms explained
- Sanction letter
- The lender’s offer setting out the loan amount, rate and key conditions.
- Processing fee
- A fee deducted from the loan, usually a percentage of the amount.
- Floating rate
- An interest rate linked to a benchmark that changes over the loan.
- Foreclosure
- Repaying the whole loan early, often subject to a charge.
- Penal charges
- Charges for late payment or other breaches.
- Personal guarantee
- A promise by a director, partner or owner to repay if the business does not.
- Key Fact Statement
- A short summary of a loan’s cost and terms that regulated lenders commonly give borrowers before signing.
Pricing in India
One plan covers all 14 India analyzers. Prices exclude GST at 18%; a GST invoice with your GSTIN is available.
Single Review
₹999 one-time + GST
One contract review. No subscription, pay once, use within a year.
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₹3,299 / month + GST
4 reviews / month. For founders, freelancers and consultants.
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₹6,599 / month + GST
10 reviews / month for HR teams and regular reviewers.
Scale
₹13,199 / month + GST
25 reviews / month for high-volume teams and firms.
Business Loan FAQs
What should I check in a business loan agreement in India?
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Check what is deducted before the money reaches you (processing fee, insurance, GST) and what you repay in total; whether the interest is fixed or floating and whether the lender can change it; prepayment, foreclosure and penal charges; personal guarantees and security; events of default that let the lender recall the loan; and whether the lender alone appoints the arbitrator.
Can you tell me the real interest rate on my loan?
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The report describes every charge and deduction the agreement states. We do not compute the rate from the model’s reading; ask the lender for a written statement of the all-in annual cost, which regulated lenders commonly provide.
Is it normal for the lender to choose the arbitrator?
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It is common in loan agreements, but a sole arbitrator appointed by one party alone is open to challenge under Section 12(5) of the Arbitration and Conciliation Act read with the Seventh Schedule. The report flags it.
Should I sign a personal guarantee for my company’s loan?
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Many lenders ask for one. The report shows how far it reaches, whether it is capped, and whether cross-default ties it to other loans, so you can discuss limits before signing.
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ClauseAudit provides information and analysis, not legal advice, and does not create an advocate–client relationship. Findings use calibrated language because enforceability depends on facts and forum. Consult a qualified advocate before acting on any finding. See India pricing.