Starting a business is one of the most thrilling choices you can make—but it takes more than enthusiasm and a good idea. From buying equipment and hiring your initial staff to funding day-to-day operations, every phase of the startup process requires money. That’s where startup business loans are available. These loans are particularly tailored to finance new and early-stage companies that might not yet have years of financial records or significant cash reserves.
In this blog, we will look at the 10 best startup business loans that can assist you in starting your business with confidence. Whether you need speedy online approvals, convenient repayment terms, low rates, or no collateral requirements, we’ve compiled reputable lenders that provide a variety of solutions for your purposes. So if you’re ready to move your business concept from plan to reality, this guide will assist you in securing the right financing partner to make it possible.
What are Startup Business Loans in India?
Startup business loans in India are specifically crafted financial products intended to finance new and early-stage entrepreneurs. Because startups typically do not have a proven financial history or collateral, these loans are designed to offer convenient capital with lenient terms.
Offered by banks, NBFCs, and through various government-backed schemes like MUDRA, Stand-Up India, and SIDBI’s Fund of Funds under the Startup India initiative, these loans cater to a wide range of needs, including working capital, infrastructure setup, product development, marketing, and hiring.
Depending on the scheme or lender, the loans can be collateral-free, come with subsidized interest rates, and offer longer repayment tenures. The primary aim of such loans is to promote innovation, employment, and entrepreneurship in the nation by alleviating financial hurdles for emerging enterprises.
Eligibility Criteria for Startup Business Loans in India
If you’re a startup founder or aspiring entrepreneur, here’s what most banks, NBFCs (Non-Banking Financial Companies), and government schemes look for when evaluating your loan application:
1. Business Age
- Your startup should usually be less than 5 years old.
- For some government schemes (like Startup India), the business should be new and not formed by splitting or reconstructing an existing business.
2. Company Type
- Must be registered as Private Limited Company, LLP, or Partnership Firm.
- Certain schemes also permit Sole Proprietorships, particularly under MSME-based loans.
3. Annual Turnover
- Certain lenders ask your startup to have a certain minimum turnover, but others (particularly under government schemes) care more about your business model and growth prospects.
4. Business Plan
There must be a clear, strong business plan. This consists of:
- Nature of business
- Revenue model
- Market opportunity
- Financial projections
- Usage of the loan
5. Founder's Background
- Your educational background, industry experience, and even your credit record (CIBIL score) count.
- A CIBIL score of 700 or higher is usually regarded as good.
6. Collateral
- Some startup loans are collateral-free (such as MUDRA loans or SIDBI schemes).
- However, conventional business loans from banks may still need assets as security.
Documentation required for Startup Business Loans
Here’s a list of documents usually needed:
- PAN Card – Proof of identity of the applicant as well as the business.
- Aadhaar Card – Applicant’s primary address and proof of identity.
- Passport/Voter ID/Driving License – Secondary proof of identity or address.
- Business Registration Certificate – This validates the legal existence of your business.
- GST Registration Certificate – Proof of your tax compliance as well as business turnover.
- Udyam Registration – This typifies your startup as an MSME under government records.
- DPIIT Recognition Certificate – Verifies your startup under the Startup India initiative.
- Bank Statements (Last 6–12 Months) – Reflects your business’s financial activity and health.
- Income Tax Returns (1–2 Years) – Verifies income stability and tax payment.
- Audited Financial Statements – Illustrates business profitability and expenditure.
- Business Plan / Project Report – Details business objectives, projections, and loan use.
- Proof of Business Address – Verifies the address of your operations.
- Partnership Deed / MOA & AOA / LLP Agreement – A Legal document that outlines company structure and ownership.
- Collateral Documents (if relevant) – Documentation to corroborate the value of assets pledged for secured loans.
- NOC from Co-owners (if relevant) – Permissions to utilize collateral shared.
Why Choose Startup Loans?
