It is understood that all business ventures, in the beginning, require some amount of capital and financial strength. Money is paramount when it comes to the founding of all businesses. Especially in the case of new start-up businesses, the amount of capital that is put in can help kick off the business into a long-running one with future lucrative prospects.
In many situations, one might not immediately posse the necessary capital for their start-up business. In such cases, the most feasible option is to apply for a startup India loans to start a business. There are many different types of startup business loans that vary depending on the nature and aim of the business.
Eligibility for a New Business Loan in India
For every business loan for a new business, there is a certain requirement that must be met in order to be eligible for the loan. Any startup or company looking to expand to ensure the following:
- The applicant for the start up business financing should be above the age of 21 years and should be below the age of 65 years.
- Proof of the individual must be provided in the form of a driver’s license or Aadhaar card.
- Bank statements for the past six months must be procured and presented at the time of loan negotiations.
These are essential to establish the credibility of the individual who is applying for the start up loans and that the startup bears future prospects of generating revenue.
Steps for getting a loan to start a new business:
When opting for a business loan for a new business, there are certain requirements that must be met. These facilitate the process of acquiring the new business loan and serve as a checklist to see if the bank will suffer a loss if they decide to proceed with the loan.
- It is important to get one’s costs and finances in order before proceeding with any step. Understanding and reviewing the startup cost will help you understand the purpose for which the small business start up loans are being taken in the first place and in which direction will the capital be utilized.
- Next, the person taking the loan must require the related documents and registration forms to legally and officially apply for the loan. These documents are simple ones that recount the business plan, credit score of the company and other formalities.
- There are a number of different start up business loans to choose from. Depending on the aim and goals of your startup, one needs to choose the right business loan for new business.
Documents required for a new business loan
- Identity proof: for this, one can present their driving license, passport, PAN card, Voters ID card or even their Aadhaar card.
- Income proof: the bank and financial statement for the last 2 years must be procured.
- Proof of business ownership: it is mandatory to have documents like a Sole Proprietorship Declaration or a certified true copy of Memorandum and Article of Association in order to show proof of the business and/ or startup for which the loan is being raised.
Advantages and benefits of taking up a startup loans
Capital is the most important aspect of any business and thus having a startup business loan for a new or expanding business can prove to have a number of benefits and advantages. This also greatly helps all individuals, especially in cases for startup business loan for women.
- Convenience: most people are familiar with their banks and are regular visitors to the branches. This makes bank loans for startup businesses that much more convenient and more accessible for application.
- Interest rate: bank loans tend to have lower interest rate I comparison to private equity lenders. In addition, bank loans have the added benefit of tax benefits which make it a more attractive and lucrative option for taking a new loan for a new business loan in India.
- Multiple loan options: Larger banks have specialized loan plans that are intended for small and new startups and businesses. Also, banks do not take any share from the startup like angel investors. The banks and their loan schemes are only concerned with the loan principal and have no affiliation any fund exchange of the startup or business itself.
Apply for a loan at Lendingkart!
We at Lendingkart offer multiple types of both working capital loan as well as business loans and also lays the means as to how to get a start up business loan without collateral. The process for applying for a loan id completely virtual and can be done in a few easy steps by visiting our webpage.
- Choose an application: on the website one can easily choose from the various applications, which suit your agendas the most. After choosing the desired application, fill in the required details and submit the application form for the loan.
- Attach documents: after filling and submitting the desired application, attach and upload the required documents that are mentioned and are needed for the processing of the start up business loan in India.
- Wait for approval: the final step if the wit for the approval for the loan request. Of everything is found to be in order and satisfactory, your loan application will be sanctioned to you in a span of 3 days.
Fees and charges:
There are some charges that you would have to pay as an applicant on LendingKart, which are as follows:
Between 15% and 27%
One time processing fee
Up to 2 years
Rs. 50,000 – Rs. 2 crores
Monthly or Bi-weekly
Startup Business Loan – 9 Best Resources for Startup Loan in India
1. A line of Credit:
The line of credit is a facility offered by your banking or financial partner, allowing you to withdraw funds as needed up to a limit. So, instead of receiving the full amount as a one-time term loan, you get the funds on a need-to-use basis. One benefit of this mode of startup finance is that the interest is charged only on the balance currently borrowed by you. The line of credit is usually used for short-term working capital to help improve the cash flow or finance unexpected expenses.
