Any funds loaned specifically to startups that have little or no history is known as a startup business loan. Using these loans a startup can grow and expand their business extensively.
Since the startup ecosystem is budding today, more and more organizations and governments are encouraging the need to provide funding to help such enterprises. Nowadays a startup has many different options to procure funding – microloans, business credit cards, business grants, crowdfunding, P2P lending etc.
The government has launched the Pradhan Mantri Mudra (Micro Units Development & Refinance Agency) Yojana scheme to provide finance to startups. Under this scheme small businesses can borrow collateral free loans from banks up to Rs.10,00,000 for non-farming income generating activities. The loans aren’t provided by Mudra directly but facilitated through different banks, NBFCs and financial institutions.
The MUDRA Bank grants three types of loans, based on the stage of growth and financial requirements of the startup. These 3 loan types are
Shishu: For startups that require a loan within ₹50,000
Kishor: For startups that require a loan above ₹50,000 and within ₹500,000
Tarun: For startups that require a loan of more than ₹500,000 and up to ₹10,00,000
To be eligible to apply for a startup business loan in India under the Pradhan Mantri Mudra Yojana one must meet all the below criteria-
In a nutshell the MUDRA Loan can be borrowed for various purposes which provides income generation and employment creation in manufacturing, services, retail and agriculture allied activities.
As a startup you must follow these 5 steps to be able to avail loans under the MUDRA Yojana –
Step 1: Procure the scheme application form from the nearest bank associated with the scheme. To know this list of banks just visit the MUDRA portal.
Step 2: After procuring the form, you must fill up the application form with all the details and submit it along with documents required.
Step 3: You will need to provide documents that serve as an identity proof, residential proof, proof of business address, proof of category of business along with your photograph. Also note that depending on the type of loan you need additional documents may be required.
Step 4: The banks does not charge a processing fee for loans under this scheme.
Step 5: Upon loan approval you will receive a MUDRA Card, which is functionally similar to a credit card.
Other than loans under the MUDRA scheme there are many other loan schemes for startups from the government. But before applying for any of these loans you must remember the following pointers –
To stay updated with all the government schemes for startups in India you must register under Startup India. This is a flagship initiative of the Government of India, intended to build a strong ecosystem conducive for the growth of startup businesses and to drive sustainable economic growth and generate large scale employment opportunities. The Government through this initiative aims to empower startups to grow through innovation and design.
Other than loan schemes this portal also has information about several incubation centers, easier patent filing, tax exemptions, ease of setting-up of business, INR 10,000 Crore corpus fund, and a faster exit mechanism, among others. To know more just register on their portal
Step 1: Log on to the Startup India portal
Step 2: Enter your legal entity
Step 3: Enter your business registration number
Step 4: Enter the registration date
Step 5: Enter your PAN number
Step 6: Enter the address, pin code and state
Step 7: Enter details of authorized representatives
Step 8: Enter the details of partners
Step 9: Upload the required document (self-attested)
Step 10: File the registration certificate of the company