How to Get Collateral Free Business Loans For Startups?

When an entrepreneur formulates a business plan to commence a start-up, their primary concern is raising funds for the business .Every start-up will be either of the following two:

1. Manufacturing Sector Enterprise: These start-ups will be involved in either production or processing or maintenance of goods.
2. Service Sector Enterprise: These entities will be involved in offering or supplying services.

Following are the two types of collateral-free loans for start-ups offered by the government, banks and financial institutions:

1. Terms Loans: These are long-term loans that have to be repaid within 1-10 years of procuring them. The funds from these loans are primarily used for new project launches, business growth, and expansion purposes, along with the purchase of machinery and equipment as well as the construction of buildings and offices.
2. Working Capital Loans: These are short-term loans that can be either fund-based or non-fund-based. The borrower has to repay this loan within a year of procuring it. The entrepreneur usually requires this loan for the payment of rent, remunerations of staff members, inventory stock up, etc.

Following are some of the features and advantages of collateral-free loans for start-ups:

1. The borrower does not need to pledge any collateral for the loan.
2. The repayment period for these loans is flexible and convenient.
3. Minimum documentation is required.
4. The loan amount is directly credited to the borrower’s bank account.
5. The borrower must be between 21 and 65 years of age.
6. The borrower must be an Indian citizen.
7. A feasible and practical business plan must be formulated.

The applicant has to submit the following documents for the procurement of the loan:

1. Two passport-size photographs of the applicant
2. Address and Identity Proof
3. Age and Income Proof
4. Bank Account Details, with signatures verified by the bank
5. Business Plan

Nowadays, the procurement of a start-up loan has become an easy, fast and hassle-free task. The applicant can apply for most of the schemes online, while in some cases, forms and documents have to be submitted physically at the bank or the institution. Following are the steps to procure a start-up loan:

1. Visit the official website or bank/institution for the procurement of forms.
2. Fill the forms with correct details.
3. Collect all the documents in the prescribed format.
4. Submit the form and documents online.
5. Form and documents can also be physically submitted at the nearest branch of the bank or the institution from which the loan is being taken.
6. Wait for verification of details and documents.
7. Once approved, the loan amount gets directly credited to the applicant’s bank account.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.