How To Obtain A Business Loan In India For New Businesses

The startup ecosystem of India has grown exponentially over the last few years. Therefore, they act as a vehicle for the development of socioeconomic transformation of the country. Being the centre of noble innovations, these startups create more career opportunities through the generation of jobs for the common population. Higher employment rate will result in the strengthening of the Indian economy which will have a direct impact on the growth of the cities where these startups are located. 

If you are an entrepreneur or you have a dream of owning your own business, you are already a step towards contributing towards the growth of the Indian economy. However, one of the major setbacks that you may face during this process is the unavailability of capital for your startup. This is where a business loan for startups can prove to be helpful. Here’s the list of the important aspects that you must be aware of to be able to maximise the benefits of business loans. Read on to know about its benefits, features, documentation processes, and more.

Features And Benefits Of Business Loans For Startups

Here are some of the major benefits and features of business loans:

  • Flexibility and Convenience

Based on the necessary requirements, if you are a business owner or an entrepreneur, you can avail of a business loan for your startup from financial institutions or banks. You can also repay that amount on a monthly basis on an interest rate which both the parties agree upon. Besides, you can also choose a tenure which you both are comfortable with. You can avail the working capital loans to meet your business’ operational expenses. In addition to this, the banks also offer overdraft facilities so that you can withdraw your funds from your current accounts.

  • No Collateral

Startup loans usually do not need the borrowers to place any kind of collateral since they are unsecured loans. Besides, the process of application does not require the involvement of any additional security deposits or payments.

  • Choice of Tenure

You can choose your own tenure to repay your business loans from Non-banking Financial Companies (NBFCs) or banks. You can also choose shorter tenures to repay your startup loans. This will help you receive financial assistance at a lower rate of interest. Since there are a lot of financiers offering business loans for startups, you can benefit a lot from the competitive structure of interest rates.

Eligibility Criteria For Startup Business Loans

The following conditions must be met to be eligible for obtaining a startup loan:

  • Partnership firms, private enterprises in trading, manufacturing, or services, and self-employed individuals can apply for startup loans.
  • Applicants must be between 21 years and 65 years.
  • The startup must have been making profits for a minimum of two years. 
  • The startup business must have a minimum turnover of at least Rs. 12 Lakhs (this limit may vary as per the lending institution).
  • Applicants must have a CIBIL score of a minimum of 750.

The requirements may vary depending on the lender you choose.

Documents Necessary For A Startup Loan

The following documents must be submitted by you (the business owner) to the concerned lender: 

  • Government ID proof such as passport, voter ID, aadhar card, PAN card (individual/company/firm), driving licence, etc.
  • Statement of your bank account for the previous six months.
  • Address proof such as passport, aadhar card, voter ID, driving licence, etc. 
  • Balance sheet, income tax return statement, proof of continuation (trade licences, sales tax certificates, etc.) profit and loss account statement.
  • Other important business related documents such as the sole proprietor declaration or partnership deed, a certified copy of articles of association and memorandum, etc.

The requirements of the documents may vary depending on the lender you choose.

How To Apply For A Business Loan For Your Startup

It is advisable for you to first compute your EMI amount for your desired principal amount by using an online EMI calculator to be able to estimate the amount you will have to keep aside for your EMI. After you are done with an estimate calculation of your EMI, you can apply for a business loan for your startup if you follow these simple steps:

Step 1: Navigate to the official website of your respective lender.

Step 2: Click on ‘Apply Now’ and fill in the required personal information.

Step 3: Enter the preferred loan principal amount, loan tenure.

Step 4: Once the application is approved and verified, you will get the loan amount.

You must keep the necessary documents handy while initiating your loan application process. 

Business Loans For Small Business By The Government Of India

There are thousands of Indian startups who have access to debt funding and private equity funding options. However, it gets difficult for small businesses to get funded at an early stage. The Micro, Small, and Medium Enterprises (MSME) sectors in India have a limited access to formal credits. Hence, the GoI has decided to roll out business loans schemes for startups and MSMEs.

Some of these notable schemes offered by the GoI for MSMEs and startups are given below:

  • Bank Credit Facilitation Scheme

This scheme is led by the National Small Industries Corporation (NSIC) and targets at meeting the credit related requirements of the MSME units in India. Partnered with several banks, the NSIC provides business loans to the MSME units. The tenure of repayment for the scheme ranges from 5 years to 7 years. However, in special situations, it may even extend up to 11 years.

  • Pradhan Mantri Mudra Yojana (PMMY)

The PMMY was launched in the year 2015 and is headed by the Micro Units Development and Refinance Agency (MUDRA). The major objective of the Mudra loan is to offer business loans to every kind of trading, service, and manufacturing sector activities. The loan is offered under 3 categories, namely, Kishor, Tarun, and Shishu. The amounts range from Rs. 50,000 and Rs. 10,00,000. Mudra loan interest rate start at 7.30% per annum. Artisans, vegetable vendors, shopkeepers, repair shop owners, machine operators, etc. can avail of the Mudra Loan.

  • Credit Guarantee Scheme (CGS)

The business loan under this scheme can be availed by new as well as existing MSMEs which are involved in manufacturing or service activities. However, agricultural, retail trade, educational institutions, self help groups, etc. can not avail of this loan. You can borrow an amount of up to Rs. 2 Crores under this scheme which the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) heads.

  • Standup India

This scheme was launched in April, 2016, and is headed by Small Industries Development Bank of India (SIDBI). This scheme provides business loans to enterprises in the services, trading, and manufacturing sectors. You can avail of loan amounts ranging from Rs. 10 Lakhs to Rs. 1 Crores. Besides, the tenure of loan repayment can be extended up to 7 years whereas the maximum suspension period permitted is 18 months.

List Of Banks Which Offer Startup Business Loans

Here’s a list of some of the leading lending institutions for startups:

  • SBI
  • HDFC Bank
  • Citibank
  • Kotak Bank
  • Axis Bank
  • Induslnd Bank
  • Karnataka Bank
  • Standard Chartered

Disclaimer: Kindly visit the official website or the nearest branch of your preferred bank for more details.

Factors To Consider Before Applying For A Business Loan For Your Startup

Here are some of the basic factors you must consider prior to applying for a business loan for your startup:

  • Understanding your business and fund requirements is crucial.
  • You should research the several types of loans available in the Indian market, check for the repayment tenure options, interest rates, and more.
  • You must also check your credit score before applying for the startup loans.
  • You should also check for the additional fees involved.
  • You must also check if you are eligible for applying for a business loan for your startup.


It is evident that you will have to invest some amount of money to create your own business as an entrepreneur. Your business needs working capital for the expansion of your operations, research, development, purchasing of machinery, raw materials, and other requirements. Hence, obtaining a business loan for your startup is the easiest and one of the most flexible ways to get funding for your several business venture related requirements and goals.

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