Startup Business Loans

Eligibility Criteria for Startup Business Loan

The eligibility criteria to avail startup business loans may vary from lender to lender but the generic ones have been listed below:

1. Applicants must be at least 21 years old and not more than 65 years at the time the loan matures. 

1. Applicants should be self-employed. 

1. The startup or business must be registered as a partnership firm, sole proprietorship, private or public limited company, or limited liability partnership (LLP). 

1. A CIBIL score of 750 or above is preferred. 

1. Loans are approved easily for applicants with no history of loan defaults. 

1. The annual turnover of the business should not exceed Rs.25 crore. 

Documents Required to Avail Startup Business Loan

The list of documents required to apply for startup business loan are mentioned in the table below: 

How to Apply for Startup Business Loan?

Some of the ways through which you can apply for a Startup Business Loan are:

Step 1: Enter Basic Details 

Provide the essential information such as: 

1. Desired loan amount 

1. Status of employment 

1. Annual gross sales or turnover 

1. City of residence 

1. Years in current business 

1. Type of collateral (if any) 

1. Mobile number 

Step 2: Consent and Offer Access 

1. Agree to the terms and conditions by ticking in the consent box. 

1. Click on “Unlock Best Offers” to proceed. 

Step 3: Provide Additional Business and Personal Information 

Fill in details such as: 

1. Company type 

1. Nature and industry of business 

1. Gross annual profit 

1. Bank account information 

1. Existing EMIs (if any) 

1. Full name, gender, PIN code 

1. PAN card number 

1. Date of birth and email address 

Step 4: Wait for Representative Contact 

After submission, a bank representative will reach out to continue the loan processing and documentation. 

Step 5: Loan Disbursal 

Once the loan is approved, the sanctioned amount will be disbursed to your bank account within the specified working days. 

Benefits of Business Loans for New Entrepreneurs 

The startup business loans offer various benefits to the new entreprenuers financially thereby helping to grow their business. The benefits are as follows: 

1. Offers tax exemptions for up to three years, easing initial financial burdens. 

1. Bank loans do not require giving up business ownership or equity unlike venture capital that demands 5-10 times the return on investment. 

1. Bank loans offer fixed, nominal interest rates, making them a cost-effective funding option compared to venture capital. 

1. Entrepreneurs can approach local branches of banks or NBFCs for loans and credit support. 

1. Requires minimal paperwork and includes standardized and efficient loan approval process, thereby enabling faster disbursals. 

1. Business owners retain 100% of profits and bear full responsibility for losses, with no obligation to share financial outcomes with the bank. 

Types of Business Loan and Schemes for Startups 

There are various types of business loan and schemes for startups which are listed below: 

1. Term Loan (Short-term or Long-term) 

1. SIDBI’s Growth Capital and Equity Assistance Scheme 

1. Micro Loans from NPOs and NGOs 

1. Working Capital Loan 

1. Overdraft Facility 

1. Loans under Mudra Yojana 

1. Startup India from Govt. of India 

1. psbloansin59minutes.com 

1. Loans under CGTMSE Scheme 

1. Bill/Invoice Discounting 

1. Letter of Credit 

Government Business Loan Schemes in India 

Here are some of the vital details about the government business loan schemes in India: 

Startup India Scheme 

1. Launched to support startup businesses in India with access to easy financing. 

1. Aims to boost startup growth, generate employment, and create wealth. 

1. Registered startups can avail themselves of business loans at competitive interest rates. 

Stand-Up India Scheme 

1. Targets SC (Scheduled Caste) or ST (Schedules Tribe) individuals and women entrepreneurs to promote inclusive entrepreneurship. 

1. Offers loans ranging from Rs.10 lakh to Rs.1 crore through each bank branch. 

1. Designed to support new business ventures for underrepresented communities. 

PSB Loans in 59 Minutes (psbloansin59minutes.com) 

1. A digital loan approval platform that processes business loan applications in under an hour. 

1. Offers loan amounts from Rs.10 lakh to Rs.5 crore. 

1. Interest rates begin at 8.50% p.a., varying by lender and applicant profile. 

1. No collateral or security is required and involves a very low processing fee. 

MUDRA Loan (Pradhan Mantri Mudra Yojana) 

1. For micro and small businesses, the scheme provides collateral-free loans up to Rs.10 lakh. 

1. Requires little to zero processing fee and the loan repayment tenure is up to 5 years. 

1. No minimum loan threshold, and interest rates differ by bank and business profile. 

CGTMSE Scheme (Credit Guarantee Fund Trust for Micro and Small Enterprises) 

1. New and small business owners receive collateral-free credit via banks and NBFCs. 

1. Primarily benefits first-time entrepreneurs and startups. 

1. A government-backed credit guarantee ensures lender confidence. 

SIDBI Growth Capital and Equity Assistance Scheme 

1. Offers capital and equity-based support to startups through SIDBI and partner banks. 

1. Tailored funding solutions to meet the unique needs of startups. 

1. Depending on lending institutions, the scheme names and terms may vary. 

Startup Business Loans By Banks

Line of Credit

A startup business loan in the form of a line of credit works in a similar manner to a credit card. However, the card is tied to the individual's business instead of their personal credit. One of the best benefits of a small business line of credit is that customers will have no obligation to pay interest on the borrowed sum for the first nine to 15 months, thereby making it easier to cover expenses whilst getting their business to a good start.

Equipment Financing

In this type of loan for start-ups, the equipment that is bought when starting the business is pledged as collateral, thus enabling the lender to charge a relatively low rate of interest with a slightly higher risk. The customer is expected to repay the amount used to purchase the equipment as revenues are generated from their business. Similar to a line of credit, applicants are expected to have a high credit score (680+), and the documents required to avail equipment financing include a vendor quote, a detailed credit report, and a statement showing the manner in which the customer intends to utilise the equipment. The main benefit of equipment financing is that the depreciation of the equipment can be used by the customer as a tax benefit for many years.

Things to Keep in Mind when Looking to Apply for a Startup Business Loan

Startups looking to get such a loan should ensure the following:

1. Make a crisp and detailed business plan.
2. State clearly how you intend to use the loan amount in your business plan.
3. Summarise the objectives and goals of the business along with a chart that will highlight the potential returns and growth of the venture.
4. Give a clear approximation of the funds.

Benefits of Startup Loans

The benefits of startup loans are given below:

Tax Relief: New entrepreneurs can benefit from tax exemptions for up to three years.

Cost-Effective Funding: Unlike venture capital, which demands high returns (5-10 times the investment), bank loans do not require equity dilution. Banks charge a fixed nominal interest rate, making it a more affordable option.

Ease of Access: With a vast network of banks and NBFCs in India, entrepreneurs can easily approach local financial institutions for loans and credit facilities.

Streamlined Processes: Indian banks have a well-structured framework for processing startup loan applications, ensuring quick approval with minimal documentation.

Ownership of Profits and Losses: The business profits and losses remain solely with the borrower. Entrepreneurs are not required to justify their financial outcomes to the bank.

Key Takeaways for Startups

To secure startup funding, applicants must prepare a detailed proposal covering all business details such as a well-structured business plan, financial projections, and promoter backgrounds. A strong credit score is required, and accurate information should be provided to obtain favorable loan terms. 

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