- Easy Access to Capital: Startup loans give quick and necessary capital to entrepreneurs to start or grow their businesses. Whether for buying inventory, marketing, hiring staff, or product development, these loans give the financial boost required to make an idea a reality.
- Collateral-Free Financing: Most government programs, such as MUDRA and CGTMSE, provide loans to startups without collateral. This is a huge benefit for young entrepreneurs who may not have big assets to give as collateral, making finance more inclusive and accessible.
- Low Interest & Easy Repayment: Startup loans, particularly those under government schemes, have low interest rates, generally lower than personal or business loans. They are even available for repayment over flexible time periods of 1 to 7 years, enabling firms to better control cash flow.
- Saves Equity: Unlike equity financing, loans do not ask you to surrender ownership of your business. This implies that you can retain complete control over your business decisions and future earnings while still accessing the capital you require to expand.
- Enhances Credit & Credibility: Paying your business loan on time will help build a solid business credit profile. This not only increases your ability to secure larger loans in the future but it also enhances your standing with banks, investors, and suppliers.
List of 10 Best Startup Business Loans in India
1. Startup India Seed Fund Scheme (SISFS)
Startup India Seed Fund Scheme (SISFS) is a scheme initiated by the Government of India to offer vital financial support to early-stage startups.
Introduced to fill the funding gap during the initial stages of a startup’s growth, SISFS funds startups for activities such as proof of concept, developing prototypes, conducting product trials, entering the market, and commercialization.
Features:
- Funding Support: Funding of up to ₹20 lakh for prototype creation and ₹50 lakh for market launch through convertible instruments.
- Eligibility: Startups recognized by DPIIT that have been incorporated in the past 2 years.
- Disbursement through Incubators: Funds are disbursed through nominated incubators, which also provide mentoring and handholding.
Best for:
- Tech Startups
- Product-Based Startups
- Deep-Tech Startups
- R&D-Based Startups
- Scalable Business Models
- Social Impact Startups
Website: https://seedfund.startupindia.gov.in/
2. Udyogini Scheme
The Udyogini Scheme, launched by the Government of Karnataka during 1997-1998 and revised during 2004-2005, seeks to empower women by encouraging self-reliance and economic independence through self-employment, mainly in trade and services.
The scheme offers subsidies on loans arranged by the Karnataka State Women’s Development Corporation, which allows women to engage in various business ventures and micro-enterprises. These loans are to be disbursed by financial institutions like commercial banks, district cooperative banks, and Regional Rural Banks (RRBs).
Features:
- Women-Focused: Aims to empower women by promoting self-employment and entrepreneurship.
- Loan with Subsidy: This offers loans with subsidies through recognized banks and financial institutions.
- Subsidy Limit: Subsidy up to ₹1 lakh depending on the category (SC/ST, widow, disabled, etc.).
- Eligibility Criteria: Women aged 18–55 years with family income up to ₹1.5 lakh per annum (relaxed for special categories).
- Supports Multiple Trades: Encourages business in sectors like tailoring, saree embroidery, bookbinding, chalk/crayon making, etc.
Best for:
- Tailoring Units
- Saree Embroidery
- Bookbinding
- Chalk and Crayon Making
- Beauty Parlors
- Home-based Food Products
Website: https://www.myscheme.gov.in/schemes/us
3. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which was set up jointly by the Government of India and the Small Industries Development Bank of India (SIDBI), focuses on increasing credit availability in the micro and small enterprise (MSE) sector.
By providing credit guarantees to Member Lending Institutions (MLIs), CGTMSE urges these institutions to extend collateral-free loans to MSEs, thus allowing new and existing enterprises to gain financial access
Features:
- Collateral-Free Loans: These offer credit guarantees for loans up to ₹5 crore without requiring collateral or third-party guarantees.
- Applicable to MSEs: Specifically designed for Micro and Small Enterprises, including startups.
- Wide Eligibility: Covers businesses such as sole proprietorships, partnerships, LLPs, and private limited companies.
