Business Loan for Startups

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Startup Business Loan: Here’s What You Need to Know!

A startup is a newly established business venture, typically founded by entrepreneurs aiming to develop a unique product or service and bring it to market. Entrepreneurs work hard to scale it to achieve significant growth. India’s startup ecosystem is growing and more entrepreneurs are looking for startup business funding that will make their ideas a reality. According to Tracxn, more than 3.65 lakh startups in India have collectively secured $563 billion worth of startup business funding as of October 10, 2024. To establish a booming company, you need much more than having just a highly innovative idea; acquiring enough funds.

Key Features

Collateral-Free Funding

Secure capital without risking personal or business assets

Seamless Digital Journey

Paperless applications, instant approvals and funds transferred with just a few clicks

Tailored Repayment Solutions

Align repayments with your cash flow for stress-free financial management

Lightning-Fast Approval

Receive a lending decision within 48 hours, accelerating access to critical funds

Eligibility Criteria

Eligible Business Entities and Sectors

Self-employed professionals, sole proprietorships, private limited companies, partnership firms and Limited Liability Partnership firms engaged in manufacturing, trading, or service-oriented industries are eligible to apply.

Annual Turnover Requirement

The business must report a minimum annual turnover of ₹50 lakhs (INR 50,00,000) as per the latest financial records.

Minimum Business Operational Tenure

Applicants must have a minimum operational history of one (1) year in their current business at the time of application.

Applicant Age Parameters

The applicant must be at least 21 years old when submitting the loan application and must not exceed 65 years of age by the loan’s maturity date.

Identity & Business Address Verification Documents

PAN Card

Voter's ID Card

GST Certificate

Driving License

Passport

Ownership Proof

Aadhar Card

Bank Statement for 12 months

Udhyam Registration Certificate

Rate of Interest

Starting at just 1.5% Per Month

Stamp Duty

As per applicable laws of the state

What are Startup Business Loans in India?

Startup loans are financial assistance provided to newly established businesses to meet their funding and operational needs. In India, startups usually finance their loans via banks, non-banking financial companies (NBFCs), and government schemes. These loans are different from a usual business loan because startups are young, high-growth, and often not profitable or even loss-making companies. Hence, a business loan for new ventures may not be backed by assets or cash flows.

Why do Startups Need Business Loans?

Many startups face various issues due to a lack of enough working capital. They often are not able to develop their business, recruit staff, and manage their operational expenses. Thus, taking business loans for new ventures becomes an apt choice. These loans are customized, keeping entrepreneurial requirements in mind. They are the starting stone to obtain the required capital. Nevertheless, considering these few things mentioned below, before moving forward with such a loan, is a must to ensure a hassle-free application process.

The Indian government has created various avenues that are helping startup businesses meet their capital requirements. Let’s discuss various schemes where budding entrepreneurs can avail themselves of new business startup loans.

Pradhan Mantri Mudra Yojana (PMMY)

This scheme by the Government of India aims to provide startup business loans of up to ₹10 Lakh to MSMEs and non-farm enterprises. Under PMMY, the borrower can get loan facilities from Microfinance Institutions (MFIs), Small Finance Banks, Commercial Banks, and Non-Banking Financial Companies (NBFCs). These loans are collateral-free with a repayment period of 1-5 years. Yet it is based on certain factors like the size of your company and its growth phase.

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

This scheme provides collateral-free working capital loans for startups and MSMEs. The scheme benefits collateral-free small startup business loans up to ₹5 crores. It's best for those who want to expand their business. CGTMSE also provides guarantees to lenders in case borrowers default. The guarantee could be up to 50%, 75%, 80%, or 85%

Credit-Linked Capital Subsidy Scheme (CLCSS)

The scheme has been designed to solve the modern needs of industry by granting subsidies to new and existing startups. Startups can get a subsidy of 15% on credit up to ₹1 crore. There are about 11 nodal agencies and banks associated with the scheme that you can approach to get a subsidy.

Bank Loans

A good number of banks and financial entities are helping MSMEs and start-ups by providing business loans for new ventures. First, validate your online application by furnishing the necessary documents, and then you will be able to apply for the greater amount of money you need. Once the application is approved, you may use a high-value working capital loan for startups. Just repay the loan amount within a stipulated time through Equated Monthly Instalments.

SIDBI Loans

The Small Industries Development Bank of India (SIDBI) plays an essential role in the development of Micro, Small, and Medium Enterprises (MSMEs) and startups. It provides the necessary funds to entrepreneurs who want to grow and introduce new products and technology in the market. One can find the eligibility criteria and detailed information about the direct loan schemes on the SIDBI portal. The applicant can view the scheme's features and compare them to choose the direct finance loan scheme she/he want.

