Startup Business Loans: Benefits, Eligibility, and How To Apply?

India ranks as the third-largest country in terms of startups, accounting for more than 80,000 startups worldwide, among which, over 100 have already attained the status of unicorns. If you are also planning to join this rising wave of startups, then you must stay informed about startup business loans as they might come in handy to help you realise your venture dreams!

What is a Startup Business Loan?

As the name suggests, a startup business loan is a credit facility that can be acquired by individuals for funding the financial requirements of their new business ventures, such as the purchase of equipment, payment of salaries to employees, inventory purchases, and more.

Benefits of Startup Business Loans

Following are some of the key benefits of startup business loans –

  1. No Requirement for Collateral

Generally, the lenders of startup business loans do not require you to pledge any collateral to borrow the required funds. This is true for a majority of the private lenders and all government credit schemes focused on supporting startups, such as Pradhan Mantri MUDRA Yojana (PMMY) and Stand-Up India Scheme.

  1. Loan Approval within 24 hours

Startup business loans are known for their quick processing. The approval time for these loans is generally within 24 hours. This ensures that you get access to the required funds in almost no time to embark on your entrepreneurial journey.

  1. Simple Documentation

The application process for startup business loans involves minimal paperwork. This is one of the key reasons for the quick disbursals of these loans to the borrower’s account.

  1. Flexible Repayment Schedule

Startup business loans feature convenient and flexible loan repayment schedules. Generally, the money borrowed through these loans can be repaid in as long as five years.

Eligibility Conditions For Startup Business Loans

To acquire a startup business loan in India, you must fulfil the following eligibility conditions-

  1. Minimum Age: You must be at least 21 years of age to qualify as an eligible applicant for a startup business loan.
  2. Maximum Age: The age of the startup business loan applicant should not be more than 65 years.
  3. Nature of Business Ownership: The business should be registered as a sole proprietorship, partnership firm, or private/public company with the Government of India.
  4. Business Turnover: The business’s annual turnover should not be more than ₹25 Crores.
  5. Excellent Credit Score: A credit score of 750 or above is generally categorised as good by lending institutions.

How to Apply for a Startup Business Loan in India?

You can apply for a startup business loan by following the below-mentioned steps-

  1. Visit the nearest branch or website of the lender of your choice and fill out the startup business loan application.
  2. Provide all required details about the company such as its registered address, date of incorporation, names of its promoters/directors, nature of business, etc.
  3. Submit all the necessary documents with your application.
  4. After submitting the required documents, a representative from the financial institution might connect with you in case more details are needed.
  5. Once your loan application is approved, the startup business loan amount will be transferred to your registered corporate account.

Documents Required for Startup Business Loans

You need to submit the following necessary documents along with your duly filled startup business loan application form-

  1. KYC Documents of All Applicants – Along with the loan application form, you must submit your proof of identity and proof of address and that of your co-applicants, if any. This requirement can be fulfilled by submitting documents such as Aadhaar Card, PAN Card, Voter’s ID, Driver’s License, and/or Passport along with utility bills.
  2. Business Incorporation Certificate – As the business owner, you must also submit proof of the existence of the business.
  3. Last 12-month Bank Statement – You must also submit the bank statement of your corporate account for the last 12 months.
  4. Last 1-Year Income Tax Return – You are required to submit the Income Tax Returns of your business for the last 1 year.
  5. Business Plan – You also need to submit a self-drafted business plan detailing the use of funds and expected returns.
  6. Address Proof and PAN of Business – You must submit the document ascertaining the registered address of the business along with its PAN.

In addition to the aforementioned documents, you might be required to submit other documents requested by the lender.

Frequently Asked Questions

What factors should I consider before choosing a startup business loan?

While selecting the lender for your startup business loan, you must consider factors such as the interest rate charged on the loan, processing fees, loan prepayment charges, penalty charges, and more.

Which are some of the most popular government loan schemes for startups?

The Government of India offers many credit schemes for promoting startup businesses in the country. Some of the popular schemes include Start-Up India, Stand-Up India, MUDRA Yojana, Credit Guarantee Fund Scheme for Micro and Small Enterprises, and Bank Credit Facilitation Scheme.

Is there a minimum and a maximum amount that can be availed as a startup business loan?

Start-up business loan applicants can avail a minimum loan amount of ₹50,000 at a fixed interest rate. However, the maximum startup business loan amount stands at ₹1 Crore.

Chief Compliance and Legal Officer at Wint Wealth

Nishant is a qualified lawyer from NALSAR University of Law, Hyderabad having 7+ years of experience and is the Chief Compliance and Legal Officer at Wint Wealth. He has been working in the finance and wealth management space for the past 5+ years and is an NISM certified mutual fund expert.
He has previously worked for Khaitan & Co and Scripbox.

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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The article may also contain information which are the personal views/opinions of the authors. The information contained in this article is for general, educational and awareness purposes only and is not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision, whether related to investment or otherwise, taken on the basis of this article.

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