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Posted on September 29, 2021
How to Get Loan For a Startup in India ?
India is emerging as a global leader in GDP growth with the help of small and medium scale start-ups. On a scale, nearly 30 % of total GDP is contributed by SME (small and medium-sized enterprises) & that remains the vital source of employment in a developing country; India. Considering all these factors after the post-demonetization scheme, the Indian government has started several new business loan schemes that boost the development of start-ups at various level.
A maximum of Rs 100 Lakhs can be borrowed in the form of Term Loans or Working Capital Loans. Both new and existing Micro and Small Enterprises engaged in manufacturing or service activities except in Educational Institutions, Agriculture, Self Help Groups (SHGs) and Training Institutions can avail these loans. The following are the list of eligibility criteria & loan options offered by the Government of India for start-ups.
- Mudra Loan Scheme.
- MSME Business Loans in 59 Minutes.
- The Credit Guarantee Scheme (CGS)
- Stand Up India Scheme.
- Coir Udyami Yojana.
- National Bank for Agriculture and Rural Development (NABARD)
- Credit Link Capital Subsidy Scheme.
- National Small Industries Corporation Subsidy.
ELIGIBILITY FOR A START-UP LOAN IN INDIA
To be eligible for applying for a start-up business loan in India one must match the below criteria-
- The candidate must be a citizen of India.
- The candidate must have a unique business plan or strategy.
- The candidate must be between 21 and 65 years of age.
- ID proof of the candidate such as PAN card, Aadhaar card and Voter-ID.
- Address proof like Driving license or Aadhaar card.
- PAN Card for the business start-up.
1. MSME (Ministry of Micro, Small and Medium Enterprises) LOAN
The MSME is the most sought-after Business Loans for start-ups which can be documented in just 59 Minutes time. This scheme was first active in 2018, September & it was formatted to encourage the start-ups in India. Using this scheme, both existing and new start-ups can get a loan amount up to ₹ 1 Crore. The duration for this loan process takes 8 to 12 days, but the approval or the disapproval is finalized within the first 59 minutes of application processing.
To get the loan amount by MSME, your GST, Income Tax, bank account statement ( Last six month), ownership document, & KYC are verified by the government professionals. In addition to this, the interest rates are decided depending on your business nature and credit scores.
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2. MUDRA LOAN
MUDRA (micro-units Development and Refinance Agency ) is an official organization founded by the government of India to offer business loans to start-ups, micro, and macro business units. Due to small scale companies and start-ups are left unnoticed by private banks, the govt of India has taken this concept of Low-cost credit system. This loan option is also a refinanced loan approved by public, private, co-operative, scheduled and rural banks across the country. Mostly, this MUDRA is easy to go for start-ups such as Manufacturing, services, and trading sector. The structure which MUDRA loan follows is Sishu ( up to 50,000), Kishor ( up to 5,00,000), and Tarun ( up to 10,00,000).
3. Credit Guarantee Fund Trust
The Credit Guarantee Fund Trust for Micro and Small Enterprises ( CGTMSE) first came into practice in 2000 as a support system for loans to start-ups and micro-businesses. One of the best features about this option is that it is a collateral-free loan option for both existing and new start-ups. This type of loan is financed by various private and public sector banks.
The CGTMSE scheme offers working capital amount up to ₹ 10 lakhs without any collateral or land certificates. But, for loan amount more than ₹ 10 lakhs and up to ₹ 1 crore, some security document or land document is mandatory to avail credit for the start-ups. Also, the primary assets built or created via the credit facility associated with the business unit are also taken into consideration as security; if the credit goes beyond ₹ 10 lakhs.
4. Credit Link Capital Subsidy Scheme
The CLCSS scheme is initiated by the Ministry of Small-Scale Industries to upgrade and begin the business start-ups & this loan option is majorly concerned to finance technological upgradations of micro-scale industries. This technological up-gradation finance scheme is related to various processes such as marketing, supply chain, manufacturing etc in the organization. Via this scheme, the Indian government plans to cut short the production cost of goods and services.
For eligible business start-ups, the CLCSS scheme offers a capital subsidy of 15 % and the maximum amount that can be derived through this scheme is around ₹15 lakhs. The types of the organizations which comes under this business loan scheme are Proprietorships, Partnership Firms, co-operative, private and public companies.
5. NABARD ( National Bank for Agriculture and Rural Development)
This bank is owned by the Central Government of India to offer loan and help the start-ups to initiate businesses in the fields such as cottage, agriculture, handcrafts and it also provides refinance to lending institutions in village areas, acting as a facilitator for promoting institutional development by inspecting and monitoring the client banks.
6. Stand Up India Scheme
This is a special scheme under the Government of India to empower the SC/ST people and women entrepreneurs of the country to initiate the start-up. With the help of this scheme, one can borrow the loan amount between ₹ 10 lakhs and ₹ 1 crore to begin a business in either trading and services or manufacturing domain. The tenure for this loan amount is around 7 years and is allocated at least to a woman borrower per bank branch or at least to one SC/ST person.