Top 17 Proven Ways to Get a Business Loan for Startups in India [2025 Guide]

business loan for startups in India : To those who are planning to engage in business in India, the experience can be very thrilling and at the same time scary. The financial support is usually the key driving force behind the path of a startup although passion and innovation play a pivotal role. Business loan to start up in India is what connects a small idea with the fully-functional company, as it covers all costs, starting with purchasing equipment and going beyond paying wages and promoting the company.

In the past ten years, India has transformed into one of the fastest expanding startup centers on the globe. It is this pace that has drawn the increased attention of banks, other non-banking financial companies (NBFCs), as well as government supported plans of providing financial aid to the entrepreneurs. In 2025 the list of the startup loans is bigger than any time before; however, it is crucial to find the ways in which it should be negotiated.

The overview below analyzes the major categories of startup loans, names the most popular lenders, outlines the procedure of application, states requirements, and provides guidelines on how to increase the chance of acceptance.

Types of Business Loans Available to Indian Startups

There cannot be an optimal financing instrument which exists universally, so start ups in India can opt out of various customized alternative ones:

1. Term Loans

Term loans are orthodox, having a regular repayment plan and are very much suited to companies who need a bulky sum to develop an infrastructure or pursue strategic goals.

2. Working Capital Loans

Small scale borrowing is done through working capital loans, which are meant to cover short-term liquidity needs; i.e., paying the suppliers, employees, and rent.

3. Overdraft Facility

To organisations that have a current account with a bank, an overdraft authorization can be used to withdraw more money than they have in their account thus bridging temporary shortages in their cash-flow.

4. Equipment Financing

Startups that revolve around manufacturing or technological work may acquire funding to buy equipment or equipment, and the equipment is normally the security you acquire.

5. MSME Loans

MSME loans are actually targeted at micro, small, and medium scale enterprises and startups that fall into this category often seek these loans.

Government Schemes Supporting Startup Loans

India’s government has introduced several programs to boost entrepreneurship. These schemes offer easier loan approvals, reduced interest rates, and even collateral-free funding.

1. Stand-Up India Scheme

Provides loans between ₹10 lakh and ₹1 crore for SC/ST and women entrepreneurs to set up new businesses.

2. MUDRA Yojana

Micro Units Development and Refinance Agency offers small-ticket loans up to ₹10 lakh without collateral, categorized into Shishu, Kishor, and Tarun.

3. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

Offers collateral-free credit with the government acting as a guarantor.

4. SIDBI Startup Schemes

The Small Industries Development Bank of India (SIDBI) has various funding programs for tech startups and innovative business models.

5. Startup India Initiative

Provides funding support, mentorship, and faster registration for eligible startups.

Eligibility Criteria for Business Loans for Startups

Each lender may have slightly different criteria, but most share these common requirements:

• Business Age: 6 months to 2 years minimum (some accept even newer ventures)

• Applicant Age: Usually between 21–65 years

• Credit Score: A good CIBIL score (650+) for better approval chances

• Revenue & Turnover: Some loans require a minimum monthly income

• Business Type: Private Ltd, LLP, partnership firms, and even sole proprietors can apply

• Business Plan: A well-drafted plan demonstrating feasibility and revenue potential

Required Documents for Startup Loan Applications

Before applying for a startup business loan, gather the following documents:

• KYC Documents (Aadhar, PAN, passport)

• Business Proof (GST certificate, registration documents)

• Bank Statements (last 6–12 months)

• Financial Statements (P&L, balance sheet, projections)

• Ownership Proof (rental agreement, office lease)

• Detailed Business Plan including projected cash flows

Top Banks and NBFCs Offering Startup Business Loans

In the last decade, both, the public and the private sector banks, and NBFCs have come up with a series of specialized kinds of loan products to startups. Four providers will be the most trusted ones in 2025:

1. State Bank of India (SBI)

The SME loans product offered by SBI is e-Mudra and the Stand-Up India, which are disbursed as uncollateralized loans with competitive interest rates.

2. HDFC Bank

HDFC Bank has specific solutions with respect to working-capital and term loans to start-ups wherein any start-up may avail good EMI packages.

3. ICICI Bank

ICICI Bank Insta Business Loan product has a well-known reputation of containing minimum documentations, along with quick approval.

4. Bajaj Finserv

Bajaj finserv is a NBFC that also provides business loans of up to 50 lakh and rapid disbursal without collateral.

5. Tata Capital

Tata capital company has also been the preference of startups with flexible tenure and low processing charges.

There is a considerable variance in the loan size offered, interest rates charged as well as documentation needs and these are major considerations of potential borrowers who should thoroughly examine such institutions prior to making commitments.

Interest Rates and Loan Tenure in 2025

Interest rates and loan terms have evolved in 2025 to make borrowing more startup-friendly:

Tip: Always negotiate for lower rates based on your credit score and financials.

How to Improve Your Loan Approval Chances

Getting a loan approved isn’t just about filling out a form—it’s about demonstrating your potential to repay. Here’s how to strengthen your application:

• Boost Your CIBIL Score: Maintain a score above 700 by managing personal finances wisely.

