Startup Business Loans – Government Schemes, Features, Benefits 

The Government of India has come up with a few arrangements to provide startups with the boost they require regarding startup business loans. The Government start-up loans were set up to help businesses grow and benefit the Indian economy. The Micro, Small, and Medium Enterprises (MSMEs) can avail of a loan from the following Government schemes:

National Bank for Agriculture and Rural Development (NABARD)

National Bank for Agriculture and Rural Development (NABARD), headquartered in Mumbai, found its way into the world on July 12, 1982, and is governed by the Ministry of Finance. The development of small-scale industries, cottage industries or any other similar rural project falls on the shoulder of this organization. The rural sector of India is the principal focus of this development bank. It is among the most important financial institutions in the nation. By collaborating with numerous organisations on numerous creative projects and water and soil conservation schemes, NABARD not only meets the financial needs of the rural sector but also provides for social innovations and projects. The features of NABARD are:

• Making district-level credit plans
• Finding project refinancing
• Trains and promotes handicraft artisans
• A new project is designed for rural area development

Bank Credit Facilitation Scheme

The National Small Industries Corporation (NSIC) is responsible for meeting the MSME units’ credit needs. To finance MSME units, the NSIC scheme has partnered with several banks. The scheme’s loan repayment period is between 5 and 7 years, although it can be increased to 11 years. The loan repayment period varies depending on the startup’s profitability. This start-up a business loan by the Indian Government has the following features:

• Easy availability of credit
• Good interest rates
• Assistance provided in the documentation
• Credit availability is facilitated

Pradhan Mantri Mudra Yojana (PMMY)

Launched in 2015, Pradhan Mantri Mudra Yojana (PMMY) is managed by the Micro Units Development and Refinance Agency (MUDRA). This scheme aims to provide loans for various manufacturing, trading, and service sectors. Anyone can apply for a Mudra Loan, including craftsmen, shop owners, and machine workers. The three types of loans offered by PMMY are Shishu, Kishor, and Tarun loans. Through these interventions, the MUDRA loan program provides incentives:

• Shishu: Up to INR 50,000 in loans
• Loans over INR 50,000 and up to INR 5 lakhs in Kishor
• Tarun: Loans up to and beyond INR 5 lakhs

Credit Guarantee Scheme (CGS)

To improve the credit delivery system and ease financing for the MSME sector, the government introduced the Credit Guarantee Scheme (CGS). You can apply for CGS if you are a new or existing MME in the manufacturing or service sector; this excludes retail commerce, agriculture, Self-Help Groups (SHGs), and training institutions, to name a few. Public, private sector, foreign, regional rural, SBI, and associate banks are the critical lending institutions that provide this program. Benefits of this MSME program for business owners include term loans and working capital loan options up to INR 1 crore per borrowing unit. This start-up business loan by the Indian Government has the following features:

• The women owners of MSE receive 80% of the sanctioned loan on the guarantee cover.
• In northeastern India, a loan guarantee cover of 80% is offered for a credit amount of 50 lakhs.
• The CGTMSE group will offer a guarantee covering up to 75% of any default on credit obtained by the business from lending institutions.

Standup India Scheme

Stand Up India is one of the best small business loans for startups and helps at least one SC or ST person and at least one woman borrower in every branch. They obtain bank loans between INR 10 lakh and INR 1 crore to grow their businesses. The standup scheme is open to manufacturing, service, or trading companies. An SC/ST or female entrepreneur must own at least 51 percent of the shares in non-individual businesses. The applicant should not have any payment defaults with banks or other financial institutions and should have an excellent credit history. This scheme has the following features:

• The loan repayment moratorium period is 18 months.
• There is a need to provide either guarantee in the CGFSIL or collateral security.
• The loan repayment tenure os of 7 years at maximum

Sustainable Finance Scheme

This program is supervised by SIDBI, which intends to finance companies that deal in green energy, renewable energy, technical hardware, and non-renewable energy. The Government developed this program to promote projects for sustainable development, energy efficiency, and clean production throughout the entire value chain.

Coir Udyami Yojana

The Coir Udyami Yojana was created to aid in the development of Coir businesses in a subsidy scheme introduced by the Government of India. The Coir Board also launched the Coir Udyami Yojna scheme to assess micro and small-scale industries in the coir industry. Banks will fund capital expenditures through a term loan to satisfy the need for working capital. The bank can also provide composite loans to finance projects, which combine working capital and Capex. This program is open to any MSME startups engaged in processing coir that has registered under the Coir Industry (Registration) Rules, 2008. Banks would finance projects with a working capital requirement of up to Rs 10 lakh every cycle but not more than 25% of the total project cost. The credit amount would be 55 percent of the entire project cost after the owner contributes 5 percent, and the 40 percent margin money has been subtracted from the beneficiary’s limit of Rs 10 lakh. This startup business loans scheme has the following features:

• Initially, only 5% of the project cost is to be paid by the applicant
• The cost does not cover working capital but covers the capital purchase
• Companies, Individuals, NGOs, Self-Help Group, Registered Society, Production Co-Operative Society, and Charitable Trust, can apply for this scheme

Market Development Assistance (MDA)

The Government’s primary focus area is still export promotion. The Marketing Development Assistance (MDA) Scheme, running through the Department of Commerce, supports the following activities in light of the current macroeconomic situation, which places a focus on exports. It facilitates the various measures being undertaken to stimulate and diversify the country’s export trade:

