What is a startup business loan?
A startup loan is exclusively designed for businesses with little or no history. You can use the funds for a variety of business purposes such as working capital needs, debt consolidation, purchase of equipment, supply chain financing, asset acquisition, etc.
Individuals looking for business startup loan can explore the following option in India:
SBI Mudra Loan
The State Bank of India (SBI) offers financial assistance to Micro, Small & Medium Enterprises (MSMEs) in compliance with the Micro-Units Development and Refinance Agency (MUDRA). This type of funding is known as the SBI MUDRA loan. Small and medium sized enterprises (SMEs) can receive funding under the SBI mudra loan scheme at attractive interest rates and nominal processing fees and convenient repayment options.
You can use the SBI mudra loan to fulfil a host of business requirements including business expansion, purchase of machinery, staff payment, working capital needs and many other business related activities. SBI mudra loan is extended to business enterprises engaged in services, manufacturing and trading sectors.
Eligibility criteria for SBI Mudra loan
Borrowers need to meet the following eligibility criteria to get SBI Mudra loan
New and existing business units engaged in non-farm income generating activities.
The business engaged in either manufacturing or service sectors.
You should be staying at the same location for a minimum of 2 years.
You need to submit a crisp business plan and your credit requirement should not be more than Rs. 10 lakh.
You should not have failed to repay any loan availed in the past from any authorised financial institutions.
SBI e-Mudra
Individuals who have savings and current account in the State Bank of India can get apply for the SBI e-Mudra loan for the financial requirements of their business. They can get SBI e-Mudra loan up to Rs. 1 lakh.
SBI e-MUDRA Loan Eligibility
You should have a micro or small business venture.
You must have a current account or savings account with the State Bank of India for at least 6 months.
Maximum loan amount offered under SBI e-Mudra loan is Rs. 1 lakh.
The loan can be availed for up to 5 years repayment period.
You can get an instant loan of Rs. 50,000 as per the bank’s discretion
For SBI e-Mudra loan above Rs. 50,000, you need to visit the nearest branch of the bank for loan formalities.
Documents required for SBI e-Mudra loan
While applying for SBI e-Mudra loans, you need to keep the following documents handy. You can submit documents in the JPEG, PNG, or PDF format with size not exceeding 2 MB. Submit a photocopy or a scanned copy of any of the following documents:
GST registration certificate
Shop and Enterprise certificate
Udyog Aadhaar
Any other documents of business registration
Government of India loan schemes for business startups
Small enterprises can’t easily raise funding from the market when their business is just a concept or is in the initial stage. Keeping this in mind, the government of India has introduced the Startup India Scheme to empower aspiring entrepreneurs. Under the Startup India Scheme, ambitious entrepreneurs and small enterprises can enjoy various benefits. Startups and MSME (Micro, Small and Medium Enterprise) can avail of different types of business loans under the startup India scheme:
Here are some of the popular schemes offered by the Government of India for startups and small businesses:
Pradhan Mantri Mudra Yojana (PMMY): Pradhan Mantri Mudra Yojana (PMMY) was launched to provide financial assistance to the micro-enterprise units in the country. PMMY is headed by the Micro Units Development and Refinance Agency (MUDRA). Small enterprises can get loans for all kinds of service, trading and manufacturing activities. A startup business loan ranging from Rs. 50,000 to Rs. 10 lakh is available under three categories – Shishu, Kishor and Tarun. Vendors, shopkeepers, traders, machine operators, repair shops and small services businesses can get Mudra loans.
Bank Credit Facilitation Scheme: This startup loan scheme is headed by the National Small Industries Corporation (NSIC). NSIC has tie-ups with several banks like Yes Bank, Kotak Mahindra Bank, HDFC Bank, Federal Bank, and IndusInd Bank among others to offer financial assistance for MSME units for their financial needs. MSMEs can directly get in touch with any of the NSIC branch offices to submit their request.
Credit Guarantee Scheme (CGS): New and existing small business units engaged in service and manufacturing activities, except for educational institutions, agriculture, and retailers and Self Help Groups (SHGs) can get up to Rs. 100 lakh loan under this scheme.
Stand-Up India Scheme: With the objective of empowering SC/ST and women entrepreneurs, the government of India launched Stand-Up India loan scheme. Under this scheme, Scheduled Caste (SC), Scheduled Tribe (ST) and woman applicants can apply for bank loans between Rs. 1 lakh and 1 crore for commencing a new enterprise engaged in service, trading or manufacturing activities. The loan has a moratorium period of 18 months and can be repaid within 7 years.
Sustainable Finance Scheme: This scheme is headed by the Small Industrial Development Bank of India (SIDBI). Under this scheme, projects engaged in green energy, renewable energy, green buildings and eco-friendly labelling can get startup business loans. The ESCO must be an MSME or otherwise the unit to which it offers services has to be an MSME to get this loan.
Features of a business loan for startups
Startup business loan schemes come with a host of benefits. Here are the features and benefits of startup business loan:
You don’t need to offer assets as collateral or security to get startup business loans.
The loan schemes are exclusively designed for SME units and entrepreneurs, hence the loan application process is simple and less time-consuming.
Business loans for startups have relatively flexible and longer repayment tenure.
instant loan approval and faster disbursal directly in your bank account.
Multiple loan schemes for specific needs of different segments of businesses.
Documents required for startup business loan
While documentation may vary from one lender to another lender based on the loan scheme, here is a checklist of common and basic documents required for startup business loan:
Simple and crisp business Plan
Photographs: 2 passport size photographs
Proof of age: Passport, PAN Card
Proof of Identity: One copy of - PAN Card, Passport, Aadhaar Card, Voter’s ID, Driving License
Address Proof: One copy of - Passport, Driving License, Aadhaar Card, Postpaid Phone Bill, Electricity Bill, Water Bill, Passport
Proof of Income: Bank Statement
Bank proof: Cancelled/ scanned cheque/ your passbook’s frontpage copy
Signature proof: PAN Card, Passport, Bank verified signature
These are some of the best loan schemes for new or existing small enterprises and entrepreneurs. Enterprises with prior business history can get business startup loans from banks and NBFCs as well.