How to Get a Startup Business Loan Without Collateral
Last Updated : Feb. 6, 2023, 5:39 p.m.
Get a Startup Business Loan Without Collateral – Many new ideas for businesses comes to an end when there is a scarcity of funds. Nowadays, many youngsters lose new opportunities when the financial support in the business is lacking. Therefore, you must search for such sources that grant startup business loans in India. Many financial institutions ask for a minimum of 3 years business vintage period. But in certain government loan schemes, one can get a business loan for their startup business.
Best Available for Startup Business Loan Without Collateral
You can either choose some of the private financial lending institutions or government loan schemes. There are many other financial institutions that demand a business vintage period and they don’t loans to startups. Well, we will share some government loan schemes that will help in getting business loans for startups.
The Credit Guarantee Scheme
This scheme was launched by the government for micro and small enterprises. Most of the new and existing enterprises were covered under this scheme. It helps many small and startup businesses to take a loan for their business expansion at a reasonable rate of interest. The loan amount to be given to the business totally depends on its eligibility and feasibility. The maximum limit for the loan was ₹1 Crore.
In collaboration with Small Industries Development Bank of India, the government is running this scheme. Micro and Small enterprise involved in manufacturing businesses can easily get the loan under this scheme.
MUDRA Loan Scheme
MUDRA stands for Micro Units Development and Refinance Agency that grants loans to the non-cooperative small business sector. The business loan granted under this scheme doesn’t need any collateral security. You can get the following loans under this scheme
- Shishu Scheme – Get a loan for startup up to ₹50,000/- at a 1% rate of interest chargeable every month. The repayment period for this loan is 5 years.
- Kishore Scheme – The loan range is between ₹50,000/- to ₹5 Lacs.
- Tarun Scheme – The loan range of this loan is between ₹5 Lacs to ₹10 Lacs.
Standup India Scheme
Standup India loan is basically provided to the people of schedule caste and scheduled tribes for setting up greenfield enterprise. The range of the loan falls between ₹10 Lacs to ₹1 Crore. Enterprises with manufacturing, service and trading business can easily take this loan. This scheme is made for women empowerment who are members of a scheduled tribe or scheduled caste. The repayment period for this loan is 7 years and the bank grant this loan to at least one women entrepreneur.
Bank Credit Facilitation Scheme
National Small Industries Corporation has started this scheme. NSIC has made a tie-up with public and private sector banks to provide credit and loan facilities to MSMEs. The repayment period of this loan is not defined as it is decided on the basis of income. The repayment period may vary from 5 years to 7 years with a maximum limit of 11 years.
Coir Udyami Yojna
This scheme was launched by the Coir board. It only grants loan to the project-based businesses with the cost up to ₹10 Lacs. The loan amount provided by the board is 25% of the project’s cost. The working capital is financed by the cash credit facility. On the other hand, the rate of interest is negotiable and maximum tenure is of 7 years.
NABARD
National Bank of Agriculture and Rural Development has also many startup business loan. This organisation mainly provides loans to small industries in rural areas. The newly startup business of rural areas can easily apply for business loans from NABARD.
Some other Resources for Startup Business Loan without Collateral
Line of Credit
Line of credit is a financial help provided by many banking and non-banking institutions. In this scheme, you can take only that amount of loan which is required for the business rather than taking the full amount. The bank will only charge the interest on the loan amount used in the business instead of changing on the full loan. This facility is helpful startup business facing difficulties in financial management.
Small Business Credit Cards
Another source for startup business financing is a small business credit cards . If you are having a good CIBIL score then you can apply for business credit cards . These cards have some unique features that can help you in cost-cutting. You can save a lot of money that can be used later on, in business expansion.
Machinery Financing
You can use the equipment financing facility given by many dealers instead of taking the loan. The machinery financing will help you to set up your machinery and start producing goods without paying the full amount. Once the business starts generating profits, you can clear the debt of the machinery. You can get this facility if you have a good relationship with the seller.
External Fundings
There are some private lenders and businessmen as well lends money to a startup business with an innovative idea. If your idea is unique then you can ask the private lenders for loans. Although the rate of interest might be high, they’ll not ask for the business vintage period if your idea is innovative. So, you can get a startup business loan form them as well.
