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Essential Requirements for Startup Business Loans

Startup Business Loans

One can assist startup business loan from a bank or other financial body to raise funds to start a business of their own or expand their current business. The rate of interest charged by the bank will usually depend on the loan amount availed by them and the repayment tenure.

Factors involved in looking to apply for a Startup Business Loan

Startups Business Loan Requirements looking to get such a loan would make sure the following:

  • To make a crisp as well as detailed business plan.
  • Mention how one intends to use the loan amount in their business plan.
  • One must give a clear approximation of the funds.

Various Startup Business Loans by the Indian Government

According to the data, there are more than 39,000 startups in India at present which has access to various private equity along with debt funding options. Moreover, there are several challenges to receive funding when the business is just an arbitrary idea or is in the early stages. In addition to, the Micro, Small, and Medium Enterprises (MSME) sector in India only has quite limited access to formal credit which is why the Government of India decided to roll out startup business loan requirements for MSMEs and startups.

The Small Industries Development Bank of India (SIDBI) has also begun lending to multiple startups as well as MSMEs for business loans directly rather than channeling it through various banks. The interest rates on these business loans are lower than the ones offered by banks by almost 300 basis points. Some of the most remarkable and famous schemes offered by the Indian government for startups and MSMEs are as follows with startup business loan requirements:

The Bank Credit Facilitation Scheme

It is headed by a famous body such as the National Small Industries Corporation (NSIC), this type of scheme is earmarked to meet the credit needs of the MSME units. The NSIC has partnered with banks to offer business loans to the MSME units. The repayment tenure of these schemes usually ranges between 5 to 7 years but in special cases, it can be usually extended upto 11 years.

Pradhan Mantri Mudra Yojana (PMMY)

It was launched in the year 2015, this scheme is generally headed by the Micro Units Development and Refinance Agency (MUDRA) which aims at offering loans to several manufacturing, trading, and service sector activities. The scheme offers loans under three different categories namely Shishu, Kishor, and Tarun in various amounts ranging between Rs.50,000 and Rs.10 lakh. The Mudra loan can be availed by various artisans, shopkeepers, vegetable vendors, machine operators, repair shops, etc.

Credit Guarantee Scheme (CGS)

Credit Guarantee Scheme loans can be generally assisted by both new and existing MSMEs which are involved in service or manufacturing activities but usually exclude educational institutions, agriculture, retail trade, Self Help Groups (SHGs), etc. Up to Rs.5 crore can be borrowed under this scheme headed by the Credit Guarantee Fund Trust for Micro and Small Enterprises such as CGTMSE.

Standup India

Launched in April 2016 and headed by SIDBI, this scheme usually extends loans to enterprise in manufacturing, trading, or services. Under this scheme, loans ranging between Rs.10 lakh and Rs.1 crore can be availed. The repayment of loans must be taken under this scheme which can be done in seven years while the maximum moratorium period allowed is 18 months.

Sustainable Finance Scheme

The sustainable finance scheme is generally headed by the SIDBI which aims at offering loans to various industries that often deal in green energy, renewable energy, technology hardware, as well as non-renewable energy. The government has launched sustainable finance scheme with the intention to offer support to the entire value chain of cleaner production/energy efficiency as well as sustainable development projects.

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