If you want to start your own business or expand your current business, you can get a loan from a bank or financial institution. This is called a startup business loan. The amount of interest you have to pay back will depend on how much you borrow and for how long.
The bank might charge up to 21% interest per year. You can borrow up to 75 lakh rupees and repay the loan over a period of 5 years. There is also a processing fee, which is up to 6.5% of the loan amount plus taxes.
Can I get a loan for business from the government?
Yes, the Indian government understands the challenge that startups and small and medium-sized enterprises (MSMEs) face in securing funding, especially during the early stages of their business.
To support these businesses, the government has introduced special business loan programs designed specifically for startups and MSMEs.
The Small Industries Development Bank of India (SIDBI) is taking the lead by directly offering loans to startups and MSMEs, rather than just through banks.
As a result, the interest rates for these loans are significantly lower, about 300 basis points lower than the rates offered by traditional banks. This initiative is a great help for early-stage businesses and helps them secure the funding they need to grow and thrive.
What are the 5 types of government loans?
Business Loan Schemes by the Indian Government
Are you looking to start a business in India, but struggling to secure funding? The Indian government has several initiatives in place to help entrepreneurs and small businesses access the funding they need to grow. Here are some of the most popular business loan schemes available in India:
- Bank Credit Facilitation Scheme: This scheme, managed by the National Small Industries Corporation (NSIC), provides loans to MSMEs in partnership with various banks. The repayment period can range between 5-7 years, and in exceptional cases, it can be extended up to 11 years.
- Pradhan Mantri Mudra Yojana (PMMY): Launched in 2015, this scheme offers loans to entrepreneurs in the manufacturing, trading, and service sector. The loan amount can range from Rs.50,000 to Rs.10 lakh, and it’s available under three categories: Shishu, Kishor, and Tarun.
- Standup India: This scheme, managed by the Small Industries Development Bank of India (SIDBI), offers loans to entrepreneurs in manufacturing, trading, or services. Loans ranging from Rs.10 lakh to Rs.1 crore are available, with a repayment period of seven years and a maximum moratorium period of 18 months.
- Sustainable Finance Scheme: This scheme, also managed by SIDBI, provides loans to businesses in green energy, renewable energy, technology hardware, and non-renewable energy. The aim of this scheme is to support the entire value chain of cleaner production/energy efficiency and sustainable development projects.
- Credit Guarantee Scheme (CGS): This loan is available to both new and existing MSMEs involved in service or manufacturing activities, excluding education, agriculture, retail trade, and Self Help Groups. Up to Rs.2 crore can be borrowed under this scheme, which is managed by the Credit Guarantee Fund Trust for Micro and Small Enterprises.
- Refer Loan: At Refer Loan, we believe that everyone deserves access to the financial support they need to achieve their dreams. That’s why we offer a variety of loan options including business loans, personal loans, home loans, and auto loans, all designed to meet your unique needs.
Choose only the best, don’t settle for less. Reach out to us today for a personalised consultation and find out exactly how much loan you’re eligible for, and at what interest rate! Let us help you take the first step towards financial stability and success.
Which Banks Offer Business Loans for Startups in India?
- HDFC Bank offers business loans of up to Rs.40 lakh and in select locations, up to Rs.50 lakh. There is a processing fee of 0.99% of the loan amount that will be charged by the bank. The repayment tenure for the loan is up to 4 years.
- TATA Capital provides loans ranging from Rs.50,000 to Rs.75 lakh with a repayment tenure of up to 3 years. The lender will charge a processing fee of 2.50% of the loan amount plus GST.
- Kotak Mahindra offers business loans of up to Rs.75 lakh. The interest rate charged by the bank depends on various factors such as the loan amount availed and the repayment tenure. The bank charges a processing fee of 2% of the loan amount plus GST. The loan repayment period can last up to a maximum of 5 years.
- Fullerton India provides business loans of up to Rs.50 lakh with a repayment tenure of up to 5 years. The lender may charge a processing fee of up to 6.5% of the loan amount, including the Goods and Services Tax (GST).
What are the Different Types of Startup Business Loans Available?
Starting a new business can be challenging, but securing the right funding can make a huge difference in getting your business off the ground. When it comes to financing options for start-ups, there are two main types of loans: Line of Credit and Equipment Financing.
Line of Credit for Start-Ups
Think of a line of credit for start-ups as a credit card for your business. The credit limit is tied to your business, not your personal credit, and can be used to cover expenses as needed. One of the biggest benefits of a small business line of credit is the introductory period of zero interest, usually lasting nine to 15 months, which can help you get your business up and running without incurring extra costs.
Example for Line of credit:
Suppose, you are starting a new restaurant business and you need Rs10,00,000 to purchase equipment, furniture, and raw materials. You can opt for a line of credit from a lender. The lender will grant you a limit of Rs 10,00,000, which you can draw from whenever you need. You will only pay interest on the amount you use, not on the entire limit. For instance, if you only use Rs 7,50,000, you will only pay interest on that amount. This type of loan is flexible and allows you to manage your cash flow more efficiently.
Equipment Financing for Start-Ups
This type of start-up loan is specifically designed to help you purchase equipment for your business. The equipment serves as collateral, which means you can get a relatively low interest rate, despite the higher risk for the lender. To secure equipment financing, you’ll need to have a high credit score (680+), provide a vendor quote, credit report, and a statement showing how you plan to use the equipment. The benefit of this type of loan is that the depreciation of the equipment can be used as a tax benefit for many years to come.