National Small Industries Corporation Scheme

National Small Industries Corporation (NSIC), a government agency that supports Micro, Small, and Medium Enterprises (MSMEs) gives financial aid to those entrepreneurs who want to procure raw materials from the market with credit support for up to 180 days.

Benefits of Startup Business Loans in India

Quick access to capital

Venture capital (VC) funding generally takes a few months. If you’re looking for immediate financial help to expand your business, a startup loan is an easy, fast, and dependable solution. In fact, many lenders disburse funds within 48 hours of approval.

Better control

The VCs ask for a stake in your company in exchange for the capital. This dilutes your lower control over the company. However, startup business funding won't cost any share—especially if you will need to repay an interest rate or a flat fee

Lower cost of capital

Debt funding is a lot cheaper than equity funding due to equity dilution. Indian banks offer around 10% per year on business loans for new ventures.

Tax benefits

Interest expense is one of your business costs. This deducts your business expense which means that the cash outflows toward your loan repayment are less than your amortization schedule shows.

What are the Various Types Of Startup Loans

Startups have multiple options to choose from the various types of loans based on their financial needs and stage of business. Let's have a quick look at them:

1. Unsecured Business Loans

Such loans are one of the most reliable options for startup businesses that do not require any kind of collateral, making them ideal for new entrepreneurs who are facing a financial crisis. Unsecured loans get quick approval, require minimal documentation, and provide swift access to funds through a seamless process. For early-stage businesses, they act as acricla capital for business setup, initial operation, and marketing aspects.

2. Government Startup Loans

Startup loans for a new business by the Indian government are special financial assistance offered by various central and state governments under various schemes to promote and encourage entrepreneurship in India. These loans are provided with subsidized interest rates and credit guarantee support. These are ideal small business loans for startups and first-time founders to access affordable funding.

3. Term Loans for Startup Companies

Term loans are provided in a fixed amount for a defined repayment tenure. Mostly, term loans for startup companies are used for expansion purposes, machinery purchase, and building infrastructure. Therefore, a term business loan for startup companies improves the overall strategy of the business with a stable revenue projection.

4. Working Capital Loans

To manage the day-to-day operation seamlessly, working capital loans for startups play a pivotal role in the overall procedure of business. Such financial aid and funds can be used by newly established businesses for inventory purchase, employee salaries, and rent payment. It ensures the uninterrupted cash flow and eliminates the risk of payment delays.

5. Loans from Private Lenders

In case the traditional bank rejects your request, Private institutional lenders come into play. For a startup business, private lenders provide a flexible option, quick eligibility, and faster processing of business loans during any emergency or urgent fund requirement.

Things to Consider when Opting for Startup Business Loans

Before you proceed with the application for the working capital loan for startups, consider these elements:

Purpose: Be very specific about why you are seeking the loan. Be it the necessary purchases, acquiring the inventory, or funding marketing strategies for managing the working capital. It is necessary to understand the right type of new business startup loan by closely knowing your requirements
Repayment Ability: Check the estimates of your projected cash flow to ascertain the repayment term of the loan without affecting your financial stability.
Interest rates and fees: After comparing loans' interests, processing fees, and other added charges, choose the best alternative.
Loan tenure: Choose the loan period based on your financial projections and your repayment capacity.
Collateral requirements: Find out if the credit needs to be secured or not. Then figure out if you have appropriate assets that you can pledge as security. Giving proper collateral can sometimes help you obtain relatively better interest rates and other terms.

Grow your Startup through Business Loans with Credlix

Getting secured business loans is the best way to scale up the operations of startups, invest in technology, and build success. Entrepreneurs need to get startup business loans, which provide them with the necessary capital. There's no quicker way to scale up a company than one that fuses tradition with innovation. Whether for working capital, equipment purchase, or expansion, timely startup business funding can make all the difference. Credlix offers financing services that startups need by having a fast loan approval process, which can be completed within 48 hours. On top of that, we help entrepreneurs get easy access to funds, allowing them to focus on building their businesses.

Customer Feedback and Recommendations

Real stories from real clients showcasing their journey with us

Fastest loan approval I’ve ever seen! Helped me stock up on inventory right before the peak season.

Founder – Wholesale Electronics Trader – Delhi

Credlix’s Customer service was top-notch! They explained everything clearly and got me the best deal possible.

Proprietor – Textile Manufacturer – Surat

This loan helped me fulfill bulk export orders on time. Flexible terms made repayment easy & there were No hidden charges, smooth process, and quick disbursal.

Founder – Leather Goods Manufacturer – Kanpur

Expanding my supply network seemed tough, but Credlix's hassle-free loan process made it possible!