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Tata Capital > Blog > Loan for Business > How To Get A Business Loan For Startup In India

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How To Get A Business Loan For Startup In India

How To Get A Business Loan For Startup In India

Do you have an idea for a startup that you really believe is promising? Do you think you have the potential to build the next big thing? Is lack of funding the only worry on your mind? The answer to this conundrum is a business loan.

Money is critical to kick off a business idea and turn it into a successful venture. However, finding investors is one of the biggest hurdles enterprising entrepreneurs face. To ease their ingress into the business world and turn their ideas into reality, banks and NBFCs help aspiring entrepreneurs get a business loan in India.

But where do you begin? Worry not because we have you covered. Today, we’ll discuss how you can give wings to your business idea with a simple business loan for a startup. Let’s dive in!

Who can get it?

An individual or a group of individuals who have come together to start a business can avail a business loan for a startup. An existing business can also get this loan for expanding operations or service offerings, buying equipment, stocking inventory, investing in research and development, and meeting several other expenses.

There are a few business loan eligibility and documents requirements for business loan seekers, though:

  • Minimum age of 21 and a maximum of 65
  • Indian citizenship
  • Valid PAN and Aadhaar cards
  • Bank statement of the past six months
  • Signature proof
  • Proof of ownership of the business or a robust business plan

Types of business loans for startups

There are many types of business loans you can apply for. Depending on your needs and the loan terms, certain business loans would be more suited to you than others. And to ensure you find the best loan for your business, you must know your options. We’ll be discussing six types of business loans that you should know about. Here they are.

  1. Term loan

These can be short-term, intermediate-term or long-term loans. Their tenure can be anywhere between 12 months to five years. The repayment tenure can be negotiated according to your needs.

  • Working capital loan

Business loans are not always for a substantial amount. A working capital business loan is for you if you need help meeting your day-to-day expenses. These are short-term loans for business needs such as purchasing raw materials, paying salaries, enhancing cash f, etclike. These are especially suitable for startups.

  • Letter of credit

This is a kind of credit limit offered to businesses dealing in international trade. Under this, a financial institution provides a guarantee to enterprises in contract with their client to offer assurance against the business contract. These are utilized for import as well as export.

  • Invoice discounting

This entails receiving a business’s unpaid accounts receivable as security for a loan. You sell unpaid invoices to a financial institution and receive a percentage of the invoice as a cash advance.

  • Overdraft facility

This allows account holders to withdraw funds in excess of the amount in their account. The interest rate is calculated daily on the amount utilised from the sanctioned limit. The permitted amount depends on credit history, repayment history and cash flows.

  • Equipment finance

This is also known as a machinery loan. This is used to fund big purchases like new equipment. This is a popular business loan in the manufacturing sector.

Different types of business loans serve different purposes. So, always assess your needs and choose accordingly. Further, remember to compare loan terms from different financial institutions to find the best one for you.

How can startups avail of a business loan in India?

The two most important aspects that a lender will take into consideration to disburse a loan are the CIBIL score and the business plan.

Like any other loan, a good credit score is paramount to getting a business loan application approved. An entrepreneur’s credit standing is linked to the startup, and having a strong score can prove to be very beneficial.

The second thing to keep in mind is a sound business plan. This must detail the business idea, the need-gap it will fulfill, the objective and goal of the initiative, how and where the loan amount will be used, potential returns and expected growth of the enterprise.

Here’s how you can avail of the loan for business:

Applying for such a loan is quick and hassle-free. You can apply for an online business loan in a matter of minutes. All you have to do is visit the lender’s website, fill up a form, upload the required documents and submit the business loan application.

You can also visit the bank branch and physically submit the application; but it is more convenient, and in the current times, responsible to do it online keeping social distancing norms in mind due to COVID-19.

Tips for securing a business loan for a startup

Applying for a loan for your business can be daunting. But if you go in prepared, the whole exercise is a breeze. To help you put your best foot forward, keep in mind the following points while applying for a loan.

  • Provide a concise but detailed plan outlining your business model.
  • Have a plan on how you will spend the loan amount to further business objectives.
  • Clearly state your business goals and future plans supported by your proposed revenue and growth model.
  • Provide a clear approximation of the funds required.

In closing

Laying a strong groundwork for your business loan can help fast-track the process. It is equally important to choose the right financing partner. Someone who understands the dynamic needs of a startup and offers the much-needed flexibility the new set-up needs will always be the right choice.

As a part of the Tata Group – one of the original home-grown startups in India, Tata Capital is always eager to partner with ambitious, young entrepreneurs who define the new enterprising India.

Visit our website and apply for a loan today!

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