Essential Steps for Getting a Small Business Loan in India

Funds are essential for any business, new or old, and are fundamental to starting a new business.


One of the biggest hurdles that needs to be overcome when starting a new business is capital requirements and business loans are one of the oldest ways in the book to get money to create a new business. There are different types of business loans, and a relevant loan can be researched and requested depending on the needs of your business’s nature.

Some popular business loan options include working capital loans, start-up loans, prepaid loans, etc. The first step is to determine how much money you need and what is it required for. This goes into the business plan, which is evaluated during the loan approval process.

There are many ways to raise capital, of which the most prominent are:

Bank loans (many offer small business loans),

Going to non-bank financial institutions (NBFCs) for funds,

Methods such as crowdfunding, and

Investment by angel investors and venture capital agencies.

Eligibility for Startup Business Loan

A business loan can be applied for with a public or private bank, or non-banking finance company. But there are some basic licensing requirements, most common of which are:

A business should have been around for over six months,

Its minimum turnover should be ₹ 90,000 or more in the last three months,

It should not be blacklisted for raising funds, and

It should not be a trust, NGO or charity.

For a new business idea in the early stages, the best way to raise funds is through a NBFC. Most banks prefer to lend to existing small businesses instead of a new start-up. Banks want to bury the risk, and because of this, officers can complicate the documentation and evaluation process over time. NBFCs, on the other hand, are more open to investing in newer business ideas and support budding businesses than banks.

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You need to state the loan's requirement clearly. Many programmes and offerings which governments and its agencies manage help businesses to grow based on their needs and pitch.

Startup Business Loan Interest Rate 

Interest rates are one of the main problems for small business owners who sign up for business loans. Higher interest rates can increase the total amount owed and repaid in each EMI. Because small businesses are generally run with very little or no profits, business debt rates have to be a precautionary measure. So, start-ups need to find a plan, either from private finance or the government.

Steps required in obtaining a business loan

Stating a clear need for the loan

You need to state the loan’s requirement clearly. Many programmes and offerings which governments and its agencies manage help businesses to grow based on their needs and pitch.

Creating a business plan

A good business plan must include corporate goals, previous work details and project information.

Document’s organization

As the most crucial step, your documents should include financial transactions, taxes, licenses and more complex issues for getting funds and loans approved. 

Required Important Documents

The following documents and their details need to be presented before the loan sanctioning process is successful:

Company’s joint certificate or joint deed,

Business Account Bank Report,

Financial reports for the last three years, 

Profit and loss accounts, audited balance sheets, and audit reports,

Statutory regulatory reports such as income tax refund,

GST refund, VAT refund (for previous business),

PAN Business Card and other essential operations, and 

Financial forecasts for the future.

Aakash Sharma
Aakash Sharma
Aakash writes on Startup Ecosystem, Policies, Legal and Regulatory aspects of business planning. An alum of Delhi University, he is assistant editor at Dutch Uncles.

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