Personal Loans Become a Key Source of Business Funding

Small business owners are increasingly borrowing to meet their business requirements, but a significant share of these loans continues to be taken in individuals’ names rather than under business entities. Over the past three years, personal loans taken for business purposes grew at an average annual rate of 26% in Telangana and 25% in Andhra Pradesh. In comparison, loans taken in the names of micro-business enterprises grew by just 13% in Telangana and 11% in Andhra Pradesh. A joint study by TransUnion CIBIL and the National Small Industries Corporation (NSIC) has highlighted the gap between rising credit demand among small businesses and access to loans in the names of business entities. As of June 2026, outstanding loans to micro businesses stood at ₹1.74 lakh crore in Telangana and ₹1.45 lakh crore in Andhra Pradesh.

As of March 2026, 19.6 lakh business owners in Telangana and 23.8 lakh in Andhra Pradesh had taken personal loans for business purposes but had never borrowed in the name of their business entities. Together, they account for 43.4 lakh borrowers across the two states. Notably, 62% of such borrowers in Telangana and 61% in Andhra Pradesh had CIBIL scores above 730. Loans secured against property accounted for 53% of small-business lending in Telangana and 41% in Andhra Pradesh. NBFCs played a significant role in personal business lending, with a share of 48% in Andhra Pradesh and 38% in Telangana. Nationwide, total commercial credit to micro businesses reached ₹29.6 lakh crore as of June 2026.