What are the best loan options to start a new business?

Thinking of starting a new business is an attractive proposition for individuals as well as the country. It makes a big contribution to the growth of an economy and provides jobs to several people. However, it is a challenging task to fund a new business, especially if you don’t have sufficient capital to start and run a business smoothly. In addition, investors also hesitate to invest in a business which is just a concept. Hence, the moot point is how to get capital to start and run a new business?

It may be challenging to get funding for a new business but there are ways to do so. The government of India has launched multiple business loan schemes to help start-ups in realising their goals. If you want to start a new business, multiple schemes, including SBI mudra loan, , credit guarantee scheme, sustainable finance scheme, etc., are available in the market. Here are some of the best loan options to start a new business:

Startups business loan by the government of India

Keeping the entrepreneurs and micros, small and medium enterprises in mind, the government of India has introduced the Start-up India Scheme. The schemes are designed to empower budding entrepreneurs and small businesses by offering them affordable loans with favourable terms and conditions. Multiple business startup business loan schemes are available for individuals who want to start a business of their own:

Here are some of the most recommended startup business loan schemes:

Bank Credit Facilitation Scheme: Headed by the National Small Industries Corporation (NSIC), micro and small business units can get funding under this scheme. Several banks like Yes Bank, Kotak Mahindra Bank, HDFC Bank, Federal Bank, and IndusInd Bank among others, work with NSIC to offer business loans to small businesses for their financial needs. You can directly approach any of the NSIC branch offices to submit their request.

Credit Guarantee Scheme (CGS): Manufacturers or service providers, except for agriculture, retailers, educational institutions and self-help groups (SHGs), can get a business loan up to Rs. 100 lakh under this scheme.

Stand Up India Scheme: The Stand up India scheme is designed to empower SC/ST and women entrepreneurs. Under this scheme, Scheduled Caste (SC), Scheduled Tribe (ST) and woman business aspirants can apply for bank loans between Rs. 1 lakh and 1 crore for starting a new venture that is engaged in service, trading or manufacturing activities. Stand up India scheme has a moratorium period of 18 months and repayment tenure up to 7 years.

Sustainable Finance Scheme: Small Industrial Development Bank of India (SIDBI) is developed to financially help business projects engaged in green energy, renewable energy, green buildings and eco-friendly labelling. The ESCO or the unit to which it provides services must be an MSME to get this loan.

Documents required for start-up business loan

  • Neatly explained crisp business plan
  • 2 passport size photographs
  • Passport/ PAN Card/ birth certificate for date of birth proof
  • PAN Card/ Passport/ Aadhaar Card/ Voter’s ID/ Driving License for identity proof
  • One copy of — Passport/ Driving License/ Aadhaar Card/ Postpaid Phone Bill/ Electricity Bill/ Water Bill/ Passport — as a proof of residence
  • Bank Statement
  • A copy of cancelled/ scanned cheque/ front page of your passbook
  • PAN Card/ Passport/ Bank verified signature

Pradhan Mantri Mudra Yojana (PMMY): The honourable Prime Minister of India launched Pradhan Mantri Mudra Yojana to offer financial help to the micro-enterprise units in India. It is headed by the Micro Units Development and Refinance Agency (MUDRA) and caters to the financial needs of small enterprises for all kinds of service, trading and manufacturing activities. The loan is offered under three categories — Shishu, Kishor and Tarun. Businesses such as vendors, shopkeepers, traders, machine operators, repair shops and small services can get the loan.

Documentation process is short and simple for startup business loans. While the documentation may vary from one scheme to another, here are basic documents you will need to provide for a startup business loan.

If you want to start a new business or expand your existing business, these are some of the best startup business loans. Multiple loan schemes have been prepared to meet the different needs of businesses. You can choose the scheme based on the requirements and nature of your business. These startup business loans are collateral-free loan schemes.

Read More: Get To Know About Mudra Loan Eligibility Criteria & Required Documents

Originally published at https://shrutikeshre.kinja.com on September 19, 2020.