Overview Startups Loans and Grants

The benefits of startup business loan are as follows:

• Zero collateral required: Loans are considered as a reliable source of funds which can be used to support the startup's growth and expansion plans.
• Flexibility: Startups loans offer flexibility in terms of usage. Startups owners do have the freedom to allocate the funds based on the specific business requirements.
• Built credit score: Taking the startups loans and making timely repayments can build a positive credit history for the business.
• Retain Ownership and Control: By not giving up equity, Startups owners can maintain decision-making power and future potential value.
• Access to Capital: Startup loans provide the capital to fund for various aspects of the business, such as product development, operational expenses, marketing efforts, equipment purchases, or hiring employees.

What are Startups Grants

• Grants are non-repayable funds awarded by the government agencies, non-profit foundations, and private corporations.
• Grants are provided to businesses which meet specific criteria, such as social impact, industry focus, location, or innovation.
• The application process for grants involves submitting the detailed proposal outlining the goals, business plan, and expected outcomes.
• Grant funding can vary ranging from a few thousand dollars to millions, depending on the grant program and its objectives.
• Startups often need to demonstrate how the grant will be used and provide periodic progress reports.

Benefits of Startup Business Grants

• Non-Repayable Funding: Unlike loans, grants do not require repayment. By accessing non-repayable funds, startup owners can focus on building the businesses without the pressure of any repayment.
• Validation and Credibility: Being awarded a startup grant can enhance the credibility and validation of the business idea or concept. This validation can attract additional investors, partners, customers, and media attention, helping to establish the startup's reputation.
• Access to Specialized Resources: Some grant programs offer access to specialised resources, such as research facilities, incubation or co-working spaces, training programs, and industry-specific expertise.
• Focus on Long-Term Goals: The startups have more flexibility to focus on long-term goals and strategic initiatives rather than being solely driven by short-term financial constraints.
• Capital for Launching and Expanding: Grants can provide the financial boost needed to turn ideas into viable businesses. Startup grants provide the necessary capital to launch a new business or expand existing operations.

Government Schemes For Startup Loans

There are some important Government Schemes For Startup Loans are as mentioned under:

National Bank for Agriculture and Rural Development (NABARD)

NABARD is a bank which primarily focuses upon the rural sector of India. It is one of the financial institutions which provides loans for agriculture and rural development.. The National Bank for Agriculture and Rural Development was established in July 1982. NABARD monitors the development of small-scale industries, cottage industries, and any such other rural projects. Besides meeting the rural sector's financial requirements, NABARD also provides for social innovations and projects by partnering with various organisations.

Pradhan Mantri Mudra Yojana (PMMY)

The Micro Units Development and Refinance Agency (MUDRA) was  launched in 2015. This yojana aims to offer loans to all kinds of trading, manufacturing, and service sector activities. PMMY provides loans divided under three categories – Shishu, Kishor, and Tarun loans. Anyone, from artisans to shopkeepers to machine operators, must avail for the Mudra Loan. MUDRA loan scheme offers incentives with these interventions:

• Shishu: Loans up to Rs. 50,000
• Kishor: Loans above Rs. 50,000 and up to Rs. 5 Lakhs
• Tarun: Loans above Rs. 5 Lakhs and up to Rs. 10 Lakhs

Credit Guarantee Scheme (CGS)

The government has launched the Credit Guarantee Scheme (CGS), this scheme is to strengthen the credit delivery system and facilitate financing to the MSME sector. The existing and new MSMEs in manufacturing or service activities, however excluding retail trade, self-help groups (SHGs), agriculture, etc., can apply for CGS. The lending institutions offering this type of scheme are public, private sector banks, regional rural banks, foreign banks, and associate banks. This MSME scheme for entrepreneurs comes with many benefits, including term loans and the working capital loan facilities extend up to Rs. 100 Lakhs per borrowing unit.

Stand Up India Scheme

The StandUp India scheme facilitates bank loans between Rs 10 Lakh and Rs 1 Cr. This scheme covers at least one SC or ST individual or at least one woman borrower in the unit to build their business. Businesses which fall under the category of manufacturing, trading or service industry can apply for the standup scheme. For non-individual enterprises,  at least 51% of the shareholding requires to be held by an SC/ST or a woman entrepreneur. The applicant under standup India scheme must have a good credit history and do not have default payments with any bank or financial institution.

Bank Credit Facilitation Scheme

The National Small Industries Corporation (NSIC) has the target to fulfil the credit requirements of the MSME units. The NSIC scheme gets partnered with various banks in order to provide loans to the MSME units. The loan repayment tenure varies depending on the income generated from the startup and generally extends from 5 to 7 years. However, in exceptional cases, it can extend up to 11 years.

