In India, anyone can take Business Loans for Startups from banks and financial institutions to raise money to start their own business or grow their business at present.
The interest rates charged by the banks depend on the amount and duration of the loan borrowed
In recent times, there has been a marked increase in Micro, Small, and Medium Enterprises (MSMEs) and start-ups in India.
The MSME sector in India has limited access to formal credit facilities. Thus, the Government of India has created various avenues that can help MSMEs and start-ups meet their capital requirements.
The number of new Micro, Small & Medium Enterprises (MSMEs) has been on the rise. The campaign is based on an action plan aimed at promoting bank financing for Startups and new businesses.
It has encouraged startups, which will eventually lead to more job creation, and equity and shall help in the nation’s socio-economic growth.
They offer Startup loans for new businesses at low-interest rates. Startup business loans help startups procure necessary funding for kickstarting their business, purchasing machinery, developing prototypes, conducting product trials, etc.
The MSME loan is a financial aid scheme introduced by the government in September 2018. This loan actively helps in the growth of the country’s economy as it helps finance numerous small businesses.
- Eligibility Criteria for Start-up Business Loans – The eligibility criteria for each scheme and loan are different, however, the general criteria are as follows:
- As an applicant, you should be above 21 years of age, with the maximum age being 65 years.
- You must be a citizen of India.
- The MSME or start-up should have been formed as a sole proprietorship, partnership firm, company, or Limited Liability Partnership (LLP).
- The MSME or start-up must have a good credit score.
2. Documents required to apply for Business Loans for start-ups – Applicants have to submit the following documents while applying for the Business Loan for MSMEs and start-ups:
- KYC documents like passport, Aadhaar Card, Driving License, PAN Card, Voter ID, utility bills, etc.
- The business plan is drafted by the applicant.
- Business incorporation certificate.
- Business address proof.
- Any other document as specified by the lender.
3. The Government of India has launched various schemes and Business Loan for MSMEs.
They are as follows:
a) Pradhan Mantri Mudra Yojana (PMMY) – PMMY provides loans of up to ₹10 Lakh to non-farm and non-corporate small and micro-enterprises.
Under PMMY, you can obtain loans from institutions like Microfinance Institutions (MFIs), Small Finance Banks, Commercial Banks, and Non-Banking Financial Companies (NBFCs).
- You can apply for Mudra Loans by approaching these lending institutions. These loans are collateral-free and come with a repayment tenure of 1 year and 5 years. The loan amount offered depends on the development stage of your business.
b) Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) – CGTMSE is a loan scheme that offers collateral-free Business Loans for MSMEs and start-ups.
It offers a credit facility of up to ₹ 200 Lakh to MSMEs and start-ups. CGTMSE also provides a guarantee cover to lenders in case the borrowers default.
The guarantee cover offered can be up to 50%, 75%, 80%, or 85% of the loan amount sanctioned by the lender.
- The National Bank for Agriculture and Rural Development (NABARD) classified select regional rural banks and scheduled commercial banks are institutions that offer Business Loans for MSMEs and start-ups.
The interest rates levied under the scheme are decided as per RBI guidelines.
c) Credit-Linked Capital Subsidy Scheme (CLCSS) – CLCSS grants a subsidy to new and existing MSMEs or start-ups for the purpose of technological upgrades. Under this scheme, you can get a subsidy of 15% on institutional credit up to ₹1 crore for identified technology, sectors, and sub-sectors. You can approach the 11 nodal agencies or associated banks to avail of the subsidy.
- The scheme aims to help start-ups create products of superior quality by focusing on areas related to the same
d) MSME Loan in 59 Minutes – Launched by SIDBI – Launched by SIDBI or Small Industries Development Bank of India, MSME loan in 59 minutes is one of the unique government loan schemes for MSME and new business, wherein a loan is approved in 59 minutes flat.
Once the loan is approved, the process to disperse loans takes 8-9 days.
- Under this scheme, Small businesses and MSMEs can get loans up to Rs 10 crore, under refinance schemes wherein 5 Nationalised (PSU) Banks are authorized to provide the loans.
The interest rate on this special loan for MSMEs depends on the nature of the business, the current credit rating of the owner, and the tenure for which the loan has been approved.
All you have to do is meet the eligibility criteria and submit the documents required. Once your application is approved, you can avail of a high-value loan amount. You have to repay the loan over a fixed repayment tenure.
However, the interest rate, tenure, and loan amount on offer may differ. You can repay the loan amount with interest due via Equated Monthly Instalments (EMIs) accordingly
Conclusion
As we all know, Startup business loans are one of the best ways to get a business startup loan.
This not only gives subsidies for various activities but can also help improve the goodwill of the company. You can even claim tax benefits on business loans sanctioned to you as a part of a government scheme.
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