Navigating the Maze: A Beginner’s Guide to Business Start-Up Loans

The last few years have seen a substantial increase in Micro, Small, and Medium Enterprises (MSMEs) and start-ups in India, thanks to the Start-Up India Initiative and MSME Act of 2006, supporting this boost. However, start-up founders often find it challenging to arrange the required funding during their business’s early stages. On top of that, the Indian MSME sector has limited access to conventional credit facilities, making start-up Business Loans the preferred funding option among budding entrepreneurs. Go through this beginner’s guide to navigate the maze of start-up loans in India.

Who is Eligible for a Start-up Loan?

The eligibility conditions differ for each loan provider and funding scheme. However, the general requirements are as follows: 

• Business vintage of at least a few months
• A decent turnover for the last few months
• Businesses not falling under the excluded or blacklisted list 
• The business location does not fall in the negative location list

Documents Required to Obtain a Start-up Business Loan 

Applicants must submit the following documents when applying for start-up Business Loans:

• Bank statements
• Business registration proof, like Business Registration Certificate, GST filing, Trade License, Drug License, TIN, VAT registration
• Individual and company PAN card 
• Partnership deed for a partnership company 

Factors to Consider When Applying For a Start-up Business Loan

Before applying for a start-up Business Loan, one must consider these factors impacting eligibility and approval chances:

• Determining the Required Loan Amount: When applying for a Business Loan, evaluating the intended expenses and deciding upon an adequate loan amount is important. For instance, when looking for a dairy farm loan, consider the costs involved, such as setup, livestock, feed, transportation, etc. Plan out the expenses and apply for an accurate loan amount rather than over- or under-borrowing.

• Choosing the Best Financial Institution: Each lending company has its set of loan schemes, repayment terms, and interest rates that one must compare to make an informed choice. It’s important that the loan plan suits the borrower’s preferences at the lowest interest rates possible.

• Checking the Credit Score: The credit score is an important factor to consider when applying for a start-up loan. This 3-digit number describes the applicant’s credibility by looking at their credit history and repayment habits. A decent good score significantly boosts the chances of loan approval.

Several finance companies offer startup Business Loan in India. Any aspiring entrepreneur who meets the eligibility conditions and submits the required documents may qualify for a loan and obtain the necessary funding in minutes. Make a robust repayment plan to repay the borrowed amount within a pre-determined term to achieve business goals and improve credit history.