- Support for New & Existing Units: Available for both newly established and already operating enterprises.
- Guarantee Coverage: Up to 75% – 85% of the loan amount is covered under the guarantee (up to 85% for women, SC/ST, and special category units).
Best for:
- Manufacturing activities
- Service activities
- Retail trade
- Wholesale trade
- Educational institutions
Website: https://www.cgtmse.in/
4. Coir Udyami Yojana
Coir Udyami Yojana is a credit-linked subsidy scheme launched by the Ministry of Micro, Small, and Medium Enterprises to encourage the setting up of coir units in India.
The scheme funds projects with a maximum cost of ₹10 lakh, along with one cycle of working capital up to 25% of the project cost; however, the working capital is not subsidized. Under this scheme, the financial pattern includes a 5% contribution of the beneficiary, 55% credit from the bank, and a 40% subsidy on the project cost.
Features:
- Credit-Linked Subsidy Scheme: CUY is a government-backed scheme that offers financial assistance for setting up coir-based industries.
- Support for New Entrepreneurs: Aimed at promoting first-generation entrepreneurs in the coir sector.
- Subsidy Structure: 40% of the project cost is provided as a government subsidy.
- Bank Credit Facility: 55% of the project cost is covered through bank loans.
- Low Personal Investment: The Beneficiary needs to invest only 5% of the total project cost.
- Working Capital Provision: Working capital up to 25% of the project cost is allowed but not eligible for subsidy.
- Project Cost Limit: The Maximum project cost eligible under the scheme is ₹10 lakh (excluding working capital).
Best for:
- Fibre Extraction
- Yarn Spinning
- Mat and Matting Production
- Rope Making
- Handicrafts
- Geotextiles Production
- Pith Processing
- Brush and Broom Making
Website: https://www.myscheme.gov.in/schemes/cuy
5. Small Industries Development Bank of India (SIDBI)
The Small Industries Development Bank of India (SIDBI), which commenced its operations on April 2, 1990, under an Act of Parliament, is the core financial institution mandated to promote, finance, and develop the Micro, Small, and Medium Enterprises (MSME) sector of India. Based in Lucknow, Uttar Pradesh, SIDBI provides a variety of financial products and services, such as direct financing to MSMEs, refinance facilities to banks and financial institutions, and assistance to microfinance institutions.
Apart from lending, SIDBI is instrumental in executing government initiatives like the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) and the Production Linked Incentive (PLI) schemes for the telecom and pharma sectors.
Features:
- MSME Focus: Dedicated to the promotion, financing, and development of the Micro, Small, and Medium Enterprises sector.
- Financial Services: It offers direct loans, equity support, and microfinance solutions to MSMEs.
- Refinancing Support: Provides refinancing to banks, NBFCs, and other financial institutions for on-lending to MSMEs.
- Government Scheme Implementation: Implements major schemes like CGTMSE (Credit Guarantee) and PLI (Production Linked Incentives).
- Entrepreneurship Development: Promotes entrepreneurship, innovation, and skill development through various programs.
- Green and Sustainable Financing: Supports eco-friendly initiatives like energy efficiency and green financing for MSMEs.
- Digital Solutions: Operates digital lending platforms and tools to simplify MSME credit access.
Best for:
- Manufacturing Units
- Service-Based Enterprises
- Startups and Innovation-Driven Businesses
- Textile and Handloom Industries
- Food Processing Units
- Renewable Energy and Green Businesses
- IT and Tech-Based MSMEs
- Export-Oriented MSMEs
- Agro-Based and Agri-Tech Enterprises
Website: https://www.sidbi.in/en/
6. Efficient Capital Labs (ECL)
Efficient Capital Labs (ECL) is a financial services company that specializes in offering non-dilutive growth capital solutions for AI and SaaS startups internationally.
Established in 2022, ECL seeks to make capital more democratic by providing between $2 million and $2.5 million in growth financing without the use of equity, warrants, or collateral, allowing founders to have complete ownership of their businesses.
