Starting a successful business requires a compelling idea and significant financial commitment. Entrepreneurs and existing business owners need crucial financial assistance to launch or expand their ventures. In India, business loans provide practical funding solutions for entrepreneurial goals.
Business loans are debt financing, where lenders provide substantial funds repayable with interest. Loans can be secured, requiring collateral, or unsecured, without collateral but with higher interest rates and stricter criteria.
Lenders evaluate creditworthiness and repayment ability based on credit score, business age, and revenue. Startups with limited credit history can explore alternative funding like term loans, lines of credit, asset-based financing, and business credit cards. Support from friends, family, and crowdfunding also offers flexible funding options.
In 2024, securing a business loan in India remains vital for entrepreneurs. The right loan can help start or grow a business, providing the financial support needed. This guide explores the best business loan options available in India, helping entrepreneurs achieve their goals.
Types of Startup Business Loans
1. Term Loans
Term loans provide upfront lump sums repaid with interest over a fixed period, ideal for credit establishment, with terms ranging from short-term (up to 12 months) to long-term (5 years or more), often collateral-free up to Rs. 2 crore.
2. Lines of Credit
Lines of credit offer flexible funding up to a limit, with interest on borrowed amounts, secured or unsecured, resetting with repayments. Startups with six months’ business history may qualify, with varying collateral and interest terms, some offering no interest initially.
3. SBA Loans
SBA loans, backed by the Small Business Administration, feature competitive terms, lower down payments, and lender-specific eligibility requirements, typically requiring two years in business. The microloan program offers up to $50,000 through nonprofits with relaxed criteria.
4. Equipment Financing
Equipment financing uses purchased assets as collateral, spreading costs and offering tax benefits, popular among larger enterprises and manufacturing sectors, with varying lender terms on interest rates, amounts, and repayment schedules.
Startup Business Loans by the Indian Government
1. MSME Loan Scheme in 59 Minutes
The MSME Loan Scheme helps new and existing enterprises meet their working capital needs by offering loans up to Rs. 1 crore. Loan processing takes 8-12 days, with approval or disapproval in just 59 minutes. Loans are available at an 8% interest rate, with a 3% reservation for women entrepreneurs.
2. Pradhan Mantri MUDRA Yojana (PMMY)
Pradhan Mantri MUDRA Yojana supports women entrepreneurs and small businesses in service and trading sectors. MUDRA (Micro Units Development and Refinance Agency Ltd.) provides collateral-free loans with flexible repayment options through banks and NBFCs, offering loans up to Rs. 10 lakh.
3. Credit-Linked Capital Subsidy Scheme (CLCSS)
The CLCSS provides government subsidies for businesses needing finance for technological advancements in industries such as marketing, supply chain, and manufacturing. All types of business entities, including partnership firms, private or public limited companies, sole proprietorships, and cooperative companies, are eligible.
4. SIDBI Loan
SIDBI (Small Industries Development Bank of India) offers direct loans to MSMEs needing funds, with loan amounts ranging from Rs. 10 lakhs to Rs. 25 crores and repayment periods up to 10 years. Without collateral, loans up to Rs. 1 crore can be availed. SIDBI also provides indirect loan schemes to NBFCs and SFBs.
Other Government Initiatives
- Startup India Scheme: Provides funding support, incubation facilities, and tax benefits to qualifying startups to foster innovation and entrepreneurship.
- Credit Guarantee Fund Scheme for Startups (CGFS): Offers collateral-free credit for startups in manufacturing, services, and trading sectors, covering up to 85% of the sanctioned loan amount.
- Stand-Up India Scheme: Promotes entrepreneurship among women and SC/ST communities with loans from Rs. 10 lakh to Rs. 1 crore to set up greenfield enterprises.
- SIDBI Make in India Loan for Enterprises (SMILE): Provides financial assistance to startups in the manufacturing sector to enhance competitiveness.
These government-backed schemes are vital for providing financial support, fostering growth, and boosting employment opportunities within India’s startup ecosystem.
Top 5 Startup Business Loans By Banks
1. HDFC Bank
| Loan Amount | Interest Rate Range | Repayment Tenures | Loan Processing Charges |
| Up to ₹50 lakhs | Minimum 10.75% to Maximum 22.50% | Up to 5 years | Up to 2.00%* of the loan amount |
2. Kotak Mahindra
|
Loan Amount |
Interest Rate Range | Repayment Tenures |
Loan Processing Charges |
| Up to Rs. 1 Crore | 17% | 2 years | Maximum 2% of the loan amount |
3. Axis Bank
|
Loan Amount |
Interest Rate Range | Repayment Tenures | Loan Processing Charges |
| Up to ₹75 lakhs | Minimum 11% to Maximum 25% | Up to 5 years |
Up to 2.00%* of the loan amount |
4. ICICI Bank
| Loan Amount | Interest Rate Range | Repayment Tenures | Loan Processing Charges |
| Up to ₹2 crores | 12.25% | Up to 7 years | Up to 2.00%* of the loan amount |
5. IDFC First Bank Business Loan
| Loan Amount | Interest Rate Range | Repayment Tenures | Loan Processing Charges |
| Up to ₹1 crores | 14% – 25% | Up to 5 years | Up to 3.5%* of the loan amount |
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Conclusion
In 2024, startup business loans in India present a robust landscape of financial opportunities designed to empower entrepreneurs and fuel economic growth. From government-backed initiatives like the Startup India Scheme and Pradhan Mantri MUDRA Yojana to specialized offerings such as equipment financing and SBA loans, startups have access to a diverse range of funding options. These loans cater to various needs, whether it’s quick capital infusion through schemes like MSME Loan Scheme in 59 Minutes or long-term financing with competitive terms from institutions like SIDBI. With flexible loan amounts, interest rates, and repayment terms, these offerings enable startups to innovate, expand, and thrive in a competitive market environment. By leveraging these resources effectively, entrepreneurs can navigate financial challenges, drive business success, and contribute significantly to India’s entrepreneurial landscape in 2024 and beyond.
