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Can NGOs Get Business Loan Operating Their Business?

Can NGOs Get Business Loan Operating Their Business?

Although NGOs do not make profit, they often need capital to further their cause. They rely on various funding sources to meet their requirements. But can NGOs get a business loan? Find out in this article.

Business financing for NGOs

NGOs also operate like enterprises and need funding for salaries, equipment, training, office space, etc. However, being non-profit, any money they earn is reinvested in the organisation.

As a result, they are deemed as high-risk borrowers. While no laws state that NGOs cannot be granted loans, since the probability of repayment is low, securing business finance is often difficult. If they get a loan, it will likely be against high-value collateral, strong financial standing, or high business loan interest rates.

NGO Funding Options & Loan Schemes

As non-profit organisations, NGOs rely on various other methods for raising funds to finance projects, facilitate operations, pay salaries, and cover overhead costs. Let’s take a look.

Non-profit grants

Many charities and foundations offer grants to NGOs that are aligned with their mission statement. Grants are free funds that an NGO can obtain without any clause or repayment obligations. You can choose an organisation for raising funds based on grant type, geography, your cause, type of service, etc.

Before approaching the corporation, you must prepare a grant proposal. NGOs typically hire grant writers to draft a proposal outlining their funding requirements and how they plan on using the funds. The grant provider may ask you to submit NGO-related documents and other necessary paperwork.

Corporate Social Responsibility (CSR) programmes

Many organisations have a dedicated budget for CSR activities. You can approach them to receive funding in the form of sponsorships or donations. You can begin by visiting the websites of big corporations and businesses to familiarise yourself with their charity and CSR programmes.

Government funding

NGOs can also reach out to government agencies for fundraising. The Indian government has many schemes for non-profit organisations to secure grants and funds. Depending on your organisation’s goal, you can apply to various departments. Rural development, environment, forest and climate change, tribal affairs, empowerment of people with disability, women and child development, and 30 other departments offer funding to eligible NGOs.

Membership dues

Various NGOs design membership programmes to extend additional engagement opportunities for members against donations or membership fees. This can boost your annual fund, benefit your campaigns, keep your workspace up and running, cover your membership benefits, and help provide scholarship for special causes.

Also, read – Micro Credit: Definition, How it Works & Importance

How to Apply for NGO Loan Schemes Online

Applying for NGO loan schemes in India has become easier, as many government portals now allow online application and registration. To apply for NGO loans, you must first visit the NGO Darpan portal. You can also visit the National Government Services Portal and navigate to the NGO Darpan site there. 

Once you have reached the NGO Darpan portal, register for a unique Darpan ID. This can be done by creating an account, uploading the necessary documents, and submitting them. Once you receive the unique ID, you can begin applying for NGO-related grants and exemptions. 

Specific other sites may also offer NGO loan schemes, such as the Ministry of Tribal Affairs or JanSamarth (which provides government-backed loans). To apply for NGO loans on these sites, navigate to each site and follow the instructions. 

Most sites will have their own specific application forms. They will also require documents such as ID verification, proof of address, financial records, project proposals, and more. Remember to check the site-specific requirements for a quick and seamless process!

Also, read – What Is the Market Development Assistance Scheme for MSMEs?

Understanding NGO Full Form & Registration Process in India

The full form of NGO and its registration process are crucial to understand before applying for any NGO loans. These entities seek philanthropic or charitable funding to improve society, with no profit motive. 

NGOs operate independently of the government and are managed by their own trustees or governing bodies. Their central purpose is social welfare, not profit. They work across areas such as education, health, poverty, the arts, and the environment.

In India, an NGO can register as a Trust, Society, or Section 8 Company. These are defined as follows:

  • A Trust is formed by transferring assets to trustees for public or charitable purposes and is governed by a Trust Deed and state trust laws.
  • A Society is a group of at least seven members working toward a common social or charitable goal, managed by an elected governing body under the Societies Registration Act, 1860.
  • A Section 8 Company is a not-for-profit entity registered under the Companies Act, 2013, where all income is reinvested in its objectives, with stricter compliance and formal governance.

