What are the types of start-up business loan schemes available in India?

It can be easy to understand that, at the beginning of every Business there is a requirement of some amount of capital and financial strength to run the business. Thus, here is one of the loan schemes offered such as a start-up business loan to the borrowers. As the loans offer various benefits, eligibility criteria, at attractive interest rates.

Description of Startup business loan 

The start-up business loans are mainly used for businesses with little or no history. This loan can be used for a variety of business purposes which includes working capital needs, debt consolidation, and purchase of machinery, supply chain financing, asset acquisition, and more.
Features of startup business loan 
There are various features & benefits comes under startup business loan schemes that has been offered to the users. Here are some key points of features and benefits has mentioned for the borrowers which are explained as under:

  • Borrowers don’t need any collateral or security to get a startup business loan. As loan schemes are exclusively designed for SMEs and entrepreneurs, thus they are required to submit fewer documents.
  • The startup business loans have flexible and longer repayment tenure during the processing.
  • It always has quick approval and fast disbursal directly in your bank account.
  • In the startups, there are multiple loan schemes offered by several banks.

Eligibility of start-up business loan   

Here are some key points of eligibility criteria for a start-up business loan:  

  • SC/ST/women entrepreneur’s age should be 18 years up to 65 years.
  • Under this business loan, the company should be a private limited company or a limited liability partnership firm.
  • The borrower must be an Indian citizen for applying for the loan.
  • Individuals should be an entrepreneur or have a convincing business plan.
  • The age of the firm should not be more than 5 years.
  • In the case of non-individual enterprises, 51% of the shares and stakes should be held either by SC/ST/women entrepreneurs.
  • The business of the borrower should not result from a dissolution.
  • The company should not have achieved a total turnover of more than 25 crores.
  • Should have a good CIBIL score.

Types of start-up business loan available in India 

  •  Equipment financing: 

In this type of loan, when the equipment is bought by the entrepreneur then, the start-up business loan acts as collateral. The equipment is treated as collateral, the rate of interest on a business loan is low on this type of loan, and the depreciation of the equipment can be used as tax benefits for the user.

  • Business installment loan: 

Business installment loans are offered by the top banks such as ICICI Bank, HDFC Bank, and Standard Chartered bank that helps to get the immediate cash and expansion needs of the borrowers. Generally, it is offered as an unsecured loan to the users.

  • Growth capital & equity assistance scheme by SIDBI: 

Many banks and financial institutions offer this type of loan for entrepreneurs to help in funding their startups. Banks may have different names for these startup business loans. For example, SIDBI offers Growth Capital & Equity Assistance scheme. This type of loan can be used for several business needs like the purchase of machinery and raw materials, business expansion, marketing, brand building, R&D creation of distribution network, software purchase, and more.

Some popular schemes offered by the Government of India for startups and small businesses are as under:

  • Stand Up India scheme: 

Stand Up India scheme offers bank loans starting from Rs. 10 lakh up to 1 crore to the borrowers. In this scheme, there should be at least one scheduled caste (SC) or Scheduled Tribe (ST), and one women borrower is essential for setting up a greenfield enterprise. This enterprise may include manufacturing, services, or the trading sector. In the case of non-individual enterprises, there should be at least 51% of the loan amount and it can be repaid within 7 years with the moratorium tenure of 18 months.

  •  Bank Credit facilitation scheme:

This scheme is headed by the National Small Industries Corporation (NSIC), MSME units can apply for the loan and get funds to fulfill their financial needs. NSIC has already tie-ups with several banks such as Yes Bank, IndusInd Bank, and HDFC Bank, etc.

  • Credit Guarantee Scheme (CGS): 

The new and existing MSME units are involved in service and manufacturing activities other than educational institutions, retailers, Self-Help Groups and agriculture, educational institutes, retailers, they can get up to Rs. 200 lakh loan under this scheme.

  • Pradhan Mantri Mudra Yojana (PMMY):

It is headed by Micro Units Development and Refinance Agency (MUDRA), PMMY has launched to offer financial help to the micro-enterprise sector. Startups can get a business loan starting from Rs. 50,000 up to Rs. 10 lakh which is divided into three categories such as- Shishu, Kishore, and Tarun.

  •  Credit Guarantee Scheme (CGS): 

New and existing MSME units are involved in service and manufacturing activities, other than educational institutes, retailers, Self Help Groups (SHGs), and agriculture, can get up to the amount of Rs. 200 lakh under the CGS scheme.

To be concluded:
Under the startup business loan, you can get various schemes such as Credit Guarantee Scheme (CGS), Stand up India scheme, Pradhan Mantri Mudra Yojana (PMMY), Bank Credit facilitation scheme, and more. You can select any of these schemes and apply for a loan according to your business requirements. Before applying for any of the scheme, you must read the terms and conditions mentioned above. 

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