When hearing about a startup loan, we feel it is so simple. Owning and operating your very own business can be a dream come true venture for most individuals who get involved in such an ordeal. However, while getting started, money turns out to be the major hurdle for every new entrepreneur. The universal solution to this is nothing but a business startup loan. A startup loan is a money lent to you to help you start operating your business but like every loan, you will have to pay it back.
So the next question is how do you choose a business startup loan?
A startup loan can be extremely difficult to obtain. The main reason is simply the fact that banks do not want to take risks. A lot of the time patience, effort, and determination will be required to obtain a startup loan.
Where to obtain a loan from?
Once you have a solid business plan, the two places for you to approach for a startup loan would be banks and credit unions. Before you approach these two places make sure you have a flawless business plan and a good credit rating.
When you avail of a startup business loan from a bank or a financial body, the rate of interest charged by the bank will depend on the loan amount taken by you and the tenure of repayment. However, getting funding when the business is in its seed stage is still a challenging procedure. Also, the MSME (Micro, Small, and Medium Enterprises) sector in India has very limited access to formal credit which is the reason why the Government of India has decided to roll out startup business loan schemes for small startups and MSMEs.
What are the Eligibility Criteria for a Startup Business Loan in India?
- The applicant should be between18 years to 65 years of age
- The startup should have a solid business plan
- The startup must have a recommendation letter by an incubation
- All the preferred registrations and licenses to function as a business firm are required
- Approval from DIPP (Department of Industrial Policy and Promotion) is necessary
- The startup should have a minimum annual income of 150000 p.a.
- A good CIBIL score and good credit rating
- Applicant should be a resident Indian Citizen without any criminal records
- The applicant should be devoid of any previous loan defaults with any bank.
What are the Documents Required to apply for a Startup Business Loan?
- Two passport size photos of the applicant
- Recently filled application form with all the required documents
- Proof of stable income needs to be provided
- KYC documents
- A flawless Business Plan
- Proof of Identity: Passport, Voter’s ID or Driving License, PAN Card, Aadhar card
- Proof of Age: PAN card, Passport or Voter’s ID card
- Address proof: Passport, Voter’s ID card, Electricity or Telephone bills
- CIBIL score and credit report of the business
- Financial statements scrutinized by a CA
- Proof of Address and Tenure of the business
- Signature proof can be submitted by either PAN card or by statements verified by the bank
- Last 12 month’s bank statement and IFSC code proof (canceled/scanned cheque)
- Copy of Certificates, Registrations, Permits, and Licenses
- Any other document as mentioned by the lender
Business Loan Types and Schemes for Startups In India:
- MUDRA Scheme under PMMY
Micro Units Development and Refinance Agency Ltd was set up by the Government of India to provide funding to non-corporate, non-farm sector income generating activities of micro and small enterprises whose credit needs are below 10 Lakh Rupees.
- Startup India
It is an initiative by the government of India launched on 16th January 2016. It renders a 3-year tax holiday. The government has provided 2500 crore for startups and also approved a credit guarantee fund of Rs 500 crore
- Standup India
It is a credit provider scheme aimed to provide credit to Scheduled Castes, Scheduled Tribes, and women for promoting entrepreneurship in non-farm activities.
The government of India has launched this scheme in which to take a loan you don’t have to visit banks again and again. Rather you will be able to apply online for loans just by being at your home. Loans ranging from Rs. 1 lakh to Rs. 5 crores have been provided by the government under this scheme.
Credit Guarantee Fund Trust for Micro and Small Enterprises is also an initiative by the government of India which provides loans to SME’s and MSME. The members of this section are eligible for a maximum credit of Rs 2 Crores.
- Business Installment Loan
An installment loan is a personal or commercial loan that has an established payoff date or term length.
- SIDBI’s Growth Capital and Equity Assistance Scheme
Small Industries Development Bank of India is a principal development financial institution for the promotion, financing, and development of the MSME sector in India.
One of the fastest-growing online industries – Crowdfunding is when individuals or startups use an online platform to gain funding for a project globally. There are four major types of crowdfunding sites – debt, equity, rewards, and donation-based.
A grant is simply a sum of money that is given by the government or other organizations for a particular purpose. The fact that differentiates a grant and a loan is that a grant doesn’t have to be paid back whereas a loan needs to be paid back.
For all these loan schemes documentation is hectic. You need to submit the financial proposal/ business plan/ project report to make sure that the proposed project is viable. Finline helps entrepreneurs and professionals to create financial proposals easily. You can create the proposal wiathin minutes and if feel worth then only need to purchase the plan to download the report.