The company operates on numerous currencies, such as USD, INR, and SGD, enabling easy funding for companies doing business across various markets.
Features:
- Non-Dilutive Funding: Offers up to $2.5 million in financing without requiring equity, warrants, or ownership dilution.
- Revenue-Based Financing: Provides capital based on a company’s annual recurring revenue (ARR), with repayment tied to future earnings.
- Rapid Disbursement: Enables fast access to funds, often within as little as three days.
- Global Accessibility: Offers funding in multiple currencies such as USD, INR, and SGD, supporting cross-border operations.
- Founder Empowerment: Focuses on democratizing access to growth capital for B2B SaaS founders using tech-driven financing models.
Best for:
- AI Startups
- SaaS (Software as a Service) Companies
- Tech-Enabled Platforms
- Subscription-Based Businesses
- Cloud-Based Software Providers
- B2B Software Solutions
- Data Analytics and ML Companies
- Fintech Startups
Website: https://www.ecaplabs.com/
7. Pradhan Mantri Mudra Yojana (PMMY)
The Pradhan Mantri Mudra Yojana (PMMY) is a Government of India flagship program with the objective of extending credit up to ₹10 lakh for income-producing micro-enterprises in the non-farm sector, including manufacturing, trade, and services sectors, and allied agricultural activities like poultry, dairy, and bee-keeping.
The scheme classifies loans into three segments: Shishu (up to ₹50,000), Kishore (above ₹50,000 and up to ₹5 lakh), and Tarun (above ₹5 lakh and up to ₹10 lakh), covering the varied financing requirements of micro and small units.
Features:
- Loan Categories: It offers loans under three categories – Shishu (up to ₹50,000), Kishore (₹50,001 to ₹5 lakh), and Tarun (₹5 lakh to ₹10 lakh).
- No Collateral Required: Loans are collateral-free, reducing entry barriers for small borrowers.
- Wide Accessibility: Available through commercial banks, RRBs, small finance banks, MFIs, and NBFCs.
- Low-Interest Rates: Competitive interest rates are based on the applicant’s profile and the lender’s policy.
- Flexible Usage: Can be used for a wide range of non-farm income-generating activities like manufacturing, trading, and services.
- Target Beneficiaries: Focuses on micro and small enterprises, especially new and first-time entrepreneurs.
- Government Backing: Operated under MUDRA (Micro Units Development and Refinance Agency) Ltd., a government initiative.
- Support for Women & SC/ST: This encourages entrepreneurship among women and marginalized communities with special provisions.
Best for:
- Small retail shops
- Street vendors and hawkers
- Beauty parlours and salons
- Tailoring units
- Repair and service centers (mobile, electronics, etc.)
- Food stalls and small restaurants
- Transportation (e-rickshaws, taxis, goods vehicles)
- Dairy and poultry farming
- Handicrafts and artisan units
Website: https://www.myscheme.gov.in/schemes/pmmy#benefits
8. ICICI Direct
ICICI Direct provides customized SME/MSME loans to fund varied financial requirements of small and medium-sized enterprises in India. The loans offer flexible financing solutions for various requirements such as working capital needs, acquisition of commercial assets and equipment, and business growth projects.
A significant aspect is the facility for collateral-free loans of up to ₹2 crore under the scheme of Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to provide improved access to capital without the burden of security. Eligible recipients are sole proprietorships, partnership firms, private limited companies, and public limited companies.
Features:
- Collateral-Free Loans: No security or collateral is required for availing loans.
- Flexible Loan Amount: Loan range from ₹50,000 up to ₹2 crore based on business need.
- Easy Repayment Tenure: Repayment period from 12 to 60 months for flexible EMIs.
- Quick Disbursal: Fast loan processing and quick access to funds.
- Minimal Documentation: Simplified paperwork for easy loan application.
- Versatile Usage: Funds can be used for working capital, machinery, or expansion.
