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How to Get A Start-up Business Loan in India?

What is a Startup Business Loan?

A start-up business loan is a lump-sum amount of money financed by various banking institutions as a loan to new businesses to fulfil their monetary needs. Business owners can require a start-up loan for purposes like purchase of equipment, supplies, working capital, inventory, furniture, machinery, and construction or purchase of the real estate.

While starting up a new business, one of the biggest challenges a person faces is securing the required funds to flourish their idea into a business and promote initial growth. For turning the metaphorical or physical sign that says, ‘open for business,’ one needs to have access to the necessary funds in the form of a start-up loan.

Those who have started their hunt for a start-up loan know that small business loans are not easily available, although there are seemingly infinite options available. Each loan has its own pros and cons. But low-cost loans are not easily available.

Step by Step Process to Get a Start-up Loan

Reviewing of start-up’s costs – One should be clear to understand what the loan is used for listing the costs associated with the start-up.

  • All required registrations and documents should be prepared beforehand. Ensure to have the details of the following – business plan, credit score, essential documents & required registrations.
  • One’s qualifications should be checked. The chances to get a loan can be improved by improving one’s credit score, building assets, expanding one’s potential customers & updating the financial projections.
  • The most important point is choosing the right start-up loan. One should select the type of loan for needed, like a business credit line, credit line builders, equipment financing, or business credit cards.

Costs covered: There are many start-up costs that one might have to bear when one is getting one’s small business up and running.

Getting Registrations and Documents Ready

As far as small business owners are concerned, getting even a small business loan to start one’s new business can be tough because traditional lenders in the market are quite reluctant to finance a new venture with no business history and no previous revenue.

On the other hand, start-up businesses have a better choice at securing loans if they do their homework beforehand in search of the start-up loan best suited to them.

The initial step for getting a start-up business loan is to make sure that one has the required documents in hand to start a start-up loan search. Then proper and detailed planning of the business is required to be done at this point. Next, the start-up business has to be registered. This has to be followed by checking that one has collected all the necessary documents. If one does all these, one is set to succeed in getting a loan.

Checking Qualifications for a Start-up Loan

After having one’s paperwork in order, one must check if one qualifies for the loan one needs. This means checking the following:

  • Annual turnover
  • Business timing
  • Credit score
  • Cash flow.

Choosing the Right Startup Loan

Now after following all these steps, one is ready to start one’s start-up loan search. What follows is a breaking down of every option for small business start-up loans available in the market so that one can make the best and most appropriate business financing decision.

Costs Covered

Every business’s list of expenses will be different, but here are some common costs for starting a business:

  • Purchase of equipment like cash registers, vehicles, machinery, etc.
  • Purchase related to technology, like tablets, printers, and computers.
  • Purchase of inventory needed for initialization
  • Licenses and permits like trade license, GST, etc
  • Furniture for business
  • Office supplies
  • After one pays these initial costs, one will have to ongoing expenses like employee payroll, rent, taxes, mortgage payments, etc. that one needs to cover as one grows one’s start-up.

Eligibility Criteria for Startup Business Loan

The eligibility criteria for start-up business loans vary, but the general ones have been listed below:

Minimum age of the applicant


21 years
Maximum age of the applicant


65 years
Citizen Indian Citizen
Documents Required for Startup Business Loan
Photographs 2 passport size
Identity Proof Aadhaar Card, Passport, PAN Card, Voter ID, Driving License
Address Proof Voter ID, Aadhaar Card, Driving License, Postpaid Phone Bill
Age Proof PAN Card, Passport
Bank Statements Last 6 months
Proof of Income Salary Slips, Income Tax Returns
Signature Proof PAN Card, Bank verified signature, Passport
IFSC Code Proof Copy of passbook 1st page, Cancelled or scanned cheque

Applying for Business Startup Loan

The application of start-up business loans is very simple, hassle-free, and quick. Most of the financial institutions have started accepting online applications for loans so that the applicant can fill the form at their convenience. For an online process, one needs to fill-up the form, upload the necessary documents, and wait for the loan approval. One can also visit the branch of the loan provider and submit a physical application form and documents. After filling up, the bank will notify about the loan approval, and the applicant will receive the amount in their bank account.

But the applicant needs to check the eligibility before applying for the loan application process. The steps to follow for online application for start-up loans are: –

Step 1: Visit the bank’s website and fill up an online application form for a loan.

Step 2: Enter one’s KYC details and loan details like interest rates, loan amount, tenure, etc.

Step 3: fter completion of start-up business loan application, the applicant will be assigned a loan representative who will assist in the application process. On verification of the document, the loan will be approved by the bank.

Step 4: The approved loan will be transferred to the applicant’s bank account.

Features and Benefits of Startup Business Loan

  • No security or collateral is required to avail of a start-up business loan.
  • These loans come with flexible and easy repayment options.
  • The loan amount is quickly disbursed to the businessman’s bank account.
  • The documents required for getting a start-up business loan is very less as compared to traditional loans.
  • Indian Banks have a well-structured and established framework for processing the required funding on the request of entrepreneurs. So, the loan request gets processed more easily as compared to capitalist investments.
  • Another major benefit of start-up loans is that the business’s loss or profit only belongs to the borrower. Businessmen need not answer the lender or bank about the loss or profit of their start-up.

Start-up Business Loans by the Government of India

Bank Credit Facilitation Scheme – This scheme is headed by the National Small Industries Corporation (NSIC) department. The scheme is created to meet the financial needs of MSME units. The NSIC has a network of banks that provide loans to MSME units. The repayment tenure of a loan of the plan varies from 5 years to 7 years, and it can also be extended for upto 11 years in certain special cases.

Pradhan Mantri Mudra Yojana (PMMY) – This plan was launched in 2015, which was launched by the Micro Units Development and Refinance Agency (MUDRA) department headed by the government of India. The scheme provides loans to different kinds of businesses, like trading, manufacturing, and service sector activities. The scheme provides loans under three categories like Shishu, Tarun, and Kishor loans ranging from Rs 50,000 to Rs 10 lakhs. The Mudra loan can be availed by shopkeepers, artisans, machine operators, repair shops, vegetable vendors, etc.

Credit Guarantee Scheme (CGS) – This loan scheme is availed by both existing and new MSMEs who are involved in manufacturing activities or service industry but excludes agriculture, educational institutions, Self Help Groups (SHGs), retail trade, etc. An amount upto a maximum of Rs. 200 lakh can be available as a loan under this scheme, headed by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).

Standup India – This scheme was launched in April 2016 and is headed by SIDBI, which extends loans to business in trading, services, or manufacturing. In this scheme, loans starting from Rs.10 lakh to Rs.1 crore are availed by the applicants. The repayment of the loan taken through this scheme is made in 7 years while the moratorium period can be upto a maximum of 18 months.

Sustainable Finance Scheme – The scheme is headed by the SIDBI, which provides loans to such industries that deal with renewable energy, green energy, non-renewable energy, and technology hardware. The scheme was started to offer support to the production of cleaner and efficient energy and other sustainable development projects

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About the Author: Praveen Unnikrishnan

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