Business Loan for Startups

Have you always dreamt of starting your business venture but have been deterred by the need for funds? Well, there is no better time than now. Leading lenders offer startup business loans without collateral. Also known as unsecured loans, you do not have to support the loan application with any asset like machinery, equipment, gold, goods or property. Access to a collateral-free loan opens up immense possibilities for startup businesses. The loan allows you to set up and grow your business easily, and you do not have to be hassled with the need to keep your assets at stake.

Here are some of the top startup business loans by the Indian government.

1. Pradhan Mantri Mudra Yojana (PMMY)

This scheme offers an MSME startup loan classified as MUDRA (Micro Units Development and Refinance Agency). Financial institutions, including regional rural banks, MFIs and NBFCs, can offer this startup funding solution.

Traditional or regional craftsmen, vegetable sellers, machine operators, store owners, service firms, etc., can all apply for a Mudra loan.

The startup loan amount ranges from ₹50,000 to ₹10 Lakhs and is categorised as Shishu, Kishor, and Tarun, depending on the loan amount. Moreover, women business owners can avail of this loan at discounted interest rates, making the loan more affordable.

2. Sustainable Finance Scheme

Started to support ventures that work towards sustainable development and clean, energy-efficient operations, the scheme is also run by SIDBI. As such, an entrepreneur working towards sustainability through their venture can apply for these startup loans. 

Under this scheme, you can get financing of up to ₹1.5 Crores with a repayment tenure of up to 6 years. 

3. Credit Guarantee Scheme (CGS)

As the name suggests, the scheme aims to extend credit and financing to the MSME sectors. Established and emerging MSMEs engaged in service or manufacturing operations can apply for this MSME loan for startup businesses. 

However, businesses engaged in Self Help Groups (SHGs), agribusiness, academia, retail, etc., avail financing under this scheme. Under this plan, run by the CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises), you can avail up to ₹5 Crores as startup business funding.

4. Standup India

The primary aim of this scheme is to offer business loans for startups headed by women and people belonging to the SC/ST category. Standup India Under this scheme, you can get financing of up to ₹1 Crore as startup funding. 

However, to qualify for this scheme, you should have a greenfield enterprise. This means that it should be a first-time venture in the trading, manufacturing, and service sector. 

Apart from the above, there are other government schemes that offer an MSME loan for startup businesses. These schemes include:

• Financing through NABARD (National Bank for Agriculture and Rural Development)

• Startup India Scheme

• Bank Credit Facilitation Scheme

• Udyogini

• Coir Udyami Yojana

Remember to check the details of the scheme before applying to ensure that you get seamless access to the funds you need.

To apply for a startup loan, you must meet the following eligibility criteria:

• You must be an Indian citizen

• You must be a self-employed individual

• Your age must be between 21 to 70 years

• You must have a CIBIL score of at least 700

• The business must have a vintage of at least 3 years

• The business must meet the minimum annual income terms 

• The business must not be in the blacklisted or excluded category

You can check your startup business loan eligibility with the help of the Business Loan Eligibility Calculator. Keep in mind that the above eligibility criteria may vary depending on the lender you apply with. 

Check the lender’s website before applying for startup business funding to ensure that you meet all the criteria. 

Here are the documents that you need to apply for a startup business loan:

• 2 passport-size photographs

• Proof of Identity: Aadhaar card/ Driving licence/ PAN card/ Passport/ Voters ID

• Address proof:  Aadhaar card/ Passport/ Utility bills/ Lease Agreement

• Signature Proof: PAN Card/ Passport/ Bank verified signature

• Bank statement for the last 6 months

• ITR form and certified copies with income computation, balance sheet, and Profit and Loss (P&L) statement for the last 2 years

• Sole Proprietorship Declaration or authenticated copy of Partnership Deed

• Certified copy of Memorandum and Articles of Association

Most lenders allow you to apply for an instant business loan for Startup using online as well as offline modes. To apply for business loans for startups, follow the steps given below: 

• Step 1: To apply online, visit the lender’s official website and to apply offline, visit the lender’s nearest branch.

• Step 2: Fill up the application form and submit the necessary documents.

• Step 3: The lender will contact you to assist and understand other related aspects.

• Step 4: The loan application is then evaluated before it is approved.

• Step 5: After approval, the funds get transferred into your account quickly.

If you are seeking loans for your startup, you need to consider the following points:

• Provide a precise estimation of the available working capital

• Create a clear, thorough, and workable business plan

• Your business plan should be able to explain where you intend to spend the funds

• Include a summary of the company's aims and objectives

• Provide a graph of expected profits and expansion of the venture