LOGO

Get A Business Loan In India: Various Program & Benefits

An entrepreneur can get a business loan in India through banks, Non-banking financial institutions, and government schemes.

GET EXPERT
ASSISTANCE

Table of Contents

Get a business Loan in India

Get a Business loan in India

A company must grow in order to succeed. Without proper financial assistance, it will be difficult for a company to survive. In India, for businesses to grow and expand and cover their business expenses a significant amount of capital is required for various purposes like marketing, setting up an industry, working capital costs, etc. The best method those businesses can seek to get more funds is getting a business loan in India.

An entrepreneur can get a business loan in India through banks, Non-banking financial institutions, and government schemes.

In this article, you will learn about business loans and the various platforms to get a business loan in India.

Overview of a business loan

A business loan is a financial credit that can be acquired to cover the operating costs of a startup or established company.

The following benefits will accrue to the business owner if they get a business loan in India-

  • Business loans could be beneficial for funding business endeavors and maintaining the company’s daily operations.
  • Business loans often permit longer payback durations.
  • Business loans provide more significant funds at a low lending rate.

Ways to get a business loan in India

Let us have a look at the various ways that an entrepreneur can use to get a business loan in India-

1. Loans under government schemes

The Indian government has launched a number of loan programs to support people, MSMEs, entrepreneurs, and other organizations operating in the manufacturing, service, and trade sectors. There are various financial institutions that provide loans under government schemes, including banks, non-bank financial institutions, RRBs, etc.

The numerous government initiatives that the Indian Government has put forward for entrepreneurs to get a business loan in India are-

  1. Pradhan Mantri Mudra Yojana (PMMY)

Pradhan Mantri Mudra Yojana (PMMY) is a government-sponsored credit funding program introduced on April 8, 2015, and offers MSME  and business loans of up to Rs. 10 lakhs. Individuals, business owners, non-corporate entities, and small businesses can use this scheme to get a business loan in India.

As part of this scheme, MUDRA has created three categories to get a business loan in India to represent the development phases and financial requirements of the recipient micro unit. They are-

  • Shishu Scheme The ‘Shishu Scheme’ guarantees funds up to Rs.50000.
  • Kishore Scheme Under the Kishore Scheme, credits over Rs.50000 to Rs. 5 lakhs are covered.
  • Tarun Scheme Loans beyond Rs. 5 lakh and up to Rs. 10 lakh are insured by the Tarun scheme.

Benefits

  • The bank does not request any collateral from the borrower
  • Low-interest loans up to Rs. 10 lakh with free or minimal processing fees
  • Duration of Repayment: 12 months to 5 years
  • All non-farm businesses that participate in income-producing activities are eligible to apply for MUDRA loans.

To get a business loan in India under this scheme, entrepreneurs can apply online at www.udyamimitra.com.

  1. MSME Loan in 59 Minutes: This scheme also known as PSB Loan in 59 minutes was introduced by the Indian Government to create a quick business loan site for people who need to develop their current businesses. Under this program, MSMEs can obtain loans ranging from 1 lakh to 5 crores at an interest rate of 8.50% in less than 59 minutes from banks and non-banking financial institutions. A modern online financing platform is available at psbloansin59minutes.com. This site makes use of advanced technology in order to streamline and digitize the procedures for lending a loan.
  2. Credit Guarantee Fund Scheme For Micro And Small Enterprises(CGFMSE): A business lending program called CGFMSE was introduced by the Indian government and the Credit Guarantee Fund Trust For Small And Medium Enterprises (CGFTMSE). It was introduced to bolster the process of finance delivery of the MSEs.  It was set up to assist MSMEs access collateral-free financing. Any current or new businesses can avail the benefits of this scheme. Under this program, MSMEs are eligible to get a business loan in India of up to INR 200 lakhs. The scheme’s guarantee coverage varies from 75% to 85%.
  3. National Small Industries Corporation (NSIC): Under the MSME, the National Small Industries Corporation (NSIC) is an Indian Government organisation with ISO certification. NSIC aims to encourage, support, and facilitate the progress of the MSMEs in India by offering excellent support services that cover marketing, technology, finance, and other operations. The NSIC streamlines the process of obtaining loan assistance for MSMEs from several private and nationalized banking institutions, up to an amount of INR 5 lakh. The borrower may also submit an online application to get a business loan in India at www.nsicspronline.com.
  4. Credit Linked Capital Subsidy Scheme (CLCSS): Credit Linked Capital Subsidy Scheme (CLCSS) is a creative financing programme established to help MSME businesses advance their technology. Under CLCSS, entrepreneurs can choose to get a subsidy of 15% ( on corporate financing over Rs 1 crore for MSMEs) on financial investment for technical advancement. Objective:  The objective is to enhance and modernize the technological apparatus of the enterprise.
  5. Pradhan Mantri Employment Generation Program (PMEGP)

2. Banking Institutions

Most business entrepreneurs prefer to get a business loan in India from a bank because of the various advantages like reasonable lending rates, faster money access, speedy application procedures, etc.

