How to Get a Small Business Loan For a Startup

In this digital age, there is an abundance of ideas for new startups and young entrepreneurs are pouncing on opportunities to create potentially world-beating businesses. Even if the idea is one of a kind, what any entrepreneur actually needs is the capital to really start their business and make it grow.Now there can be a few options a new entrepreneur can look at for funding:- Seeking out venture capitalists- Thinking out of the box with something like crowdfunding.- Applying for loans with banks- Going for loans with Non Banking Financial Companies (NBFC)Even though there are a few options for funding, most of them can be very difficult to get, like venture capitalists or crowdfunding, both of which are hit or miss. So, most entrepreneurs prefer to go for loans from banks or other lending institutions. Read on to find out everything about how to get a loan for new business .

Every lender has their own set of eligibility criteria for business loans. Most banks and NBFCs have the following (or similar) eligibility criteria:- A business established and running for at least 6 months.- At least Rs. 90,000 turnover for the past three months.- The type of business should not be blacklisted or excluded in SBA finance lists- The physical location of the business should not be in the negative location list- The business itself should not be a charitable trust or NGO.

It is common knowledge that it can be quite difficult to get a loan approved from a traditional bank for a startup that is in its infancy. Banks usually prefer businesses that are established and have been running for longer periods of time. Therefore, it is prudent to try and get finance from alternative lenders or NBFCs.

The interest rate is one of the most significant factors that come into play when entrepreneurs choose lenders. This is because most startups and small businesses have almost no profits in their nascent stage, and a higher interest rate will not only increase the total repayable amount, but also skyrocket EMIs significantly. Since physical banks have higher operational costs, their interest rate will also be high.Fintech NBFCs on the other hand, can afford to have lower interest rates because their mostly online and digital functioning leads to lower operational costs. So, for a new startup, loans from Fintech NBFCs can be the best way to go as far as interest rates are concerned.

Again, the documents required for business loans can differ from lender to lender. Banks usually rely on heavy documentation mostly in physical form. ‘Online only’ NBFCs, on the other hand, are known to require only relevant business and personal documents in their digital form, making it more convenient. A list of basic documents required is given below:- Bank statement for the last 6 to 12 months.- Business registration proof like business registration certificate or GST filing.- Trade license, drug license, TIN or VAT registration.- Copy of proprietor’s Aadhar Card.- Copy of proprietor’s PAN Card as well as company’s PAN card.- Copy of the Partnership Deed (if applicable).

Thus, one of the best ways to get a small business loan for your startup is through NBFCs. The documentation is less, and the turnaround time is surprisingly fast. Most fintech NBFCs can get your loan approved in 15 days. So, what are you waiting for? Apply for your startup business loan as soon as possible!

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.