India is one of the major emerging markets in the world at the moment. A major portion of this growth comes from the micro, small and medium enterprises including startups. The SME sector makes up nearly 40% of the total GDP and is a major source of employment for the growing population of India. Considering the importance of SME growth in recent times, the government has initiated many business-loan schemes to support the same. Apart from government schemes, start-up businesses also have the option of seeking loans from private lenders.
Top Banks Offering Start-Up Business Loans in India
|Bank||Business Loan Interest Rates||Processing Fee|
|SBI Business Loan||11.20%||From 2% to 3%|
|HDFC Bank Business Loan||15.65%||
Starting from 0.99%, Max 2.50%
|ICICI Bank Business Loan||16.49%||
Starting from 0.99%, Up to 2%
1.80-2.20% of loan amount
From 1.50% to 2.50%
2% of the loan amount
Upto 2% of loan amount
|IDFC First Bank||22.00%||2.00%|
|IIFL||16.00%||Up to 2%|
|Bank of Maharashtra||14.50%||
1.00% of the loan amount, Min Rs. 1,000
|Kotak Bank||16.00%||Up to 2%|
|Indifi||24.00%||2 to 3%|
2.5% of loan amount
Rs. 229 - per lac, Min Rs. 2,038 Max Rs. 22,928
|Yes Bank||16.25%||Up to 2%|
|PNB||12.65%||1.8% + taxes|
0.50% of Loan Amount
|Indian Overseas Bank||14.90%||Rs. 204 per lakh|
|Dhan Laxmi Bank||12.90%||
On a case-by-case basis
|Andhra Bank||15.75%||Case to Case|
|United Bank of India||13.00%||1.15%|
1.5%, Min Rs. 500
0.5%, Min Rs. 500
|Bank of Baroda||14.10%||Up to 1.00%|
Eligibility Criteria for Start-up Business Loans
Start-up businesses must have a detailed and thorough business plan.
It must be incorporated as a private limited company. Alternatively, it can also be incorporated as a limited liability partnership.
The net turnover of the business must not exceed Rs. 25 crores.
The company must have documented approval from the Department of Industrial Policy and Promotion (DIPP).
To get a business loan, a start-up must have a patron guarantee. This must be from the Indian Patent and Trademark department.
The business is also required to have a recommendation letter from an incubation cell.
List of Documents Required for Start-up Business Loan
2 copies (passport-size)
|Proof of Identity||
PAN Card, Passport, Aadhaar Card, Voter’s ID, Driving License
Passport, Driving License, Aadhaar Card, Postpaid Phone Bill, Voter’s ID
Passport, PAN Card
|Bank Statements||Last six months|
|Proof of Income||
Income Tax Returns, Salary Slips,
Bank verified signature, PAN Card, Passport
|IFSC Code Proof||
Cancelled/scanned cheque, copy of the front page from the passbook of the same bank account
Advantages of Start-up Business Loans from Banks
Applying for a start-up business loan from a bank is beneficial in many ways. This is especially true when compared to sourcing funds from other financial institutions. Here are some of the key benefits of business loan for a start-up Business:
Start-ups which take a business loan can get tax relief for about 3 years.
Venture capital funds are very expensive when it comes to a start-up business since investors of venture capital generally ask for 5 to 10 times the initial investment. On the other hand, a bank loan does not seek any equity dilution and returns required by the bank are fixed at a nominal interest rate.
Banks can be approached easily. With multiple banks offering business loans in India, it is easier to approach a local banker and seek funds for a start-up.
India banks have a well-established and defined framework when it comes to the processing of funding requested by entrepreneurs. This is why any loan request can be processed more quickly as compared to other forms of investors.
The profit or loss of the business belongs solely to the borrower. Borrowers don’t have to justify the business performance to the bank.
Tips to Secure a Start-up Business Loan Easily
While opting for unsecured loans, it is important to note that every lender may have a different set of policies. In case the borrower does not fulfil the eligibility criteria set out by the bank, it may reject the loan application. Here are a few tips that can help a start-up business in improving the chances of getting the loan application approved.
Better Credit Score – As a start, identifying the factors which result in a low credit score is very important. Credit score can be impacted by the late payments of credit card bills or even a default on outstanding EMI payments. Defaulting or late payments could result in a poor credit score. It is extremely critical to have a good and steady credit repayment track record by making all the payments on time. Always make sure that you have sufficient balance in the bank account to fulfil ECS transaction requests.
Don’t opt for Multiple loan applications – You could apply for a business loan at many banks in the hope of improving the chances of getting a timely loan. However, this could be damaging as it increases the chances of the loan getting rejected since each request gets recorded in your credit report. Many times, applicants are unaware that any loan which is rejected by a bank, has lesser chances of getting approval at other banks also. Banks get more cautious in lending to those customers who have already been rejected by other banks.
Choose the Right Bank – Always study about the banks which are offering business loans, especially focusing on the interest rates. Go for a bank which has a faster service combined with low interest rates. You can also calculate your eligibility criteria by using an online Eligibility Calculator. This will help to get an understanding of your loan eligibility and whether you will be able to service loan repayments from the cash flows of the business.
Business Existence – Usually, banks offer loans to businesses which have been in existence for a minimum of 3 years. If it is a new business, start-up and even a loss-making business, it has higher chances of being denied an unsecured business loan. In such a scenario, you can explore secured business loans.
Focus on Repayment Capacity – Calculate and estimate the loan amount that you will be able to conveniently repay in the future. If you take a loan amount that is higher than your eligibility, it could create doubts in the lender’s mind and the lender may reject your loan application. So, ensure that you choose the appropriate loan amount which you can easily service.
Keep Record of Accounts and Finances - As a start-up business, it is critical to keep your GST registration in place. Always keep audited financial statements in place, since these are important for the bank while calculating your eligibility.
Periodic Credit Score Check: If your business needs to borrow frequently from banks, it makes sense to access your credit score report periodically and make regular corrections in the report as needed.
Start-up business loan caters to the main funding of a business which you wish to start. The start-up can from any sector and a loan for this will help to boost your business initially giving the necessary machinery and equipment to your startup.
The minimum and maximum loan amount depend on the financial lender you choose and the requirement that you have. The minimum loan amount can start from Rs. 50,000 and the maximum loan amount can be decided as per the terms and conditions of the financial lender.