• Prepare a Solid Business Plan: Include revenue projections, market research, and risk management strategies.

• Keep Financial Records Clean: Avoid bounced cheques, unpaid bills, and tax delays.

• Choose the Right Loan Product: Tailor your loan type to your business needs.

Banks favor applicants who show stability, vision, and the ability to manage cash flow effectively.

Role of Collateral and Unsecured Loan Options

Startups without significant assets can still get loans, thanks to unsecured lending options:

• Unsecured Loans: No collateral needed but may attract higher interest rates.

• Secured Loans: Offer lower rates but require you to pledge assets like property, machinery, or FDs.

Several NBFCs and government schemes like MUDRA and CGTMSE specialize in collateral-free lending.

Online Loan Platforms and Fintech Lenders in India

Digital lending is booming in India, and fintech platforms are making it easier for startups to access quick funding.

1. Lendingkart

Offers collateral-free loans with approval in 72 hours. Ideal for small businesses.

2. Razorpay Capital

Provides working capital financing based on business transaction volumes.

3. Indifi

Caters to startups in travel, e-commerce, and restaurants with customized loan offerings.

4. FlexiLoans

Provides instant business loans with flexible repayment and paperless documentation.

These platforms use alternative data and AI to assess creditworthiness, often offering faster approvals than traditional banks.

Step-by-Step Application Process

Applying for a business loan can be broken down into the following steps:

1. Determine the Right Loan Type – Match your needs to a specific product (term, working capital, etc.).

2. Compare Lenders – Analyze interest rates, processing fees, and eligibility.

3. Gather Documents – Ensure all paperwork is complete and error-free.

4. Submit the Application – Online or at a branch, depending on the lender.

5. Loan Assessment – The lender will evaluate your credit history, business plan, and financials.

6. Approval & Disbursal – Once approved, funds are usually disbursed within a few days.

Mistakes to Avoid While Applying for Startup Loans

Avoiding common pitfalls can save your application from rejection:

• Incomplete Documentation: Missing paperwork is a red flag.

• Applying for Too Many Loans Simultaneously: Multiple hard inquiries hurt your credit score.

• Overestimating Your Loan Requirement: Only borrow what you can repay comfortably.

• Neglecting Credit History: Both business and personal credit scores matter.

• Unclear Business Plan: Vague or unrealistic projections will get your loan declined.

Business Loan vs Equity Funding for Startups

While both are valid funding options, they serve different purposes:

Startups seeking long-term strategic partners might prefer equity, while those wanting independence should consider loans.

Impact of CIBIL Score and Business Credit History

Your CIBIL score isn’t just a number—it’s your financial fingerprint:

• Score above 700 = Excellent; improves chances of approval

• Score below 650 = Risky; may lead to rejections or high interest

Also, building business credit history is vital. Use trade credit responsibly, pay vendors on time, and separate personal and business finances.

Real-Life Success Stories of Indian Startups Using Loans

Here are a few inspiring examples:

• Chai Sutta Bar: Used a small business loan from a private lender to expand their outlets across India.

• Biryani By Kilo: Raised working capital through fintech lenders, helping scale their cloud kitchen model.

• Mamaearth: Initially used bank loans before attracting equity funding, proving the power of hybrid financing.

These stories show that the right loan, at the right time, can be a launchpad for success.

Frequently Asked Questions (FAQs)

Q1. Can I get a business loan if my startup is less than a year old?
Yes, some lenders and schemes like MUDRA provide loans to even newer startups if they meet basic criteria.

Q2. What is the minimum turnover required for a startup loan?
Many lenders expect a monthly turnover of ₹1–2 lakh, though fintechs may have more flexible norms.

Q3. Can I get a loan without collateral?
Yes, through unsecured loans, NBFCs, and government schemes like CGTMSE.

Q4. Are there any startup loans for students or fresh graduates?
Yes, schemes like Stand-Up India and some fintech platforms support young entrepreneurs.

Q5. How long does it take to get a startup business loan approved?
Depending on the lender, it can take from 3 days (fintech) to 2 weeks (traditional banks).

Q6. What if I have a low credit score?
You can improve your score before applying or explore lenders that use alternative credit assessments.

Conclusion: Best Practices to Secure a Business Loan in 2025

To secure business loan to start-up business in India is no more a daunting task as it was before; however, it requires careful planning, intense research, and proper knowledge on what the lenders expect. Whether it is a normal bank, a fintech platform or even a government scheme; the chapter there will write will be based on a clear eloquent statement that shows the investment to fund the business is worthwhile.

The would-be borrower is encouraged to research applicable options, develop a convincing business proposal, as well as preserve his/her credit rating. These steps will allow a start-up to gain access to the financial capital needed to continue their advancement, tap into innovation, and have a profound impact.

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🔗 External Link Resource: SIDBI Official Website – Explore startup funding schemes and MSME initiatives.

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