NGO Registration Fees & Compliance Costs

NGO registration fees and costs usually vary depending on the type of legal structure they are registered as (a Trust, Society, or Section 8 Company). This is because each company type has its own registration process, documentation requirements, and cost implications. 

Below, we break down the approximate costs of registering each type of NGO:

1. Trusts 

Trust registration is usually the most cost-effective form og NGO registration. Preparing a Trust Deed can cost Rs. 2,000–8,000, depending on its complexity. Government registration fees at the Sub-Registrar’s office range from Rs. 500 to Rs. 2,000, and stamp duty varies by state.

2. Society 

Society registration fees have to be paid to the Registrar of Societies. This amount typically ranges from Rs. 500 to Rs. 2,000. Additional documentation, notarisation, and affidavits usually cost Rs. 1,000–Rs. 3,000, while professional legal assistance may add ₹3,000–₹10,000.

3. Section 8 Companies 

Section 8 Companies’ costs typically include name approval, DSCs, DINs, drafting the MOA/AOA, ROC fees, and professional charges, totaling Rs. 15,000 to Rs. 30,000. 

Also, read – List Of Businesses That Come Under the MSME Sector

Step-by-Step NGO Registration Fee Structure

While obtaining a loan for an NGO can seem daunting, the process can be broken into more manageable steps. Keep reading for a simplified guide to registering your NGO on the NGO Darpan website:

1. Visit the NGO Darpan Portal

2. Create Your User ID

3. Log In and Enter Details

4. Upload Required Documents and Submit

6. Receive Your NGO Darpan ID

Upload the NGO Darpan registration certificate, PAN card, and details of trustees, directors, or governing body members. Once you have verified the information, click submit. Once your registration application has been approved, you’ll receive a unique NGO Darpan ID, which is required to apply for government grants and schemes.

Also, read – What is Udyog Aadhaar Loan?

Top 5 NGO Loan Providers in India

In India, securing an appropriate loan for NGOs can seem overwhelming. Luckily, there is a mix of government and private initiatives that make access to funding easier. 

1. Government-backed loan programmes: Many different Government of India schemes offer structured, affordable financing for organisations looking to scale operations or fund long-term projects. Different Ministries have other types of welfare and NGO loan schemes. 

2. Private sector loan options: In recent times, alternative lenders have also started actively funding NGOs that show strong governance and measurable outcomes. 

To secure the best funding options, it is crucial to explore both channels to help NGOs access flexible, purpose-driven financial support.

Conclusion

Securing business loans for NGOs can be challenging due to their organisational structure.  However, various foundations, charities, and government schemes provide support through donations, sponsorships, grants, etc.

If your business requires financing, turn to Tata Capital. With us, access high loan amounts at attractive interest rates. Enjoy easy business loan eligibility, quick disbursals, and extended loan tenures.

Fund your business expansion, cash flow, equipment and inventory needs, and more with us. You can use our business loan EMI calculator to calculate your repayment and decide your loan tenure and EMI amounts.

Check out our website, give us a call, or visit your nearest Tata Capital branch right away.

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FAQs

What is the full form of NGO and how does it impact loan eligibility?

The NGO full form stands for Non-Governmental Organisation. They are not technically legal entities in their own right; instead, they must be registered as a Trust, Society, or Section 8 Company.

What are the registration fees for starting an NGO in India?

 

NGO registration fees vary depending on the type of entity registered. These costs range from Rs. 5,000 to Rs. 20,000, depending on whether the entity is set up as a trust, society, or Section 8 company.

Which government schemes offer loans for NGOs in India?

 

NGOs can access funding through several government-backed NGO loan schemes. These can be applied for on the NGO Darpan portal or on the portals of various ministries.

How much loan can an NGO secure for operational expenses?

 

NGOs can secure funding through NGO loans. This can be done via government-backed loans or through private funding. It can also be done through donations and membership fees. 

What documents are required for NGO loan applications?

NGO loan applications typically require a project proposal, budget, financial statements, proof of legal registration, bank details, and compliance documents to verify credibility and fund utilisation.

 

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