Business Loan for Startups

A well thought out business plan needs a good business loan free of traditional loan terms. There are different types of business loans for startups, MSMEs and others offered by Banks, NBFCs and Government initiatives. A business loan for startups can help fund the initial stages of a business. These loans offer entrepreneurs the financial resources needed to cover initial expenses and invest in infrastructure to move their ventures forward.

Whether you're launching a tech startup, a boutique retail store, or a service-based enterprise, a loan for startups will help turn your ideas into a reality. Get business loans for startups at flexible loan amounts of up to ₹50 Crores at competitive or subsidised interest rates for long repayment tenures of up to 15 years. The Indian Government has also launched many loan schemes to help fund entrepreneurs start their businesses and contribute to economic growth and development.

Table of Contents

• ⇾ Types of Business Loans for Startups
• ⇾ Bank Loan For Startups
• ⇾ Government Loan Schemes for Startups
• ⇾ Pradhan Mantri Mudra Yojana (PMMY)
• ⇾ Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE)
• ⇾ MSME Loan Scheme
• ⇾ Stand-Up India Scheme
• ⇾ Pradhan Mantri Rozgar Yojana (PMRY)
• ⇾ PSB Loanin 59 Minutes Scheme
• ⇾ Udyogini Scheme
• ⇾ Mahila Samridhi Yojana
• ⇾ Prime Minister's Employment Generation Programme (PMEGP)
• ⇾ Eligibility Criteria for Business Loans for Startups
• ⇾ Business Loan EMI Calculator
• ⇾ Documents Required for Loans For Startups
• ⇾ Features & Benefits of Getting a Business Loan for Startups
• ⇾ Steps to Apply for a Start-up Business Loan
• ⇾ Frequently Asked Questions

Types of Business Loans for Startups

There are various types of loans for startups offered by lenders and financial institutions. These business loans help entrepreneurs turn their innovative ideas into a successful company. Which brings about job creation and economic growth and development. The different types of business loans offered are:

1. Term Loans: Term loans are a common type of business loan where a sum is borrowed from a lender and repaid over a fixed tenure with interest. These loans can be used for various purposes such as purchasing equipment, inventory, or machinery, expanding operations, or meeting working capital needs.
2. Working Capital Loans: Working capital loans provide short-term financing to cover day-to-day operational expenses such as rent, utilities, employee's pay, and inventory purchases. These loans help startups maintain cash flow and ensure smooth business operations.
3. Equipment Financing: Equipment financing allows startups to purchase or lease equipment and machinery needed for their business operations. In this type of loan, the equipment itself serves as collateral for the loan, making it easier for startups to qualify for financing.
4. Startup Loans: Specifically designed for new ventures, startup loans provide capital to entrepreneurs to launch their business idea, cover initial expenses, and establish operations. These loans may have flexible terms and requirements that are specific to the unique needs of startups.
5. Business Line of Credit: A business line of credit provides startups with access to a predetermined credit limit, which they can draw from as needed. Interest is only charged on the amount borrowed, making it a flexible option for managing cash flow fluctuations and unforeseen expenses.

Bank Loan For Startups

Several banks in India provide startups the necessary financial support required to establish themselves in the business landscape, by offering specialised loan products to support their growth. Among them, prominent banks like State Bank of India (SBI), Union Bank of India, HDFC Bank, Axis Bank, are known for their startup-friendly lending programs.

These banks provide various loan solutions that are designed to meet the unique needs of startups, offering competitive interest rates, flexible repayment terms, and dedicated support throughout the application process. With these resources, aspiring entrepreneurs are given the opportunity to access the capital needed to bring their innovative ideas to fruition and contribute to the country's vibrant startup ecosystem.

Here are the loan amounts, interest rates and repayment tenures offered by the banks:

Government Loan Schemes for Startups

Recognizing the important role startups play in driving economic growth, the Indian government has implemented loan schemes specifically for startups. These initiatives aim to address the challenges that startups face in getting capital, encourage entrepreneurship and job creation by offering subsidised interest rates, relaxed eligibility criteria, and favourable repayment terms. By providing affordable funding, government-backed loan schemes give startups the opportunity to fund their initial expenses, invest in research and development, and scale their operations more rapidly. Here are some of the Government schemes that offers business loans for startups:

Pradhan Mantri Mudra Yojana (PMMY)

The Pradhan Mantri Mudra Yojana (PMMY) is an important scheme launched by the Indian government in April 2015 to provide financial support to micro-enterprises and small businesses.

PMMY loans can be availed from various banks, NBFCs, and microfinance institutions. The scheme also emphasises the inclusion of women entrepreneurs and borrowers from marginalised communities. PMMY aims to promote entrepreneurship, generate employment, and foster financial inclusion by providing easy access to credit for small businesses across India.

