Startups play a vital role in economic development with innovative thought implement advanced products in market. Most prominently it helped to create numerous employment opportunities as well as improve economic growth.
Significantly, Small business Loan have big ideas & innovative technologies often create new opportunities. One of the most tremendous difficulties faced by startups is funding. Due to lack of funding many new ideas were being unexploited. To ease the complication, (SIDBI) Small Industries Development of India & Ministry of Micro Small Medium Enterprises (MoMSME) together initiated several credit-linked schemes to newly establishing enterprises called startup.
Various banks & financial institutions offer business loan for startup to raise funds for business setup & expansion.
Key features & benefits: -
- Startup loan at competitive rates: - Startup Business Loan comes up with competitive interest rates – much affordable rates to avail loan.
- Flexible tenure facility: - It gives the flexibility of repayment, you can focus on business growth rather than worrying about repaying the loan.
- Collateral free loan is available: - There are 2 types of loan, one as secured loan where you must pledge any collateral/assets to get the loan while another known as unsecured loan reduces the complexity of security -without pledging collateral can easily able to avail loan.
- Less documentation: - Less documentation helps to make the loan process easier & faster.
- Easy & quick processing: - Many banks offer online applications which ease the entire business loan process & making it possible to get quick approval.
Top 5 Business loan scheme for startup
CGTMSE Scheme: - Government initiated Scheme CGTMSE full form Credit Guarantee Fund Trust for Micro and Small Enterprises with an ideal aim to provide financial assistance to MSME via banks & financial institutions. Under this scheme startup are the one who get additional benefits.
Startup India Scheme: - Under startup India Scheme borrowers with SC/ST & Women entrepreneurs categories are financially supported by facilitating Rs. 10 lacs to 1 Crore per bank branch to setup greenfield projects at their own.
MUDRA Scheme: - Pradhan Mantri MUDRA Yojana (PMMY) offers MUDRA Scheme to facilitate loans upto 10 lacs at NIL Collateral at affordable rates but bank to bank interest rates differed & depends upon applicant profile & repayment capacity.
PSB Loans in 59 Minutes: - To ease entire business loan process Government of India has launched a portal named psbloansin59minutes.com which enable borrowers to avail loans approval in less than an hour & loan facilitate upto 5 Cr at competitive rates.
Prime Minister Rozgar Yojana (PMRY): - PMRY aims to boost self-employment by providing financial assistance to young generation entrepreneurs especially engaged in engaged in manufacturing, services & trade units.
Types of Business Loan for Startup
Secured Business Loan: - This type of loan is availed against pledging any security/assets called as collateral. Therefore, collateral is an essential requirement that needs to be fulfilled at the time of loan application.
Unsecured Business Loan: - Most businesses don’t have security to pledge & avail a loan, in such a scenario It’s an ultimate funding solution that allows you to avail business loans without pledging any collateral. No security required!
Business Loan Interest Rates 2021
Bank to bank business loan interest rates get differed & are determined by evaluating factors such as required loan amount, tenure period, project plan & other relevant criteria levied by lenders. But generally, the bank charges 14.50% Onwards.
Also Read:-HDFC Personal Loan Interest Rates
|Interest Rate||Case to Case basis|
|Loan Amount||Minimum Rs.50,000 to Maximum 100 Cr|
|Loan Tenure||Loan upto 5 Years|
Compare Business Loan Interest Rate with Top Banks
|Business Loan Bank Name||Interest Bank|
|HDFC Bank Business Loan||16% Onwards|
|RBL Bank||19% Onwards|
|Yes Bank Business Loan||17% Onwards|
|Kotak Mahindra Bank||14% Onwards|
|IDFC First Bank||20% Onwards|
|Axis Bank Business Loan||17% Onwards|
|Tata Capital||17% Onwards|
|NeoGrowth Finance||18% Onwards|
Factors affecting Business Loan Interest Rate 2021
Nature of Business: - Nature of business is one of the prime factors that affect business loan interest rate because business is the ideal thing that represents the type of business operated to know its scope level.
CIBIL Score: - CIBIL score reflects your capacity of repayment which consists of 3-digit numeric numbers. Generally, a CIBIL score ranging above 750 is considered to be a good score. It plays a significant role in determining your interest rates as well, therefore make sure you maintain a good CIBIL Score to avoid higher interest rates.
Turnover of Business: - What’s your annual turnover of business is the frequently asked question by lenders, as much as the annual turnover of business is higher the lower interest rate is offered to borrowers.
