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written by | April 26, 2022

Indian Government Loans for Startups and MSMEs

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Ever since the Entrepreneur Indian campaign launched in 2015, the proportion of innovative micro, small, and medium Enterprises has increased. The platform's base is on an implementation plan designed to encourage banks to provide startup capital. This has boosted the number of businesses, leading to greater employment generation and contributing to the country's economic progress.

Did you know?

India is the 3rd largest country in the startup ecosystem. 21 companies fall under the unicorn club with a net worth of more than 50 billion.

Startup Business Loans

One can obtain this kind of loan from a banking company seeking to lift finances to establish a new business or grow an existing one. The institution's cost of borrowing is determined by the amount borrowed you take out and the payback period you choose.

Business Loan Details

Interest rate

Up to 21%  per annum

Amount of the loan

₹ 75 lakhs 

Term of the Loan

Maximum of 5 years

Fee for processing

6.5% of the total loan amount plus GST

Business Loans for Startups by the Indian Government

Over 39,000 entrepreneurs in India currently receive a range of privately debt financing and equity financing alternatives. Whenever a firm is only a concept or in its initial stages, getting capital might be difficult. In addition, these MSMEs industries in India have restricted access to proper finance. The Indian government opted to carry forth MSMEs and new beginning company loan programs. The following are a few of the most well-known and famous schemes primarily obtainable by the Indian govt for starters and MSMEs:

Also Read: How to Compare Business Loan Interest and Apply For a Loan?

Bank Credit Facilitation Scheme

National Small Industries Corporation leads this program, which aims to address the funding requirements of MSME businesses. The NSIC has teamed up with several banks to extend credit to small businesses. The monthly payment for the program is around five and seven years. However, one can extend it up to eleven years in exceptional circumstances.

Pradhan Mantri Mudra Yojana

The Micro Units Development and Refinance Agency have taken a step to launch this plan in 2015 to provide financing to each type of production industry, commerce, and services industries operations. This scheme offers three types of loans: Shishu, Tarun, and Kishor, with loan balances varying from ₹ 50,000 to ₹ 10 lakhs. Artisans, retailers, vegetable sellers, maintenance workers, repairing firms, and others can apply for a Mudra loan.

Credit Guarantee Scheme

This credit is available to new and current MSMEs engaged in services or manufacturing operations, except academic institutions, agricultural, retail sectors, Self Help Groups, and others. Underneath this plan, the Credit Guarantee Fund Trust for Micro and Small Enterprises may lend a maximum of ₹ 2 crores.

Standup India

This plan, which began in April 2016, and SIDBI is leading it, provides loans to businesses involved in manufacturing, trade, or providing services. Financing from ₹ 10 lakhs to ₹ 1 crore is available underneath this plan. Loans received within this arrangement can be repaid in 7 years, with a maximal deferment term of eighteen months permissible.

Sustainable Finance Scheme

The SIDBI is now in charge of this program, which intends to provide loans to businesses involved in green power, renewable, technical equipment, and nonrenewable resources. The govt created this program intending to assist the full cost chains of greener manufacturing, power efficiency, and environmental sustainability initiatives.

Psbloansin59minutes.Com

It is an online service that gives users access to financing options if they want to start a company. Depending on the individual's eligibility and other restrictions, you may borrow a maximum of ₹ 10 lakhs underneath the Mudra Loan plan and ₹ 5 crores underneath the MSME Loan program. Personal loans of up to ₹ 20 lakhs, housing loans maximum of ₹ 10 crores, and vehicle loans of up to ₹ 1 crore are also available.

Startup Business Loans by Banks

The lender's name

Rates of Interest

HDFC Bank

15.75% per annum onwards

TATA Capital

19% onwards

Kotak Mahindra

17% onwards

Fullerton India

17% per annum to 21% per annum

There are two sorts of startup business loans

Line of Credit

Identical to just a credit card, a beginning company financing within the shape of a revolving credit operates in the same way. The lining of the card is directly to the individual's business rather than his\her personal credit. Among the most appealing features of a small company, the credit facility is also that clients are not required to pay extra on the loan money for the first 9 to 15 months, making it simpler to manage expenditures while establishing their company off to a solid start.

