Funding is the key ingredient for starting and sustaining any business. And when it comes to Startups, thorough research is called for about the avenues that may be suitable to finance your business. A smart business idea could fail to survive if the business model is not sound enough to plan out its funds.
In this article, we are going to discuss a few things briefly. You will read about eligibility norms for Startup business loans, documents required for getting a business loan and how to apply for it, Startup loans provided by the Indian Government and a list of other banks, etc.
Things to note before you apply for a Business Startup Loan
These are a few basic things like,
- Determine the fund requirement based on your understanding of the business.
- Do enough research on available sources of finance like the banks, NBFCs and interest rate of the loans offered by them, repayment criteria etc.
- The cost involved like the documentation charges, and processing fees.
- Your credit score matters. Repayment of previous obligations as well the new loan that you are going to take is important.
Eligibility Norms to get a Business Startup Loan
- Who can apply?- Any self-employed individual, partnership firm or a private company engaged in manufacturing, trading or other services can apply.
- Age of the applicant-Age should be between 21-65 years.
- CIBIL score-A minimum of 750.
- Criteria of earning-The business should have a minimum amount of turnover and it should have booked profits for at least two previous years.
What are the documents required for a Business Startup loan and how to apply for it?
The documents that should be submitted while applying for the loan are a PAN card, a Government ID like an Aadhar card, voter ID, driving licence etc., valid address proof, and bank account statement for the last 6 months.
Your business details like copies of the balance sheet, profit and loss account, Income tax return, trade licences, and sales tax certificates are also required to be given.
The documents specifying your nature of business like a sole proprietorship, partnership deed, certified copy of memorandum and articles of association etc. should be submitted.
Keep all your documents ready before you apply for the loan. You should visit the lender’s branch near you and fill in the application form. Submit it along with the necessary documents.
In case of online submission for a Startup loan, follow the below-mentioned steps:
- Go to the website of the lender of your choice. Click on ‘apply now’
- Enter your personal information.
- Enter the amount of the loan that you want to get and the amount of EMI.
- Click on ‘Confirm’. You will get a confirmation message after some time.
Startup Loans by the Indian Government and Other Banks
- National Bank for Agriculture and Rural Development provides loans for businesses with their nature of business like agriculture and conservation.
- Pradhan Mantri MUDRA Yojana provides loans ranging from Rs. 50,000 to Rs. 10 lakh under different names like Shishu, Kishor and Tarun depending upon the size of the loan.
- Credit Guarantee Schemes for the companies dealing in manufacturing and service. The loans can be as high as Rs. 100 lakh.
Other primary banks offering such loans include SBI, ICICI Bank, HDFC Bank, Axis Bank, Kotak Bank, IDFC First Bank, IndusInd Bank, Standard Chartered Bank etc.
Business owners can avail of start-up loans without any collateral under the scheme offered by the Government of India. If the borrower’s credit history is not good, the lender can still provide the loan, but the rate of interest charged will be higher or it will be offered for a shorter duration.
If your business is running on a small scale, then you will find many financial institutions that provide loans. You can either visit their offices or obtain the loan via their official websites or apps.
Why a Business Startup Loan?
Because of the benefits that startup loans offer, they are becoming popular. The primary reasons among them are a flexible rate of interest and tenure. You can choose a lender whose interest rates are competitive. The selection of tenure is optional. If you go for a shorter duration, you might get a favourable rate of interest. The business owners can avail of the loans which suit them the best. There are many banks and other financial institutions offering such loans. You can get a loan even for your working capital requirements. There is no need for collaterals, security deposits or other payments.
Starting up a business needs capital to pay for machinery and other operations. Funds are required for marketing, research and development purposes. Once the business is initiated, the running expenses also need to be paid known as working capital. Finding the most appropriate source by way of a loan is the best recourse you have to fulfil all your requirements.
Smrutirekha Bhoi