2. Small Business Credit Cards:
Business credit cards can be a very cost-effective way to finance your startup business as many of these products come with zero percent APR introductory periods, cashback, and rewards programs. These cards can be used for covering immediate expenses while you wait for payments from customers and sometimes help in preserving cash for working capital or other requirements. However, small business credit cards are not ideal for funding large capital investments due to the very short-term nature of the loan and high-interest rates.
3. Peer-to-peer Lending:
Online P2P platforms connect you directly to individuals and institutions looking for investment. These business loans are generally known as P2P finance and help you reach lots of debt/income investors. The platform charges a processing fee and interest rates on P2P finance can go up to 26% because of the risk involved for the lenders. A good credit score is also a prerequisite to borrow from a P2P lending site.
4. Equipment Financing:
You can use equipment financing to purchase equipment, machinery, or vehicles for business use. Equipment finance is available through dealerships, banks, and online equipment finance providers. Typically, the business loan is given by keeping the purchased equipment, machinery or vehicles as collateral and a processing fee are also charged. The main benefit of equipment finance is that you get the ownership of a valuable asset, the payments for which are spread over a period of time (generally one to five years). Equipment finance is a good choice for startup businesses that rely on equipment or machinery.
5. Small Business Loans for Startups:
Short-term small business loans are one of the best ways to finance your startup business. These loans are offered by banks and other RBI governed financial service providers. Small business loans from non-banking financial companies like Lendingkart come with features that are optimized for modern enterprises. For example, Lendingkart’s small business loans have a ticket size of ₹ 50,000 to ₹ 2 crores, which can be repaid in monthly or biweekly installments of up to 24 months. Moreover, these loans come with lower interest rates and zero prepayment penalties. Lendingkart also offers a quick turnaround time for approving and disbursing your small business loan when compared to the time and hassle you face in applying for a business loan with a bank. You can get the money in your bank within 3 days of application if all your information and documents are in order.
The benefit of a small business loan of up to ₹ 2 crores is that it can be utilized for several things simultaneously, such as inventory or equipment purchase, streamlining your working capital and paying off immediate debts. A startup that has been in business for more than 6 months can apply for a small business loan with Lendingkart Finance.
6. Micro Loans:
These loans are generally given to very small business startups who have a less than the ideal credit rating and no assets to collateralize. In India, these loans are offered by government programs like the Mudra Yojna. However, the loan value is often less than ₹ 50,000 which makes these loans not very useful for enterprising individuals. A plus point of micro loans is that they are given at lower interest rates and are unsecured.
Online crowdfunding platforms allow you to raise small amounts of money from a large number of people. However, there is a difference between P2P platforms and crowdfunding platforms. In crowdfunding finance, you are not required to pay back the money you get. It is a kind of donation towards your entrepreneurial cause by people interested in your idea. But sometimes, crowdfunding terms may include a provision for equity share if the startup becomes successful. The crowdfunding platforms usually charge a one-time percentage-based fee from the capital you raise.
8. Angel Investors:
Wealthy individuals who invest in your business in exchange for an ownership stake are often called Angel Investors due to the debt-free nature of the finance. However, money raised from Angel Investors is often less than the money you can raise through venture capital. On the plus side, Angel Investors are less likely to interfere with your role in the organization.
9. Venture Capital:
Venture capitalists are a group of rich individuals/investors who operate as firms. VCs, give you debt-free finance in exchange for a percentage of equity in the enterprise. However, VCs are more hands-on in their approach and often induce an organizational change in your business to retrieve their investment. Also, funding by venture capitalists is given in several rounds, such as a seed round (generally known as Series A), and subsequent payments upon achievement of growth targets.
So, this concludes our list of financial vehicles you can tap into for getting a startup loan or investment. Our recommendation is in favor of small business loans from NBFCs because of the versatility and flexibility of this particular financial product. And, the unsecured nature of these business loans makes the deal even sweeter for small businesses and startups who lack assets for collateralization.
To know more about small business loans for startups, visit us at www.lendingkart.com.