Here are the details of the PMMY scheme:

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

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE) is a government initiative that aims to provide collateral-free credit to micro and small enterprises (MSEs). CGTMSE aims to facilitate easier access to credit for MSEs by providing credit guarantees to banks and financial institutions.

Under this scheme, MSEs can avail loans up to ₹2 crore without the need for collateral or third-party guarantee. CGTMSE covers both term loans and working capital facilities extended to new and existing micro and small enterprises. By taking away the risk for lenders, CGTMSE encourages financial institutions to give credit to MSEs, which brings about entrepreneurship, promoting growth, and supporting the development of the MSME sector.

MSME Loan Scheme

The MSME (Micro, Small, and Medium Enterprises) loan scheme offers vital financial support to small businesses, with loan amounts typically ranging from ₹50,000 to ₹10 crore, depending on enterprise size. These loans are often collateral-free and feature subsidised interest rates for accessibility and affordability. They offer flexible repayment terms that are suited to the borrower's financial capacity. MSME loans can be utilised for diverse purposes such as working capital, machinery purchase, and business expansion. Government support through credit guarantee schemes and interest subsidies further incentivises MSME lending which brings about economic growth nationwide.

Stand-Up India Scheme

The Stand Up India scheme launched by the Government of India, aims to encourage entrepreneurship among women belonging to the Scheduled Castes (SCs), and Scheduled Tribes (STs). It offers collateral-free loans ranging from ₹10 lakh to ₹1 crore for businesses setting up greenfield enterprises or businesses built from scratch in various sectors. Eligible individuals, above 18 years of age and without any loan defaults, can access competitive interest rates and repayment periods of up to 7 years.

The scheme prioritises financial inclusivity and economic empowerment, offering accessible funding through participating banks. Stand Up India seeks to drive socio-economic development by encouraging entrepreneurship and job creation in marginalised communities.

Pradhan Mantri Rozgar Yojana (PMRY)

The Pradhan Mantri Rozgar Yojana (PMRY) is a government scheme introduced in 1993 to provide self-employment opportunities to educated unemployed youth in urban and rural India. PMRY offers loans of ₹2 lakh up to ₹10 lakh for setting up micro-enterprises, with a subsidy component of 15% of the project cost, capped at Rs. 7,500 per entrepreneur. Eligible individuals, aged between 18 to 35 years in urban areas and 18 to 40 years in rural areas, can apply for PMRY loans through District Industries Centers or other agencies. By promoting entrepreneurship and reducing unemployment, PMRY aims to promote economic self-reliance and contribute to overall socio-economic development in the country.

PSB Loan in 59 Minutes Scheme

The PSB Loan in 59 Minutes Scheme is an initiative launched to simplify and expedite the loan approval process for micro, small, and medium enterprises (MSMEs). Under this scheme, MSMEs can apply for loans of up to ₹5 crore through a dedicated online platform, with loans being granted within 59 minutes. The scheme covers various types of loans, including working capital loans, term loans, and business loans.

Eligible applicants must have a GST registration, income tax returns for the previous year, bank statements for the last six months, and a digital signature. The scheme aims to provide quick and hassle-free access to credit for MSMEs, thereby ensuring flow of business growth and expansion.

Udyogini Scheme

The Udyogini Scheme is a government initiative aimed to empower women entrepreneurs by providing financial assistance and support for setting up micro-enterprises. Launched to promote economic self-reliance among women, particularly from marginalised sections of society, the scheme offers financial assistance for manufacturing, service, and business enterprises.

Under the Udyogini Scheme, women entrepreneurs can avail loans of up to ₹1 lakh for individual ventures and up to ₹3 lakh for joint ventures, with a subsidy of 30% of the project cost. The scheme emphasises on skill development, capacity building, and entrepreneurial training for women beneficiaries, to help them establish and manage their enterprises successfully. Eligible applicants must be women above 18 years of age, belonging to below the poverty line (BPL) families. The Udyogini Scheme plays a crucial role in creating livelihood opportunities across the country.

Mahila Samridhi Yojana

The Mahila Samridhi Yojana is a government scheme focused on promoting women's economic empowerment and financial inclusion in India. Launched to provide financial support to women, the scheme offers loans for various income-generating activities such as agriculture, animal husbandry, small businesses, and handicrafts. Under the Mahila Samridhi Yojana, women can avail loans of up to ₹50,000 for individual enterprises and up to ₹1 lakh for group enterprises. The scheme provides a subsidy of 30% of the project cost, with the remaining 70% financed through loans. By giving access to credit and creating entrepreneurship among women, the Mahila Samridhi Yojana aims to promote socio-economic empowerment and reduce gender disparities in Indian Society.