Written by : DG Gupta

A financial professional, qualified Chartered Accountants and Company Secretary examinations and enriched with experience of all types of accounting, taxation and compliance of Manufacturing as well as Service Industries

How to Get a Loan for a Startup Business in India?

DG Gupta
DG Gupta, CA, CS

May 29, 2021 02:42

Over the last few years, the number of startup businesses in India is mushrooming like never before. It has now become easier to grow and build a startup from level zero in India with the presence of an encouraging startup ecosystem backed by the government. Entrepreneurs all over India can now have access to various funding schemes, tax incentives, and registration procedures in a rapid and facile way.

For any business, raising sufficient capital is among the foremost priorities. Most folks intending to startup business in India are not born with a silver spoon to inherently have the requisite financial sources. As per reports, 29 percent of the startups fail because they do not have access to the required capital. Borrowing funds becomes one of the significant ways to generate the necessary funds.

Hence, as an owner of a startup business in India, you might feel compelled to ask how to get a loan to start a business from the government or other financial institutions. Let us find out.

Exploring your options for quick and easy loans for startup business in India!

Loans from Commercial Banks

There can be various sources to obtain a loan or funding depending upon the type and scale of your startup business in India. The most commonly used option is to get a business loan from any commercial bank. However, getting a loan from a public sector banking institution can involve a long and stringent process. It includes quite a sizeable chunk of documentation and evaluation. Most banks' interest rates for loans to startup business in India vary from 15 percent to 21 percent. These rates are on the higher side. You must also have a scalable asset as collateral to be eligible for the loan. If this requirement is not met, getting a loan from the bank can prove a bit arduous. Generally, most banks prefer to offer loans to pre-existing businesses that already showcase a decent financial position to showcase.

Loans from NBFCs for startup business in India

Apart from the banks, there are various non-banking financing options available. These companies offer loans and funding to new businesses based on their potential to reap out profits. These finances usually have a low-interest rate. To avail of these loans, there is a list of eligibility criteria that needs to be followed. If your business is competent in these criteria, you can apply for the loan.

Further, if your company doesn't hold good for the loan schemes from NBFCs, you can turn your head towards government schemes and funding.

How to get a loan to start a business from the government in India?

The Indian government has in effect various schemes for expanding the chambers of magnifications of startups in India. Let us delve into how to get a loan to start a business from the government. Enlisted below are the details related to government schemes that can offer loans to small businesses at a reduced interest rate:-

1. MUDRA Loans for small scale startup business in India

Micro- units development and Refinance Agency (MUDRA) is an organization that provides refinances from the various public sector, private sector, and corporative banks to micro-businesses and startups with a low-interest rate. There are three categories of loans available under this banner -

  • Shishu: covering loans up to 50,000 rupees.
  • Kishor: covering loans in between 50,000 and 5 lakhs
  • Tarun: covering loans from 5 lakhs up to 10 lakhs rupees.
Check your eligibility for MUDRA:

To be eligible to obtain the MUDRA loan, you must be-

  • Aged between 18- 65 years.
  • Your startup or business can be new or existing.
  • Documents such as identity proof, address proof, duly filled application form with passport-sized photos must be available.

To avail of this loan facility, you can fill the application of any public or private sector bank. Attach all the documents mentioned above and submit them for evaluation, there is no need for collateral, and the bank will provide this loan once your documents are verified.

This scheme aims to provide low-interest loans to new businesses and expand their profit returns without the worry of withholding collateral.

2. MSME loans within 59 minutes

MSME Loans in less than an hour is the fastest and easiest business loan for micro, small and medium enterprises. It is granted within the first 59 minutes of application, the further proceedings take 8-12 days, but the approval is done within 59 minutes. This is also a refinance scheme provided by five authorized public sector banks. Under this banner, you can avail of a loan of up to 1 crore. The interest rate depends upon the nature of your business and credit rating. Both new and existing ventures can utilize this loan.

Documentation required for MSME

To be eligible for this loan, you need the following documents-

GST verification, income tax verification, bank account statements of the previous 6 months, ownership-related documents, and KYC details. If you possess all these documents handy, you can apply for this scheme.

How to move further?

To apply for this loan, you need an MSME card or Udyog Adhar registration.

  • Go to the MSME website, fill the application form available.
  • Get yourself verified and obtain the card.
  • There are no documents required for the registration of the MSME card apart from the Aadhar card.
  • Once completed, you can apply for the loan from any authorized bank registered under this scheme.
  • Submit all the documents mentioned above, and the bank will verify your eligibility and grant the loan.
3. Loan schemes for Startup business in India under National small industries corporation subsidy (NSIC)

The NSIC subsidy for small businesses covers two aspects of the business- raw material assistance and marketing assistance. The raw material that the business buys can be indigenous or imported depending upon the type; these are covered by NSIC. Under the marketing assistance, the funds are given to SMEs for enhancing their competitiveness and brand value in the market. The prominent focus of this scheme is to improve the productivity of small existing businesses.

To apply for a subsidy loan under this scheme-

  • Visit the NSIC website, download the application form and collect all the documents mentioned in the form.
  • Visit the nearest bank and submit the form for the Bank Credit Facilitation scheme.
  • The bank will verify your documents and form and grant the loan.

To sum up, you can obtain a loan for your startup in three ways- the bank, non-banking finances, and government scheme. Always look for a low-interest rate and a longer period of return before approval of the loan.

Find excellent assistance to get a loan for your startup business in India with GotaxFile!

Gotaxfile is one of the eminent names in the domain of finance, accounting, and taxation. We can help your startup business in India find the apt sources for acquiring loans as per their requisites. Our team has the technical prowess to help you with your financing needs with utmost conformity. Using our services, you can ease out the process of procuring loans for your startup business in India. We have supported numerous startup business entities in attaining their financing requisites. Contact our team now!

DG Gupta
DG Gupta, CA, CS

May 29, 2021 02:42

Need some Help?

We know trying a new service can be scary, that's why we want to make this 100% risk-free for you and your company

Order Now Ask Tax Mentor

GoTaxfile is trading name operated by TaxTrolley Fintech Pvt. Ltd. in India. Learn more about org. under terms & privacy policy.
India Co. Reg. 132121 / UK Co. 10827411
UK GDPR ICO Registration ZA787002, India GSTIN 09AAHCT9946J1ZI