1 October 2023

How start-ups in India can secure loans

How start-ups in India can secure loans

Starting a new business in India can be an exciting as well as a challenging endeavour and, especially start-ups, face several challenges while trying to secure financing to get their ideas off the ground (Photo: Pixabay).

Fortunately, India has a slew of financing options and schemes designed to support budding entrepreneurs.

In this article, we will explore how start-ups in India can get loans, information on equated-monthly instalments (EMIs), interest rates, maximum and minimum loan amounts, and real-life instances of successful start-ups.

Types of loans for start-ups

Mudra loans for start-ups

Maximum loan: Up to Rs 10 lakh

Minimum loan: Varies

Interest rate: Varies

EMI: Depends on the loan amount and tenure

Mudra loans, offered under the Pradhan Mantri Mudra Yojana (PMMY), are mainly for micro, small, and medium enterprises (MSMEs), including start-ups.

These loans fall under three categories — Shishu (loans up to Rs 50,000), Kishor (loans between Rs 50,000 and Rs 5 lakh), and Tarun (loans from Rs 5 lakh to Rs 10 lakh), each catering to different funding needs and age groups.

Example of Mudra loan

Rajesh, an aspiring entrepreneur, started a micro manufacturing set up for eco-friendly packaging materials.

He took a Mudra loan of Rs 5 lakh in the Shishu category to buy machinery and raw materials.

His EMI for a 5-year tenure loan is around Rs 10,000, with an interest rate of 8 per cent.

Start-up India loans

Maximum loan: Rs 5 crore

Minimum loan: Varies

Interest rate: Competitive

EMI: Customised based on the loan agreement

Under the Start-up India initiative, numerous financial institutions as well as banks offer loans tailored to meet the unique requirements of start-ups.

These loans can be utilised for working capital, technology adoption, or even growth.

Example of Start-up India loans

XYZ Tech Innovations, a technology start-up, clinched a Rs 2-crore loan from a top bank to develop its groundbreaking app.

The start-up managed a competitive interest rate of 9 per cent, leading to a monthly EMI of nearly Rs 3.5 lakh for a 5-year period.

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)-backed loans

Maximum loan: Rs 2 crore

Minimum loan: Rs 10 lakh

Interest rate: Competitive

EMI: Varies based on loan amount and terms

The CGTMSE provides collateral-free loans to start-ups as well as MSMEs.

This scheme minimises the risk for lenders and encourages them to extend credit to budding entrepreneurs.

Example of CGTMSE loan

A fashion boutique start-up, Trendy Threads, sought a Rs 20-lakh loan under the CGTMSE scheme to grow its product line.

The start-up managed to get the loan at an attractive interest rate of 10 per cent, paying an EMI of around Rs 40,000 per month for a 5-year period.

Stand-Up India loans

Maximum loan: Rs 1 crore

Minimum loan: Rs 10 lakh

Interest rate: Competitive

EMI: Decided by the lender

The Stand-Up India scheme is mainly for women entrepreneurs and individuals belonging to the scheduled castes and tribes.

It gives financial assistance for setting up greenfield enterprises in manufacturing, trading, or the services sectors.

Example Stand-Up India scheme

Sita, a youth entrepreneur belonging to a marginalised community, started a retail grocery store with a Rs 15-lakh loan under the Stand-Up India scheme.

Her lender gave her a competitive interest rate of 9.5 per cent, which is an EMI of about Rs 32,000 per month for a 7-year period.

Tips for securing start-up loans

Develop a comprehensive business plan

Lenders often require a well-documented business plan, which outlines your start-up’s goals, revenue projections, and repayment strategy.

Do research to compare lenders

Check out multiple financial institutions, banks, and government schemes to find the best loan option that suits your start-up’s needs.

Maintain a good credit score

A strong credit history raises your chances of loan approval and may result in lower interest rates.

READ ALSO | Determine your financial credibility through CIBIL score

Ready a collateral, if needed

Some loans may need collateral, so be prepared to provide assets as security, if required.

Go for expert advice

Consulting with financial advisors may be of help to navigate the loan application process and strike a favourable deal.

Documents needed for start-up loans

Proof of individual identity

Address proof

Last 3 years Income Tax returns

Last 3 years Sales Tax returns

Last 6 months bank statement that must be authorised by the branch manager

Details of Profit and Loss and Balance Sheet statements for the last 3 years


You have options like Mudra loans, Startup India loans, CGTMSE-backed loans, or Stand-Up India loans.

However, it’s absolutely necessary to understand the EMI, interest rates, maximum and minimum loan amounts, and the overall terms and conditions.

So, securing loans for start-ups in India is a crucial step towards realising your entrepreneurial dreams and there are options galore.

READ ALSO | Microfinance options for rural entrepreneurs in India

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