Startup Business Loans

What are Startup Loans?

Startup Business Loans are offered to startups/new businesses by banks, NBFCs, etc., to fund, expand, or grow their business. The Government also provides financial assistance to startups through various schemes and initiatives across the country.

Startups can check, compare, and apply for startup business loans on Tax Intelligence with interest rates starting from 13.00% p.a. The interest rates of these startup business loans vary from lender to lender based on the applicant’s profile.

Types of Startup Business Loans

1. Unsecured Startup Loans

• Business loans offered to entrepreneurs to fund their business needs without the need for collateral.
• Factors like your creditworthiness, financial history, business performance and more are considered by lenders before approving unsecured business loans

2. Term Loans

• Long term business loans offered to startups for investment purposes
• Can be used for business growth, acquisition or expansion of business units, etc.

3. Working Capital Loans

Working capital loans are used by businesses to manage their day-to-day operations, including paying for utilities, covering rent and salaries, etc.

Working Capital Loans include:

• Cash Credit: A secured overdraft facility with a sanctioned limit; interest is charged only on the amount actually utilised.
• Letter of Credit: A bank-backed payment guarantee for international trade, offering security to both buyers and sellers.
• Bill / Invoice Discounting: Enables businesses to unlock immediate cash by discounting outstanding invoices, without waiting for customer payments.
• Trade Credit: A short-term financing option for importers and exporters, helping bridge the gap between shipment and payment realisation.
• Overdraft Facility: A flexible, short-term credit arrangement to manage sudden expenses or temporary cash flow mismatches.

Eligibility Criteria for New Business/Startup Loans

• The applicant should be between 21 years and a maximum of 65 years at the time of loan maturity
• Should be self-employed
• Should be a sole proprietorship/partnership firm/private or public limited company/a limited liability partnership (LLP)
• Should have a credit score of 750 or above
• Should not have any previous loan defaults with any bank
• Total annual turnover of the firm should not exceed Rs. 25 crore

Government Loan Schemes for Startups in India

Find below the details of loan schemes initiated by the Government of India over the past few years:

Factors Influencing Business Loan Approval for Startups

Multiple factors influence the approval chances of your business loans. As a startup, keeping the below-mentioned factors in check can help you increase your chances and land better offers.

1. Creditworthiness: The higher the credit score/rating of you and your business, the better the approval chances. Banks look at your credit profile to assess your repayment capacity and the risk involved.
2. Business Stability: Cash flow stability, along with a low debt-to-income ratio, is considered safe by lenders.
3. Business Type and Industry: The nature and industry of your business also influence the approval chances. The riskier the industry and the type of business, the more scrutiny the loan will face.
4. Business Plan: A well-structured business plan that details goals, market research, and a clear roadmap for profitability significantly boosts approval chances.
5. Loan Purpose: A well-specified loan purpose is preferred by lenders over unclear reasons.
6. Documentation and Compliance: Accurate, up-to-date and error-free documentation helps prevent delays in loan approval. Additionally, for startups in India, DPIIT recognition can enhance credibility and access to specialised schemes.