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Business loan for Startups

May 16, 2020By Admin

One of the toughest jobs in the country can be the process of securing loans for startups. Many times, it has been witnessed that several startups face troubles in establishment owing to the financial needs. However, with the rapidly changing times, there are several funding options available for the new entrepreneurs who are really aiming for something of a change in the society with their startups. However, one must understand that there are pros and cons associated with these funding options available in the market.
There are several banks and financial agencies that offer loans and funding to the startups and help them in the establishment of business in a better way. All these financial institutions and agencies have diversified options to cater to the needs of the startups all across India.
In an effort to promote business and entrepreneurship, the government has launched several programs and ‘Startup India’ is one remarkable effort in that direction.

Startup India
Under the Make in India support, ‘Startup India’ is an action plan, which provides a boost to the aspiring entrepreneurs. Under the action of the Startup India, initiated by the government is intended to build an environment where the new ideas and startups, thrive the best. It is believed that the startups can be the backbone to the country’s development and can better shape the future of the country with several new ideas and innovations. The efforts are on to promote the innovations and startups all over the country. With this effort, the government is with the aim to accelerate the startups in the country.
With easy exit policy and no inspection during the first 3 years, there is very little tension for young entrepreneurs. Also to mention, there will a tax relaxation during the first three years and all female applicants will be given a special assistance.

Offers through several banks
Several national banks are in efforts to promote the startups with their own products and services.

Offers through State Bank of India
In an effort to promote entrepreneurship, the State Bank of India grant financial assistance to all those people who are technically qualified, trained and experienced for the purpose of setting up new viable industrial projects. Under the entrepreneur scheme, the state bank of India provides the financial assistance for term loans, working capital and equity fund finance. Also to mention the fact, for requirements up to Rs 5 lacs, there are no margins as such, while for requirements ranging from Rs 5 lacs to Rs 20 lacs, the margin is set at 10%.

SIDBI Make in India Loan for Small Enterprises (SMILE)
With a corpus of Rs. 10,000 Crore and focus on 25 different sectors under the ‘Make in India’ program, SMILE will offer quasi-equity and short-term loans to startups and thus motivate all new entrepreneurs towards a better and bright future.

Micro Units Development and Refinance Agency (MUDRA Bank)
Under this scheme, a corpus of Rs. 20,000 Crore was earmarked in the better promotion of startups. However, one must remember the fact that under this scheme, SC/ST enterprises would be given preference over others while the process of lending.

India Aspiration Fund (IAF)
This is an indirect way to the promotion of startups in the country.  Instead of directly investing in startups, the government would invest in various VC funds which in-turn would invest in MSMEs for the promotion of startups in the country. This scheme is under the support of SIDBI and LIC.
Several other government agencies and funding resources are available all throughout which are catering to the needs of the new entrepreneurs. Agencies like SIDBI, NABRAD, and NSIC are extending a helping hand to the MSMEs in order to better promote them and the best thing about the help is that the loan can be available at low cost or low rate of interest. However, the startups need to fulfill the requirements and conditions in order to avail the benefits as offered by the government agencies and the process of the lending can be sometimes tiresome.

Laghu Udhyami Credit Card from IDBI
Just another option, Laghu Udhyami Credit Card from IDBI is a way to borrow money through IDBI. Banks offer credit card facility to the small business entities who are already existing borrowers and with this, comes the easy loan options to the people. These credit cards can be used as a fund raiser during the early stages of the businesses and in the process can avail interest free loan for a time period of around 50 days. However, the catch is that, if you have a formal setup, the option of this fund raising is not available.
One must keep in mind, that almost all banks in the country provide MSE loans at low rate of interest and many of them can be seen as providing 7-8 different options while offering collateral free business loans. You can personally check out all different options available with the bank of your choice and can make a decision of your own.

Several micro finance providers or better be called as NBFCs, are another good option to secure funding for your startups. These Non Banking Financial Corporations are a way out, especially for those who cannot avail the banking services of those bigger banks and thus these banks can prove to be a great rescuer during the time of needs.
At the same time, several states have come up with their policies and ways to promote startups. For example, Kerala State Self Entrepreneur Development Mission (KSSEDM), Maharashtra Centre for Entrepreneurship Development, Rajasthan Startup Fest, and many others encourage small businesses in their own ways. You can check out the domicile state of your own and can check what facilities are offered by your state.

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