A few types of business loans and schemes are listed below to help entrepreneurs become familiar with the various business loan facilities available in India:

  1. Term Loan: A lot of enterprises can get a business loan in India with the aid of a  term loan. A term loan is a sum of money borrowed from a bank with a set repayment term It is a financial loan made available to enterprises for capital purchases and development that has to be repaid over a predetermined period. Terms loans come up with a specified repayment period and borrowing amount. However, the borrowing amount, loan tenure, and lending rates are different for each bank. Lending rates, in the case of term loans, can either be fixed or floating. Term loans can either be classified as short-term loans, intermediate-term loans, or long-term loans. The money obtained through this loan may be put to a variety of business requirements, including:
    • business growth
    • Purchase capital assets
    • expenditure for working capital
    • maintenance of machines and equipment, etc.
  2. Working Capital Loan: A working capital loan is a loan that is availed by businesses to finance their daily operations. A firm may use a working capital loan to get a business loan in India when it lacks the working capital to meet essential needs. The interest rate on a working capital loan varies from 12%-16% depending on the firm’s credit rating. Different banks may have different lending amounts. However, small enterprises are eligible for a fixed-interest loan with a minimum amount of Rs. 50,000 at a fixed lending rate. Working capital loans can be employed to fund the following-
    • settlement of debt
    • Purchasing supplies and raw materials
    • Maintaining overhead expenses, etc.
  3. Loan Programs: Numerous loan schemes are available in the banks to get a business loan in India to will fulfill a variety of company requirements, including:
    • machinery expenditures.
    • working capital costs
    • Finance involved for firm’s growth, etc.

There are numerous banks that offer loans with differing interest rates under various conditions. On the bank’s official website, entrepreneurs can look for the particulars of the various loan programs in order to obtain a loan.

Applying for a loan on a banks website

An entrepreneur can get a business loan in India by registering on the bank’s official website and applying for the loan. Registering on the official portal of the bank would help the entrepreneur get a Udyam Registration Number (URN).  the URN will be linked to the applicant’s Aadhar and PAN number which will help the bank to authenticate the registrant’s information.

The applicant can swiftly get a business loan in India if the bank can collect the necessary data from the applicant’s URN.

3. Non-Banking Financial Companies (NBFCs)

NBFCs frequently take the initiative in offering Micro, Small, and Medium Enterprises (MSMEs) financial services that are most appropriate for their business needs. NBFCs have seen a substantial change over time.

Non-Banking Financial Companies (NBFCs), commonly referred to as Non-Banking Financial Institutions (NBFIs), are organizations that offer some financial services that resemble those offered by banks but do not possess a banking license. A lot of businesses prefer to get a business loan in India from the NBFCs as NBFCs have the following advantages-

  • The eligibility requirements used by NBFCs to approve requests for business loans are liberal and permissive.
  • NBFCs offer loans to business owners with little to no previous expertise.
  • The minimal documentation required by NBFC makes it simpler and faster for business owners to obtain a business loan.
  • NBFCs offer reasonable rates for lending.

Two types of loans are provided to MSMEs in India by NBFCs. They are-

  1. Pre-approved loans: Different NBFCs in India offer preapproved credit limits for entrepreneurs to borrow money. In India, entrepreneurs who obtain a loan through a pre-approved loan procedure will have to pay interest only on the portion of the loan they have used and they will not be charged interest on the entire amount of the loan. It is beneficial for entrepreneurs to have a plan that reduces their monthly installments, thereby allowing them to save even more money. Additionally, a pre-approved loan limit guarantees that businesses never run out of money. They are not required to submit fresh applications to get a business loan in India in emergency cases.
  2. Flexi business loans: NBFCs provide entrepreneurs with flexible borrowing options. Under this scheme, there are two ways to get a business loan in India. They are-
    • Flexi term loans: In Flexi term loans, the EMI that is to be paid consists of the principal as well as the interest amount.
    • Flexi interest-only loans: In Flexi interest-only loans, the EMI that is to be paid includes the interest amount, with the possibility of repaying the principal amount at the conclusion of the term. This lowers the EMI payment.

Finance

Book free end-to-end experts consultation with Odint legal, accounting and company formation experts.

GET EXPERT
ASSISTANCE

Conclusion

The above article shows the various ways through which a business can get a business loan in India along with their benefits.

You can contact Odint Consultancy with any additional questions.

We’ll be glad to answer any questions you have.

FAQ’s

A business loan is a credit system for businesses in order to meet their business operations. A business takes a business loan when they are unable to meet the financial requirements of the enterprise.

An entrepreneur can apply for a business loan v=for various reasons like-

  • To start a business
  • To expand or develop the existing business
  • To meet financial requirements of the business, etc.

A business owner can obtain financing in India through the following methods-

  • Banks,
  • Non-banking financial institutions, and
  • Government schemes to provide finance

Yes, entrepreneurs can take business loans online by applying on the official website of the banks.

Follow us

Privacy Policy Terms and Conditions

©2021 ODINT Consulting LLP

Looking for an Expert Guidance?

Get 30 minutes of free consultation with our company formation experts!

Will help you to setup your company anywhere in the world

Get Dedicated company formation consultant

End-to-end management and consulting

GET EXPERT
ASSISTANCE

Share to...