The business loan for startups in India

  • Emerging startup business requires funds to support their startup business process from outside sources such as banks, or venture capital firms to begin operations. Get the business loan for entrepreneurs at the best rates.
  • However, there are several ways of getting financial support for funding startup businesses in India. Loans for emerging companies can be obtained from
    • The banks
    • Financial institutions
    • Angel investors, and
    • Venture capital firms.
  • Most banks in India offer competitive interest rates for startup business loans depending on:
    • The requested loan amount
    • The time period of the loan
    • The type of business
    • The financial history of the applicant. There is a proper process to avail business loan.
  • Most banks in India offer startup loans to the followings
    • Sole proprietorship
    • Partnership firms, and
    • Limited companies in the fields of
      • Trading
      • Manufacturing
      • Retail, and
      • Service industries

Types of business loans offered by banks

According to the financial needs of a company, banks offer various types of business loans

  • Working capital loans, and
  • Term loans to fund a business.

Startup Business loans can be stated as follows

Term loans 

  • Long-term loans, which can be requested for a time period of 1 to 10 years, for huge investments such as
    • Expansion of business
    • Launching a new project, and
    • Purchasing machinery.

Working capital loans

  • Short-term loans, which can be requested for less than a year along with high-interest rates to meet immediate business needs like
    • Paying rent
    • Stocking up seasonal inventory, and
    • The working capital loans for employees’ salaries.

Asset-based loans

Loan obtained by providing collateral security in the form of assets accordingly machinery, real estate, and accounts receivable. However, the interest rates are higher for asset-based loans compared to traditional loans.

Interest rate and fee details

Loan schemes for startup businesses

  • SMEs are the heart of the Indian economy. Anyhow, retrieving funding for SMEs with reasonable interest rates of a business loan, although bringing collateral security can be troublesome.
  • Luckily, there are several government schemes under which small and medium businesses can retrieve short-term and long-term loans.
  • However, there will be a lower interest rate from banks in the manner of SBI, Bank of Baroda, Andhra Bank, etc.
  • One such scheme is the Credit Guarantee Fund Trust for Micro and Small Enterprises scheme. Under the schemes, the banks can contribute up to an INR.1 crore loan without asking for collateral security.
  • Furthermore, the Small Industries Development Bank of India offers several schemes to facilitate the growth of SMEs in India.

Loans from banks versus venture capital firms

How to approach a bank for funding a new company?

If you want o to be successful in applying, and securing funding for your startup businesses, you have to be well prepared before approaching a bank with your application. Beforehand you have to create a business model that explains the business profile clearly. Subsequently, you have to calculate the estimated sales, profits, and growth rate of the business. Thereafter, present a projected return on investment. Finally, you choose the right bank for the type of funding required.

Types of business loans offered for startups

Leading banks that offer a business loan for startup businesses in India

  • Citi Bank business loans
  • HDFC Bank business loans
  • SBI business loans
  • ICICI business loans
  • Bank of Baroda business loans

A GST rate of 18% will apply to bank services and products from 01 July 2017.