Example for Equipment Financing:
Let’s consider an example, you are starting a new manufacturing business and need Rs20,00,000 to purchase a new machine. Instead of paying the full amount upfront, you can opt for equipment financing. The lender will finance the machine and you will be expected to repay the loan along with the interest. The machine will act as collateral for the loan, so if you are unable to repay the loan, the lender can seize the machine. This type of loan is beneficial for businesses that need to purchase expensive equipment but don’t have the funds to do so. By financing the equipment, you can still get the equipment you need and benefit from the tax deductions from the depreciation of the equipment.
What should I keep in mind when applying for a startup business loan?
When it comes to applying for a startup business loan, it’s important to keep a few key things in mind to increase your chances of success. Here are a few things to consider when putting together your loan application:
- Develop a well-structured business plan: A clear and detailed business plan is essential for getting a loan. It should outline your company’s goals, objectives, and growth potential, as well as provide a detailed overview of how you plan to use the loan funds to achieve these goals.
- Clearly state your loan requirements: Your business plan should also clearly state how much money you need, and why you need it. This will help the lender understand your financial needs and determine whether or not you are eligible for a loan.
- Highlight your business’s potential for growth: Your business plan should also include a chart that outlines your projected returns and growth potential. This will help the lender understand your company’s long-term prospects and determine the potential for repayment of the loan.
- Provide an accurate estimate of funds: It’s important to provide a realistic estimate of the funds you need to start or grow your business. This will help the lender determine the amount they are willing to lend you, and also help you better manage your finances.
By keeping these things in mind when applying for a startup business loan, you can increase your chances of securing the funding you need to grow your business.
Eligibility Criteria for Startup Business Loan
To be eligible for a startup business loan, applicants must meet certain criteria set by the lender. These criteria may vary from lender to lender, but there are some common eligibility requirements that are often considered by most lenders.
The first requirement is the age of the applicant. Most lenders require the applicant to be at least 21 years old, while the maximum age limit is usually 65 years. The applicant must also be a citizen of India. Additionally, having a well-prepared business plan is also an important requirement for most lenders.
Along with meeting the eligibility criteria, applicants must also provide a set of required documents to avail a startup business loan.
When applying for a startup business loan, there are certain documents that you’ll need to provide. These documents include:
- 2 passport-sized photographs
- Proof of identity, like a PAN Card, Passport, Aadhaar Card, Voter’s ID, or Driving License
- Proof of address, such as a Passport, Driving License, Aadhaar Card, Postpaid Phone Bill, or Voter’s ID
- Age proof, like a Passport or PAN Card
- Bank statements from the last six months
- Proof of income, like Income Tax Returns or Salary Slips
- Signature proof, like a bank verified signature, PAN Card, or Passport
- Proof of IFSC code, which could be a cancelled or scanned cheque or a copy of the front page of your passbook from the same bank account.
How to apply for a startup business loan with Refer Loan?
Are you looking to apply for a startup business loan? At Refer Loan, we make the process simple and straightforward. You can choose from the following options to apply:
- Online: Visit our website and fill out the online application form with the necessary details and documents.CLICK HERE
- Phone Call: Call our customer service team and discuss your loan requirements with our experts. They will assist you in the application process. CLICK HERE
- Chat Now: Use our chat option on the website to connect with our team and apply for the loan.CLICK HERE
Don’t hesitate to reach out to us, and let us help you get the funding you need to grow your business. Contact Refer Loan today!
Advantages of Obtaining a Startup Business Loan
Starting a new business can be challenging, and obtaining a loan can help with financing and growth. A startup business loan offers the following benefits:
- No Collateral Necessary: No collateral or security is required to be provided when applying for a startup business loan.
- Flexible Repayment Options: The repayment terms for a startup business loan are easy and flexible, allowing for greater ease and comfort in repaying the loan.
- Reduced Documentation: The documentation required for a startup business loan is minimal, making the loan application process more convenient.
- Quick Funds Disbursal: The funds from a startup business loan are swiftly disbursed to the applicant’s bank account, providing the necessary financial support for the business.
- Credit History-Based Interest Rate: The interest rate for a startup business loan is based on the applicant’s credit history, ensuring that the loan is tailored to the applicant’s specific financial needs.
There are two main types of business loans that are commonly offered by lenders, term loans and working capital loans. Term loans can be used for longer-term projects such as business expansion, purchasing machinery, or launching new projects, and can have a repayment period ranging from 1 year to 10 years. Working capital loans, on the other hand, are shorter term loans with a repayment period of typically one year or less, and can be used for everyday business needs such as paying rent, salaries, or stocking up on inventory.
Typically, lenders require that the startup be a new firm or have been in business for less than 5 years, and have an annual turnover of less than Rs. 25 crore.
The maximum loan amount will vary based on factors such as the lender and the annual turnover of your business, as well as your credit history. For example, under the Mudra Loan program, up to Rs. 10 lakh can be borrowed as a startup business loan.
Yes, a business plan is often required when applying for a startup business loan. The business plan should clearly outline your business objectives and goals, as well as how the loan will be used. It is important to make sure that the plan is clear and detailed.
Having a CIBIL score below 650 may be seen as average, fair, or poor by lenders. To secure a loan, you need to show that you have the ability to repay it. Some lenders may require a minimum CIBIL score of 650 or above for business loan applications.
Get a Business Loan with Refer Loan at a Nominal Interest Rate and no hidden charges!
If you are looking for a business loan with a nominal interest rate and no hidden charges, Refer Loan can help. We understand the importance of having access to funding for your business, and our team is here to assist you in getting the loan you need.
With Refer Loan, you can get a business loan without having to worry about paying a high interest rate or hidden fees. Our team will work with you to find the best loan option that fits your specific needs and budget.
Don’t wait, call us now to start the process of getting a business loan for your startup or small business. Our knowledgeable and friendly team is ready to assist you and answer any questions you may have. Let Refer Loan help you achieve your business goals and reach your full potential.