Startup Loan for Business: Here’s how to apply and other key details

India’s startup ecosystem is thriving, with many aspiring entrepreneurs increasingly seeking funding to bring their innovative ideas into reality. According to Tracxn, as of October 10, 2024, over 3.65 lakh startups in India cumulatively secured a staggering $563 billion in funding. However, launching a successful business involves much more than just a brilliant concept — one of the most critical factors is obtaining adequate funding to transform aspirations into tangible achievements.

Without sufficient financial backing, startups often struggle to scale, hire talent and manage operational expenses. Fortunately, many funding options are available, including startup loans tailored for aspiring entrepreneurs. These loans provide the capital necessary to launch a startup. However, before applying for such a loan, it's essential to consider a few things to ensure a smooth application process.

Startup business loan eligibility

Qualifying for a startup loan often hinges on the duration of your business operations. If your startup has been active for at least six months, you may be eligible for small business startup loans. For those with more than six months of experience, you might qualify for more traditional business loans.

Here are the primary factors lenders usually consider:

• Age: Candidates need to be between 21 and 65.


• Personal credit score: A credit score of 700 or higher is generally preferred, as it significantly boosts your chances of loan approval.


• Business history: Having at least six months of operational history can enhance your eligibility.


• Business plan: A well-structured business plan is essential for most loan applications, as it demonstrates your vision and strategy to potential lenders.


• Collateral: Some lenders may require collateral, such as property or any other assets, to secure the loan providing them with a safety net in case of default.


• Industry experience: Lenders may seek insights into your experience in the relevant industry, as this can influence their confidence in your ability to manage the business successfully.

Startup loan for new business: Things to take into account

Before submitting your application for a startup business loan, assess these factors:

• Purpose: Clearly define the reasons for seeking the loan. Whether it's for purchasing equipment, acquiring inventory, funding marketing efforts or managing working capital, understanding your needs will help you choose the appropriate type of loan.


• Repayment ability: Evaluate your projected cash flow to ensure you can meet the repayment terms without straining your finances.


• Interest rates and fees: Compare interest rates, processing fees and other associated charges from various lenders. This will assist you in determining the best option.


• Loan tenure: Select a loan tenure that aligns with your business’s financial projections and repayment capacity.


• Collateral requirements: Determine whether the loan requires collateral and assess whether you have suitable assets to pledge. Offering collateral can sometimes secure better interest rates and terms.

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Documents required for availing a startup business loan

When applying for a startup business loan, you'll need to provide a few important documents, including:

1. Business plan: This plan should detail your business model, financial projections and growth strategy. It’s crucial for lenders to understand your vision.


2. Identity proof: Include a government-issued ID such as a PAN card, Aadhaar card, passport, or voter ID to verify your identity.


3. Address proof: Provide documents such as utility bills, rental agreements or property documents.


4. Business registration proof: Submit relevant business registration documents, including the certificate of incorporation or partnership deed.


5. Financial statements: Offer bank statements, income tax returns and any available audited financials to provide insight into your financial history and stability.


6. Proof of collateral: If you’re securing the loan with collateral, include documentation related to the pledged assets, such as property deeds or vehicle titles.

Steps to secure a startup loan

Securing a startup loan involves several steps that entrepreneurs must follow to improve their chances of approval.

1. Prepare a detailed business plan: A detailed business plan outlines the purpose, objectives, and expected growth trajectory of the startup. It acts as a road map for the future growth of the business.


2. Review financial requirements: Entrepreneurs should evaluate the costs associated with launching and operating their business. This will help determine the amount needed from a startup loan.


3. Gather required legal documents: Lenders often request legal documents such as business licences and registrations.


4. Compare lenders: Research various lenders to compare interest rates, loan amounts, and terms. Evaluating multiple offers will help you secure the best deal available.


5. Submit your loan application: Once you’ve shortlisted a lender, carefully review their application process and compile the necessary documentation.

Advantages of startup loans

A loan to start a business can offer several advantages for entrepreneurs:

• Convenience: Startup loans are designed for ease of access, requiring minimal paperwork. As long as the eligibility criteria are met, you can expect quick approval and disbursal of funds. Digital platforms like Moneycontrol provide a 100% paperless process to apply for instant personal loan or business loan through its partner lenders.


• Better interest rates: Compared to private equity lenders, banks and financial institutions often offer lower interest rates for startup loans. Moreover, these loans may come with tax benefits.


• Higher loan amounts: Startups can secure substantial loan amounts at competitive interest rates, enabling them to meet both short-term and long-term financial needs.


• Flexibility: Startup loans are flexible in terms of repayment tenure. Financial institutions provide various loan options for new startups without demanding a share in profits or ownership. Their primary concern is the borrower’s ability to repay the loan.

In conclusion, startup loans are instrumental in helping entrepreneurs realise their ambitions. The Moneycontrol app and website allow access to instant loans up to Rs 15 lakhs in partnership with four lenders. Based on your employment status it allows you to choose between a personal loan and a business loan, making it a convenient choice for aspiring entrepreneurs. The entire process is 100% digital, with interest rates starting at just 12% per annum and there are no hidden charges.