Loan Amount: - If your business have sufficient cash flow opt for lower loan amount rather than a higher amount in case if you have greater collateral than requirement in such case only interest rate will be lower.
Business Stability: - Lender will analyze your business cash flow to ensure that that business has enough stability & capital growth to expand the business. Hence, Business loan interest rate is calculated on revenue basis.
Startup Business Loan Eligibility Criteria
Business loans for startups have certain eligibility requirements that need to be checked prior to applications as given below: -
- Applicant should be resident of India
- Applicant age needs to be between 21 – 65years
- You must have a CIBIL score above 700
- Must have a solid business plan
- Applicant should not be defaulted by any other banks
- Stable Income proof of applicant
Startup Business Loan Eligibility Calculator
With the use of business loan Eligibility Calculator - Lenders consider certain parameters to evaluate borrower eligibility. It consists of eligible organizations, required loan amount, business vintage, CIBIL score, annual turnover, loan tenure & applicable interest rate.
Documents Required for Business Loan for Startup
To obtain a business loan for startup following documents needs to be submitted:
- Proof of Identity (Any one of the following)
- Aadhar Card
- Voter ID Card
- PAN Card
- Driving License
2.Proof of Residence (Any one of the following)
- Electricity Bills
- Water Bills
- Ration Card
- Lease/Rent/Property own agreement
3.Proof of Income – Income statement
4.Latest 6 months bank statement
5.Duly filled application form with 2 passport sized photographs
6.Business address proof
7.Last 1-year ITR
8.Any other documents as required by bank
How to apply for Startup Business Loan?
Startup Business Loan offered by various lenders, bank to bank rate get differed. To avail business loan, borrowers can compare loan offers & select the suitable deal. Kindly follow the below steps to ease startup loan process: -
Step 1: - After conducting research on different lenders, choose your financial partner & visit their official website.
Step 2: - Now click on Apply Now button & start filling your application form with required details.
Step 3: - Most prominently, you would be asked to fill personal details as well as business details such as business age, nature of business, annual turnover, required loan amount, collateral type (if applicable).
Step 4: - Once you submit the application, shortly representative will get in touch with you for bank formalities.
Step 5: - If your profile meets the requirements loan approval will be granted, within a defined working period disbursement take place- approved loan amount shall be credited to your provided back account.
Also Read:-PNB Business Loan
Business Loan for Startup FAQs
How to get startup business loan?
Borrowers can compare deals offered by various lenders & select their preferred financial partner- visit their official web portal & quote a request for startup loan with filling up required details, shortly after the request reviewed by representative will get in touch.
What is the maximum loan amount offered under Startup Business Loan?
The loan amount depends on your requirements as well as the chosen financial partners, but the maximum loan amount can go upto 5 Crores.
What is the interest rate of startup business loan?
Bank to bank interest rate get different & depends on various factors such as applicant profile, repayment capacity & other similar factors but generally business loan interest rate starts 14.00% onwards.
Is there any startup business loan scheme?
Top 5 scheme offered by Government of India for startup businesses are listed below: -
- CGTMSE Scheme
- Startup India Scheme
- MUDRA Scheme
- PSB Loans in 59 Minutes
- Prime Minister Rozgar Yojana (PMRY)
- Startup Business Loan for Women's in India by Government
How to get a startup business loan without collateral?
Considering financial constraint faced by first-time entrepreneurs & startup to avail loan to setup & expand business at NIL collateral - several schemes offered by Government to India such as CGTMSE, MUDRA, Startup India that provide loan without collateral security to borrowers.
How to improve Eligibility to get startup loans?
It has certain requirements that needs to be met prior to application: -
- Maintain Good Credit/CIBIL Score
- Promoter must have a good background
- Make sure you haven’t defaulted by any other lender
- Collateral is a plus point to improve borrower eligibility
Which bank is best for Business Loan?
Following bank considered to be best banks: -
- SBI Bank
- HDFC Bank
- Axis Bank
- Kotak Mahindra Bank
My CIBIL score is below 650 is it possible to get startup Business Loan?
Yes, there are possibilities to get a loan with less than 650 CIBIL score but that’s totally depends on case-to-case basis. Often, the interest rate will be charged higher than nominal rates along with terms would be different.
Points to Consider -
- Before approaching to a banker regarding your loan requirement, make sure you prepare a detailed proposal –it must include business framework, business scope, estimated revenue program, promoter backgrounds & other details related to business.
- Try to maintain a good credit score by paying bills on time, limit the usage of credit cards upto 50%, don’t close old credit cards as it will help to maintain longer history.
Also Read:-MSME Loan