- Dedicated Support: Relationship manager assistance throughout the loan journey.
Best for:
- Export-Import Businesses
- Service Providers (e.g., IT, logistics, education)
- Construction and Infrastructure Firms
- Transport and Logistics Companies
- Pharmaceutical and Healthcare Units
- Food Processing and Packaging Units
- Textile and Garment Businesses
Website: https://www.icicidirect.com/loans/sme-msme-loan
9. Stand-Up India Scheme
The Stand-Up India Scheme, initiated by the Government of India on April 5, 2016, is designed to encourage entrepreneurship by women and by SC and ST individuals.
The scheme provides bank loans between ₹10 lakh and ₹1 crore to at least one SC/ST borrower or one-woman borrower per bank branch for setting up greenfield projects in manufacturing, services, or trading activities. Greenfield enterprise is used to describe the initial attempt of the beneficiary in the given industry.
The scheme offers complete support through handholding facilities, pre-loan training, facilitating loan approval and disbursement, factoring, marketing, and other business support services.
Features:
- Nature of Loan: Composite loan (inclusive of term loan and working capital) between ₹10 lakh and ₹1 crore.
- Loan Size: The loan amount ranges from ₹10 lakh to ₹1 crore.
- Interest Rate: The interest rate would be the lowest applicable rate of the bank for that category, not to exceed (MCLR + 3% + Tenor Premium).
- Security: In addition to primary security, the loan may be secured by collateral security or a guarantee of Credit Guarantee Scheme for Stand-Up India Loans (CGSSI) as decided by the banks.
- Repayment: The loan is repayable in up to 7 years with a maximum moratorium period of 18 months.
- Working Capital: For drawal of working capital up to ₹10 lakh, the same may be sanctioned by way of overdraft. Rupay debit card to be issued for convenience of the borrower. Working capital limit above ₹10 lakh to be sanctioned by way of Cash Credit limit.
- Margin Money: The scheme envisages 25% margin money which can be provided in convergence with eligible Central/State schemes. The borrower shall bring in a minimum of 10% of the project cost as own contribution.
Best for:
- Beauty Parlours and Salons
- Textile and Garment Shops
- Food Processing Businesses
- Small Scale Trading Enterprises
- Service Centers (e.g., auto, electronics)
- Agro-based Industries
- Handicrafts and Artisanal Businesses
- Printing and Packaging Units
- Healthcare and Diagnostic Labs
Website: https://www.standupmitra.in/
10. Credit Linked Capital Subsidy Scheme
Credit Linked Capital Subsidy Scheme (CLCSS), launched by the Ministry of Micro, Small & Medium Enterprises (MSME), is a scheme to promote technology upgradation in Micro and Small Enterprises (MSEs) through the availability of a capital subsidy.
As per this scheme, selected MSEs can receive a 15% upfront capital subsidy, limited to ₹15 lakh, on the acquisition of approved new plant and machinery.
This program promotes MSEs to incorporate established and refined technologies, thereby improving their competitiveness and productivity. The scheme subsidizes 51 products/sub-sectors, hence benefiting a wide range of industries.
Features:
- Objective: Provide a 15% capital subsidy to Micro and Small Enterprises (MSEs) for technology upgradation via new plant and machinery.
- Eligibility: Available to MSEs availing institutional credit for approved machinery. Additional benefits for SC/ST, women entrepreneurs, and enterprises in special regions.
- Subsidy Cap: Up to ₹15 lakh on institutional credit of up to ₹1 crore.
- Special Variant (SCLCSS): Offers 25% subsidy (up to ₹25 lakh) specifically for SC/ST MSEs without sector limitations.
- Application: MSEs must apply through their lending institutions, which process the claims with designated agencies.