Equipment Financing

This kind of financing for startups uses the hardware purchased to establish the company as collateral, allowing the creditor to impose lower interest rates for a somewhat larger risk. The income-earning is through the company; the client has to reimburse the money used to buy the hardware. Candidates are considered to have a good credit rating (680 plus), and the documentation necessary for machinery loans provide a vendor's quotation, a full credit history, and a declaration demonstrating how the consumer expects to use the hardware, identical to a credit facility. The key advantage of machinery borrowing is that the client will be able to use the decline of the machinery as a tax advantage for several years.

Things to Keep In Mind When Looking To Apply for a Startup Business Loan

Startups seeking these kinds of loans should be certain of the following:

  • Create clear and concise business planning.
  • Within your business model, explain how you propose using the borrowed funds.
  • Summarise the company's objectives and ambitions and a graph illustrating the venture's prospective profits and revenue.
  • Give a rough estimate of the money.

Eligibility Criteria for Startup Business Loan

The qualifying conditions for beginning business loans differ per lender; however, the following are some of the most common:

  • The individual's age must not be below 21 years old and must not be over 65 years old.
  • The candidate has to be an Indian citizen.
  • All candidates must provide a business proposal.

Also Read: Government Loan Schemes for Small Businesses In India

How to Apply for a Startup Business Loan?

One can request a new small business financing in various methods, including

  • Going to the creditor's company portal and requesting the mortgage electronically by completing the application and sending the needed papers.
  • Submit the borrowing request form and documentation to the closest bank's office.
  • One too can contact the bank's customer service department and ask for help in filing for a beginning financing.

Features and Benefits of Startup Business Loan

  • To get finance, no assets or guarantee is required.
  • The monthly repayments for startup company loans are flexible and straightforward.
  • The paperwork needed to obtain a new small business financing is modest.
  • The bank transfers the money to the individual's checking account as soon as possible.
  • The individual's credit record will entirely determine the bank's interest rate.

Conclusion

Starting financing for a startup company is a straightforward procedure, just like getting any other commodity. A person seeking a launch loan must be familiar with the needs and economic state. They will be responsible for repaying the debt and other expenditures related to the company's daily operations.
Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting.

FAQs

Q: In India, what banking institute provides business loans to startups?

Ans:

Several institutions in India provide beginning business loans, including HDFC, Fullerton, TATA Ventures, and others.

Q: What should you look for when seeking a new small business loan?

Ans:

The cost of borrowing, processing costs, additional fees, punitive costs, advance payment or foreclosures fees, and so on are all items to consider when requesting a startup bank loan.

Q: What is the aim of the business loan for an entrepreneur?

Ans:

The major funding of such a firm that you want to establish is what a new small business financing is for. A beginning may be of the type, and taking out a loan for starting a new company will only help your firm grow at first by providing the essential machines and tools.

Q: Is a business model required to obtain a beginning business loan?

Ans:

Definitely yes! Several creditors will want a business strategy whenever you submit the application for a bank loan. Ensure that the business strategy is clear and precise, including the company's aims and goals clearly stated. The business strategy must lay out a strategy for using the funds.

Q: What is the highest amount of a business loan that you can get at the beginning?

Ans:

The highest bank loan available usually determines some other considerations like the firm's yearly revenues, your credit score, etc. For instance, you can obtain a new company loan maximum of ₹ 10 lakhs through the Mudra Loan.

Q: How old should your company be when you request a loan?

Ans:

To qualify for prospective business financing, your company must be brand new or less than five years old. In addition, the company's annual revenue must not exceed ₹ 25 crores.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.