India’s startup ecosystem is the third largest in the world. As of today, the Department for Promotion of Industry and Internal Trade (DPIIT) registers over 1.57 lakh startups in India that employ 17.28 individuals. Still, it has always been challenging for startups to get business funding in India.
Besides the lack of collateral, some lenders (Banks & NBFCs) follow a strict eligibility criteria that startups cannot meet. This is why the government of India offers startup business loans to bridge the credit gap. In this blog, we will understand everything you need to know about startup funding in India and the schemes available.
When startups are in their early stages, they have limited access to funds. However, the need is higher in this stage as the expenses start immediately, but revenue takes time to build. Here are all the reasons why a startup needs loans:
Suppose you run a startup in Pune that produces eco-friendly cotton fabric. You need ₹10 lakh to buy machinery and equipment. However, since you are just starting off, you don’t have collateral or assets, which makes it difficult to get a business loan from banks. This is when you can get startup funding in India via a government scheme.
The government of India understands that getting a startup bank loan is challenging. This is why it has introduced multiple financial initiatives to make credit accessible to small businesses and startups. Here are the top government schemes for startups in India:
The MUDRA scheme aims to offer startups financial support via collateral-free business loans to help them grow and scale with ease. MUDRA doesn’t lend money to startups directly, but offers loans via banks and NBFCs under PMMY.
The scheme so far has sanctioned startup MSME loans of over ₹33 lakh crore. The key benefit of the scheme is that it offers loans to startups without having to provide collateral or assets. Here are the four main components of the MUDRA loan
| Component | Loan Type |
| Shishu | Up to ₹50,000 |
| Kishore | ₹50,001 to ₹5 lakh |
| Tarun | ₹5 lakh to ₹10 lakh |
| TarunPlus | ₹10 lakh to ₹20 lakh |
CGTMSE provides collateral-free credit with a partial guarantee from the government. The scheme aims to empower small and micro enterprises (SMEs) by offering them credit up to ₹10 crore. It allows businesses to acquire loans at low interest rates without requiring collateral.
The Stand-Up India Scheme aims to promote entrepreneurship among women and members of the Scheduled Castes (SC) and the Scheduled Tribes (ST). It facilitates startup MSME loans of up to ₹1 crore for setting up greenfield projects (business built from scratch).
DMI Finance also provide business loans. To qualify, you need to meet simple eligibility criteria:
| Criteria | Requirement |
| Minimum Age | 23 years |
| Minimum Annual Income | ₹3,00,000 |
| Minimum Credit Score | 700 |
| Employment Type | Self-employed consultants, consultancy firms, registered entities |
| Business Age | At least 24 months in operation |
Documents Required
Here is the document list for a DMI Finance business loan:
Here is the step-by-step process to apply for a DMI Finance business loan:
Submitting the right documents is the first step toward getting a loan approved. With DMI Finance, the process is minimal, secure, and fully online, making it easier than ever for entrepreneurs, traders, and small business owners to access funds.
Funding is necessary at every stage of the business. However, it plays a crucial role in expanding and growing the business. At DMI Finance, we offer a low-interest business loan that does not require any collateral. Apply for a business loan of up to ₹25 to steer your business towards growth and success.
1. Can I get a startup loan without collateral?
Yes, there are schemes like CGTMSE and many NBFCs that provide collateral-free loans for startups and MSMEs.
2. What is the minimum credit score required for a startup business loan?
The minimum CIBIL score required to be eligible for different small business startup finance schemes is 700. It greatly improves your loan approval chances.
3. Are there special startup loans for women entrepreneurs?
Yes, there is Startup India and the Annapurna Scheme, which provides tailored funding for women-led businesses.
4. Can startups with no financial history still apply?
Yes, you can apply for a startup loan even with no financial history. Still, in this case, lenders will assess alternative data of your business, such as invoices, projected cash flow, or incubator partnerships.
5. What interest rates are standard for startup loans?
Generally, the interest rate ranges from 10% to 22%, which mostly depends on the type of lender, business profile, and loan size.
6. Are startup business loans tax-deductible?
Yes, the interest you will pay on a business loan is tax-deductible; you can claim the interest paid as a business expense.
7. What is the difference between a startup loan and an MSME loan?
The major difference is that startup loans are mostly for new ventures, whereas MSME loans usually serve expanding or operational businesses.
8. Are there any charges if I prepay my startup loan early?
Yes, there are some lenders who charge nominal prepayment fees if you prepay your startup loan.
9. Where can I find a list of verified lenders for startup funding in India?
You can easily find the verified lenders’ list by either visiting the portal of Startup India or checking lenders listed under SIDBI for more authentic options.