Coir Udyami Yojana

The Coir Udyami Yojana has an aim to support the establishment of coir units. Banks finance the capital expenditure in the form of term loan in order to meet the requirements of working capital. The bank also funds the projects which are composite loans consisting of Capex and working capital. All coir processing MSME startups that get registered themselves under the Coir Industry (Registration) Rules, 2008, become eligible for this scheme. Banks Finance those projects that cost up to Rs 10 Lakh, which must not exceed 25% of its total project cost.

Market Development Assistance (MDA) Scheme

The Ministry of Commerce presently operates a Market Development Assistance Scheme to encourage exporters (including MSME exporters) to access and develop overseas markets. This scheme provides funds for participation by manufacturing SMEs in International Trade Fairs/ Exhibitions under the MSME India stall.

Eligibility Criteria For Startup Loans

To avail of a startups loans for the business these following eligibility criteria must be fulfilled:

• Must be an Indian citizen.
• Age must be between 25-65 years.
• Must be self-employed.
• Must have a minimum business tenure of 3 years.

The following documents are required when applying for a startup’s loans for new business.

• Aadhaar card/passport/driving licence
• PAN card
• Bank statement of the last three months
• Any business proof like a certificate of business existence,
• Tax filings from the previous financial year,
• Profit and loss statements of the last 3 years

The simple steps to apply for startups loans are as follows:

• Fill up the personal details, including name, occupation, mobile number, and residential address.
• Prepare the full detailed business plan for the startup that required funding using the loan amount.
• Summarise the potential growth and financial returns expected with the venture.
• Choose a suitable loan amount and repayment tenure.
• Submit a clear plan on how you will raise funds to repay the loan.
• Get instant loan approval

Difference Between Startup Loans And Grants

Ideas to fund your Startups

There are options to fund the startup business, some broad ideas are mention as under:

Self-Finance your Start-up Business

Self-financing is the best way of financing used by several business start-ups. Investing your own savings is the best option for first-time owners. In the later stages of business, one can easily opt for business loans and lenders have no reason to deny it, as they know the stability of business

Apply for Business Loan from Public or Private Sector Bank

Banks are considered most reliable and the first priority for start-up enterprises for applying loans, as they find it a more reliable and convenient way of getting money. Banks provide funds to start-up and MSME in two forms that are term loan and working capital loan. Almost every public and private sector bank can offer business loans for start-ups. However, the interest rate, loan amount, and repayment tenure offered can vary from bank to bank.

Consider Government Loan Schemes for Funding

The Government has launched various loan schemes that aim to benefit Start-up enterprises, SMEs, MSMEs. In order to promote the socio-economic growth of rural India, loan schemes initiated by the Government of India to help Start-ups. The schemes are MUDRA loan scheme, Start-up India, (CGTMSE) Credit Guarantee Fund Trust for Micro and Small Enterprises, Stand-up India, Atal Innovation Mission, Make in India, Trade-related Entrepreneurship Assistance and Development (TREAD), etc.

Avail Small Business Loans from NBFCs or MFIs

One has to maintain the financial history or credit score to get loans from private or public sector banks. It becomes difficult for those who are obtaining a  first time loan for their business, hence they can opt for Non-banking Financial Companies (NBFCs) and Micro Finance Institutions (MFIs) for availing Startup Loan. The interest rates offered by the NBFCS and MFIs are much higher, as compared to PSU banks.

Peer-to-Peer Lending

Peer-to-peer lending is a type of borrowing where no intermediaries are involved in the whole process. Peer-to-peer lending institutions are governed by RBI for the betterment of both lenders and borrowers. Lenders lend money to borrowers as the investment and then borrowers get money at their disposal to invest in their Start-up. In this lenders can earn from borrowers, as the interest rate is higher, as compared to banks, NBFCS and MFIs. For start-up enterprises, peer-to-peer lending is a type of loan, whereas for the lender it becomes an investment.

Arrange funds from Crowdfunding portals

Crowdfunding is a concept of collecting funds from multiple investors with the help of social networking sites and web-based platforms for majorly business purposes. This concept or idea helps in raising funds for start-ups or first-time business owners and also promotes social and cultural causes. Online Crowdfunding web portals raise funds for various other purposes like social causes, charities, ideas, disaster relief, events, etc.

Find an Angel Investor

Individuals with surplus cash are known to be Angel investors who are interested in investing in new start-ups enterprises. The risk involved in the investments by Angel investors is comparatively more, as compared to loans offered by financial institutions, as investors plan to invest for higher returns to profit.

Startups loans and grants empower visionaries to transform their ideas into reality, providing the vital capital needed to start their ventures. With the potential to overcome financial barriers, these funding opportunities open doors to unparalleled growth and success. Whether you're seeking to disrupt industries, revolutionise existing markets, or create social impact, startup loans and grants provide the power of financial support. If you’re planning on getting a business started or are looking to upgrade your SME business with the latest technology we are here to help you.