Best for:
- Textile and Garment Manufacturing
- Food and Agro Processing Units
- Plastic and Rubber Product Manufacturing
- Auto Components Manufacturing
- Pharmaceutical and Chemical Units
- Engineering and Fabrication Workshops
- Electrical and Electronics Assembly Units
- Leather and Footwear Units
- Printing and Packaging Services
- Tool Rooms and Die Casting Units
Website: https://clcss.dcmsme.gov.in/
How to Choose the Best Startup Business Loan in India?
Selecting the ideal startup business loan lender can significantly impact your company’s development and steadiness. Here’s a checklist that will guide your choice:
Understand Your Needs
Before selecting a lender, define your own funding needs. Determine how much money you require, how you will use it—e.g., equipment, inventory, marketing, or payroll—and how soon you need the money. Additionally, consider your desired payback period, short-term or long-term, since this will dictate the type of loan that works best for your startup.
Compare Loan Types
Banks and other financial institutions provide many kinds of loans that are geared to various business requirements. Term loans give a lump sum of money that’s paid back with interest over a period, and lines of credit allow you to borrow as necessary up to an amount. Invoice financing enables you to borrow based on outstanding invoices, and equipment financing is reserved for buying equipment for your business. The correct loan type should match your need.
Check Eligibility Requirements
Every lender has specific criteria for approval. Common requirements include a minimum operational period (typically six months), a certain level of annual or monthly revenue, and sometimes a minimum credit score. Make sure your business meets these qualifications before applying, and be aware of any geographical restrictions on their services.
Evaluate Interest Rates and Fees
It’s important to see past the headline interest rate and look at the entire Annual Percentage Rate (APR), including everything that comes with the loan. Be on the lookout for sneaky fees such as application fees, early payoff charges, origination fees, or monthly maintenance fees. The top lenders disclose their rates clearly.
Evaluate Lender Reputation
Check the reputation of the lender by reading customer reviews on websites such as Trustpilot, Google Reviews, or the Better Business Bureau (BBB). Check for indications of good customer support, responsiveness, and transparency in loan terms. A reputable lender will have good feedback and a track record of fair dealings.
Search for Flexibility
A good lender will provide flexible repayment terms that suit your cash flow. Verify if you can repay early without charges, and if there are provisions for raising your loan amount as your business expands. Repayment flexibility and loan structure can assist you in managing finances during uncertain times.
Prioritize Speed and Simplicity
For startups, instant access to cash can be imperative. Most new-age lenders have online applications that require minimal documentation and can get loans approved in 24–48 hours. Selecting a lender that offers speed and convenience can save you from unnecessary wait times and get you back on track to focusing on your business.
Conclusion
In summary, selecting the best startup business loans can be a game-changer for your business’s early development and long-term success. The 10 top startup business loans we’ve identified provide a variety of flexible financing options that suit various business requirements, whether you need fast funding, low interest rates, or no-collateral financing.
By knowing your financial objectives and comparing what each lender provides, you can discover the ideal funding partner to drive your path—from concept to successful business. With the appropriate loan on board, you’ll be more effective at managing cash flow, taking advantage of opportunities, and growing with assurance.
FAQs
Can I obtain a business loan with no credit history?
Yes, there are lenders that provide loans based on business performance, cash flow, or expected revenue rather than personal credit history—particularly online lenders and revenue-based financing platforms.
How much money can a startup raise?
Funding levels differ based on the lender, your revenue, credit profile, and business model. Some lenders provide loans ranging from ₹50,000 to several crores for qualifying startups.
Do I need collateral to get a startup loan?
Not always. Many modern lenders, particularly online lenders, provide unsecured business loans, which don’t need tangible collateral. Traditional banks might still require assets or personal guarantees, though.
Will a startup loan hurt my credit score?
Yes, in case of a hard credit check by a lender or failure to make repayments. But timely repayment of a loan can also enhance your credit score in the long run.
What are the documents needed for a startup business loan?
Typical documents needed are your business plan, proof of identity, proof of address, bank statements, financial projections, and registration documents. Tax returns or GST filings may also be required by some lenders.
