You can avail a Startup business loan from a bank or a financial body in order to raise funds to start a business of your own or expand your current business. The rate of interest charged by the bank will depend on the loan amount availed by you and the repayment tenure.
| Interest Rate | Up to 21% p.a. |
| Loan Amount | Up to Rs.75 lakh |
| Loan Tenure | Up to 5 years |
| Processing Fee | Up to 6.5% of the loan amount + GST |
There are more than 39,000 startups in India at present who have access to many private equity and debt funding options. However, it is a challenge to get funding when the business is just an idea or is in the early stage. Also, the Micro, Small, and Medium Enterprises (MSME) sector in India only has limited access to formal credit which is why the Government of India decided to roll out startup business loan schemes for MSMEs and startups.
The Small Industries Development Bank of India (SIDBI) has also begun lending to startups and MSMEs directly rather than channelising it through banks. The interest rates on these loans are lower than the one offered by banks by almost 300 basis points. Some of the most notable and popular schemes offered by the Indian government for startups and MSMEs are as follows:
Headed by the National Small Industries Corporation (NSIC), this scheme is targeted at meeting the credit needs of the MSME units. The NSIC has partnered with various banks to provide loans to the MSME units. The repayment tenure of the scheme ranges between 5 years and 7 years but in special cases, it can be extended up to 11 years.
Launched in 2015, this scheme is headed by the Micro Units Development and Refinance Agency (MUDRA) and it aims at offering loans to all kinds of manufacturing, trading, and service sector activities. The scheme offers loan under three categories – Shishu, Kishor, and Tarun in amounts ranging between Rs.50,000 and Rs.10 lakh. The Mudra loan can be availed by artisans, shopkeepers, vegetable vendors, machine operators, repair shops, etc.
This loan can be availed by both new and existing MSMEs that are involved in service or manufacturing activities but excludes educational institutions, agriculture, retail trade, Self Help Groups (SHGs), etc. Up to Rs.2 crore can be borrowed under this scheme headed by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
Launched in April 2016 and headed by SIDBI, this scheme extends loans to enterprises in manufacturing, trading, or services. Under this scheme, loans ranging between Rs.10 lakh and Rs.1 crore can be availed. The repayment of loans taken under this scheme can be done in seven years while the maximum moratorium period allowed is 18 months.
This scheme is also headed by the SIDBI and aims at offering loans to industries that deal in green energy, renewable energy, technology hardware, and non-renewable energy. The government started this scheme with an intent to offer support to the entire value chain of cleaner production/energy efficiency and sustainable development projects.
This is a digital platform which allows you to avail business loans if you are looking to establish a business. Based on your eligibility criteria and other requirements, you can avail loan amount of up to Rs.10 lakh under the Mudra Loan scheme, and Rs.5 crore under the MSME loan scheme. You can also apply for personal loan of up to Rs.20 lakh, home loan of up to Rs.10 crore, and auto loan of up to Rs.1 crore as well.
| Name of the lender | Interest Rate |
| HDFC Bank | 15.75% p.a. onwards |
| TATA Capital | 19% onwards |
| Kotak Mahindra | 17% onwards |
| Fullerton India | 17% p.a. to 21% p.a. |
HDFC Bank
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TATA Capital
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Kotak Mahindra
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Fullerton India
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Startup business loans are of two types -
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.
Startups looking to get such a loan should ensure the following:
The eligibility criteria to avail startup business loans may vary from lender to lender but the generic ones have been listed below:
| Photographs | 2 copies (passport-size) |
| Proof of Identity | PAN Card, Passport, Aadhaar Card, Voter’s ID, Driving License |
| Address Proof | passport, Driving License, Aadhaar Card, Postpaid Phone Bill, Voter’s ID |
| Age Proof | Passport, PAN Card |
| Bank Statements | Last six months |
| Proof of Income | Income Tax Returns, Salary Slips, |
| Signature Proof | Bank verified signature, PAN Card, Passport |
| IFSC Code Proof | Cancelled/scanned cheque, copy of passbook’s front page of the same bank account |
Some of the ways through which you can apply for a Startup Business Loan are: