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Start-up Business Loan: Best Options to Finance Your New Business in 2022

Start-up business loans can availed to raise finance for starting your business and even expanding your existing venture. Banks and other financial lending institutions give out start-up loans to entrepreneurs depending on their eligibility and financial standing.

A start-up loan application requires the following documents:

  • An application with all the fields filled in with passport-sized photographs
  • KYC documents or any government-issued documents
  • A business plan that is self-drafted
  • Bank statements over the last twelve months
  • IT Returns for the past year
  • Business Incorporation Certificate
  • Proof of business’s address
  • Any other documents as specified by your lender

In addition, you must ensure that your business plan to justify the amount is ready for presentation. It should briefly feature the speculated growth and expected returns from your business and how you intend to repay the loan.  There are several factors that render startup business loans attractive, and these are –

  • Lower EMI
  • Minimal documentation required
  • Interest rates charged according to your credit history
  • No collateral required
  • Easy document verification
  • Quick approval of your loan
  • Swift disbursal of the money into your account
  • Online accessibility

Some attractive government schemes that provide start-up business loans in India are –

National Bank for Agriculture and Rural Development (NABARD)

It is one of India’s most well-known banking institutions. Targeted towards rural society, NABARD focuses on developing cottage and small-scale industries by providing loans.

Credit Guarantee Scheme (CGS)

To encourage and support the MSME section, the government of India created the Credit Guarantee Scheme (CGS). This scheme includes both private and public sector banks and regional banks, rural banks, foreign banks, associate banks, and the SBI. Under this scheme, the government aims to improve the system of credit delivery by giving various kinds of start-up loans to entrepreneurs as a source of finance.

Pradhan Mantri Mudra Yojana (PMMY)

Loans are divided into three categories under this scheme: Shishu, Kishor and Tarun. Shishu loans are loans below Rs 50,000, Kishor loans are loans ranging from Rs 50,000 to Rs 5 lakhs and Tarun loans are loans that range between Rs 5 to 10 lakhs. It was launched under the Micro Units Development and Refinance Agency (MUDRA) in 2015.

Stand Up India Scheme

Specifically for entrepreneurs belonging to SC and ST categories, banks under this scheme provide loans ranging from Rs 10 Lakhs to Rs 1 Crore. However, the individual needs to have majority shares in their business and a high credit score.

Bank Credit Facilitation Scheme

Aimed at the credit requirements of MSMEs, this scheme extends the loan repayment tenor of MSMEs up to 11 years.

Market Development Assistance (MDA)

The MDA scheme encourages exports and helps exporters help overseas markets bloom. Funds are provided to stimulate manufacturing for international trade by MSMEs.

Another option is to avail micro business loans, which are also known as microfinance loans. These  meant for small businesses that need funds for both a term loan as well as working capital. This loan can either unsecured or secured by collateral, classified under commercial. Microfinance loans are flexible in their utility and can cater to the urgent needs of the business.

Advantages of micro business loans include minimal documentation at the time of applying, no collateral required if you decide to avail an unsecured microfinance loan and easy and quick approval.

The concept underlying start-up business loans and micro business loans is to improve small businesses’ financial security and empower them to expand, grow, and compete over the years. To this effect, all you need to do is choose from the available options, check your eligibility, and submit an application.

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