• It aids exporters with international export marketing initiatives
• Provides aid to Export Promotion Councils (EPCs) in carrying out operations to promote the export of their good(s) or commodities
• It assists recognized organisations and trade bodies in carrying out unique one-time-only innovative activities related to their members’ export promotion initiatives

MSME Business Loans in 59 Minutes

This startup loan for new businesses gives Mudra and MSME loans in 59 minutes, the Government developed a new website, the PSB Loans in 59 Minutes Portal. Within an hour, loans requested through the PSB Loans Portal will be processed. The loan will be disbursed to the applicant’s firm in the following seven to ten working days after approval. On the PSB loans platform, business loans can be approved for up to INR 5 crore. Loans for working capital or term loans are both possible. Loans can be offered with or without collateral. The loans have interest rates that begin at 8% and go up.

Startup Business Loans By Banks

Startup loans for a new business can be sponsored by banks apart from the Indian Government. Some of the banks that offer the best small business loans for startups are:

HDFC Bank

It provides loans up to INR 40 lakhs or 50 lakhs based on the startup’s location. The repayment tenure is four years, and the processing fee of 0.99% is levied on the loan amount.

TATA Capital

The loan amount ranges between INR 50,000 – INR 75 lakhs with a processing fee of 2.50% plus GST of the total loan amount. The repayment tenure is three years.

Kotak Mahindra Bank

This bank offers your startup a loan of up to INR 75 lakhs with an interest rate influenced by the loan amount, tenure of repayment, etc. A processing fee of 2% plus GST of the total loan amount will be charged, and the repayment tenure will last up to 5 years.

Fullerton India

As a provider of startup loans for a new business, this bank offers up to INR 50 lakhs with a five-year repayment tenure. However, the processing fee is 6.5% plus GST of the total loan availed by you.

State Bank of India

SBI allows a person to take a loan of an amount ranging from INR 10 lakhs to INR 25 lakhs with a repayment tenure of up to 5 years. The whole process costs INR 7,500.

ICICI Bank

ICICI Bank charges a processing fee of 2% plus GST on a loan taken by you. The loan amount can go up to INR 2 crore with a repayment period of 1 to 7 years.

Things to Remember for Startup Business Loans Application

A startup business loans application requires you to remember the following points:

• A business plan must be drafted with specific details to provide your lender with a clear image of your business
• Explain in your business plan how you propose to use the loan amount
• Give a summary of the company’s goals and objectives, together with graphs that show the potential growth and earnings of the business
• Give a precise ballpark figure for the finances
• Create financial statements for the past and the future to provide to the lender to demonstrate your ability to repay the loan.
• Under the government, start-up loan programs include the loan amount and purpose.
• Check your credit report. Wait and raise your credit score if it falls below the minimum requirement before requesting start-up business loans.
• Find the best lending company for your beginning business by researching government startup loans.
• Do your homework and learn everything there is to know about the loan, including how long it will take to pay it back, any possible interest rates, and the potential uses for the loan to proceed.

Eligibility Criteria for Availing Startup Business Loans

Each lender has a different set of eligibility criteria for a startup loan for a new business. The borrower must meet the following eligibility criteria to qualify for these loans:

• The applicant must be a citizen of India
• The age requirement is between 21 to 65 years
• They must have a minimum CIBIL score pre-set by the lender
• There must be a sound business plan
• The minimum business income of the start-up must be at least INR 2 Lakhs
• The business must be operational for at least two years.

Required Documents for Startup Business Loans

The documents required for startup business loans can be sized up into a list as mentioned below:

• Two passport-size photographs
• Identity proof like passport, PAN card, driving license, Aadhaar card
• Address proof like driver’s license, aadhaar card, postpaid bill, voter ID card, passport
• Age proof like PAN card, passport
• Bank statement for the past six months
• Income proof like IT returns or salary slips
• Proof of Signature like a bank verified signature, PAN card, passport
• Proof of IFSC code like a canceled/scanned cheque, copy of the front page of the passbook from the same bank account

Benefits and Features of Startup Business Loans

A start-up business loan by the Indian Government has the following benefits and benefits:

• A business loan is much more convenient than other types of loans. It is an easy find when it comes to approaching investors.
• The rate of interest offered on the business loan is appreciatively reasonable as compared to the other loans.
• It provides an opportunity to let your business bloom
• It eliminates the demand for collateral if you meet the eligibility criteria set by the lender
• The interest paid is tax-deductible
• A limited number of documents required
• The borrower receives their finance in a short time post application approval
• Financing your business through a loan doesn’t take your power away.

How to Apply for Startup Business Loans?

You can apply for your startup business loans by following the subsequent steps:

Online

• Visit the official website of the lender of your choice,
• Opt for the business loan option and fill out the required details
• Upload the scanned copies of your documents
• Once the application is submitted, someone from the lending agency will contact you
• Upon successful application approval, your loan amount will be transferred to your bank account.

Offline

• Visit the nearest branch of the lender of your choice
• Fill in the details asked in the loan application form
• Attach the self-attested copies of the required documents
• Submit the application form to the person in charge, and they will guide you through the process
• Upon successful approval of the application, your loan amount will be transferred into your bank account

Frequently Asked Questions