Best Banks for Small Business Startup Loans in India

The startup culture has taken over the world. More and more people are showing interest to start their businesses. The recent growth that the startup world has experienced is immense and it is not going to stop anytime soon. However, beginning a startup means needing one of the most significant things and that is investment or funds. Without finance, a business cannot happen.

People who launched their businesses search for finance as they need funds to grow their companies. Businesses make money by borrowing cash. So, there are banks that willingly provide loans to small businesses. In this article, we will talk about some of the banks from which you can take loans and their eligibility criteria, and the documents that are needed. So let's get started.

Is It an Ideal Idea to Get the Loan Offered by Bank?
HDFC Bank Business Loans
Citi Bank Business Loans
ICICI Bank Business Loans
Axis Bank Business Loans

Is It an Ideal Idea to Get the Loan Offered by Bank?

Acquiring Loans from Banks for a startup with a futuristic approach is always a good idea. Loans are regarded as a better source of capital for a gainful business than share capital as you get to have better leverage. You can enjoy a surplus of the rate of return over the interest you pay for the borrowings. To begin with a startup, you need to be very well aware of how to keep your interest rate as low as possible with maximum benefits.

Loans enhance the scope of your business by aiding you in expansion as well. On the other hand, it also acts as a catalyst to motivate you for better productivity. You can avail these advantages of acquiring startup loans-

• You can get a boost to develop an even stronger business plan.
• You can effectively manage the flow of money.
• Higher rate of return on capital.

List of Best Banks for Small Business Startup Loans

Many banks offer loans to small businesses so that entrepreneurs can fulfill their dreams of running a business. However, the most popular banks that offer loans and are favored the most are listed below, they are:

HDFC Bank Business Loans

Startups can expand their operations by obtaining additional financial assistance through HDFC bank. Every entrepreneur wants to have the least amount of documents, flexible tenures as well as low-interest rates, which you can get from HDFC.  The bank offers loans to fulfill related funding. any kinds of business requirements

Loan Amount and Tenure

• The Business loan amount is up to INR 40 Lakhs and even INR 50 Lakhs in selected places.
• Loan Tenure is 12 months to 48 months.

Eligibility

• Entrepreneurs, Proprietors, Private Ltd. Co., and Partnership Firms involved in the business of Manufacturing, Trading, or Services.
• The business has a minimum turnover of Rs. 40 lakhs.
• Individuals who have been working for at least 3 years with a minimum of 5 years of working experience in the field.
• Business involved in profit-making for the past 2 years.
• A business must have a Minimal Annual Income (ITR) of at least Rs.1.5 lakhs per year.
• The applicant must be at least 21 years when they apply for the loan, and not older than 65 when the loan's maturity.

Documentation

If you are interested in a business growth loan, then you can apply for it using the following paperwork.

1. Mandatory Documents [Sole Prop. Declaration or Certified Copy of Partnership Deed, Certified true copy of Memorandum & Articles of Association (certified by Director) & Board resolution (Original)]
2. A copy of any of the following documents as identity proof:

• Aadhaar Card
• Passport
• Voter's ID Card
• PAN Card
• Driving License

3.  A copy of any of the following documents as address proof:

• Aadhaar Card
• Passport
• Voter's ID Card
• Driving License

4.  Latest ITR along with computation of income, Balance Sheet, and Profit & Loss account for the previous 2 years, after being CA Certified/Audited.

5.  Proof of continuation (ITR/Trade license/Establishment/Sales Tax Certificate).

6.  Bank statement of the previous 6 months.

Interest Rate & Charges

• The interest range for Rack is between 10% to 22.5%.
• Loan Processing Charges - Up to 2% of the loan amount.                            NIL Processing Fees for loan facility up to ₹5 Lakhs availed by micro and small Enterprises subject to URC submission before disbursal

Benefits

• You don't have to submit any collateral or security for taking a loan from HDFC.
• The process of applications is very simple.
• Least amount of documentation.
• Doorstep service is available in this bank.
• An additional feature is access to the overdraft facility. You pay interest only on the utilized loan amount together with a credit protection plan.
• You can have the credit protection plan at a nominal price.

Citi Bank Business Loans

Citi Bank offers loans referred to as CitiBusiness that offer business loans through which startups can manage working capital efficiently. A startup can also opt for diversified MSME loan products which include working capital loans, short-term loans, long-term loans, overdrafts as well as export-import finance options too.

Citi India has transferred the ownership of its consumer business to Axis Bank starting from March 1st, 2023.

ICICI Bank Business Loans

ICICI also offers startup loans. They have come up with "iStartup 2.0', which provides a broad range of business solutions that help customers beyond their banking and business needs which can help you save time and energy, and allow you to concentrate on the essential business aspects. This program has been created to allow entrepreneurs to take advantage of loans.

If you choose to use the iStartup 2.0 which includes banking services, lots of other services are offered to you, which play an essential role in the development of your business, such as a debit card that has limits and more.

Loan Amount and Tenure

• The minimum amount for a loan is INR 50,000 and the maximum amount is INR 40 Lakhs.
• Loan Tenure is 12 months to 36 months.

Eligibility

• Loans can be given to Self Employed individuals and the age criterion is 28 years. For doctors, the age criteria are 25 years.
• The minimum turnover of the business for a no-professional has to be INR 40 Lakhs and for Professionals, it has to be INR 15 Lakhs
• The minimum profit has to be INR 2 Lakhs for self-employed and INR 1 Lakhs for non-professionals.
• One has to have a minimum 1-year relationship with ICICI Bank by having a current or saving account.

Documentation

1. Copy of PAN Card for Identity Proof.

2. A copy of any of the following documents as address proof:

• Aadhaar Card
• Passport
• Voter's ID Card
• Driving License

3. Partnership deed or certificate for Partnership business and Sole Proprietorship establishment certificate is needed.

4. Last 3 Years' Audited Financial reports that include balance, profit and loss account, tax Audit reports

5.  Bank statement for the last 6 months

Interest Rate & Charges

• For secured facilities: Up to Repo Rate +6.0 %(Non-PSL). For facilities backed by CGTMSE: Up to Repo Rate + 7.10%. The interest rate for each loan is determined based on the assessment of the business, financials, loan amount, and tenure.
• The processing fees are up to 2% (plus applicable taxes) of the facility amount.

Benefits

• Collateral or security is not needed.
• An overdraft facility is offered by the bank.
• There are numerous branches of the bank in India.
• Loan processing is quick and simple.

If you opt for iStartup 2.0, you are given the perfect solution for healthcare, IT & services, real estate, and manufacturing. In short, it may prove to be a tiny step to the big leap.

Axis Bank Business Loans

Axis Bank is among the banks that could be the right option for you. It provides the required fund as a loan for the requirement of your business. Small and micro businesses can easily apply for loans in Axis Bank.

Loan Amount and Tenure

• The loan amount is up to INR 50 Lakhs.
• The tenure is 6 to 36 months.

Eligibility

• The business must be at least 3 years old and running.
• Have a minimum annual turnover of INR 30 Lakhs.
• Individuals must be in the age group of 21 to 65 years.
• The individual has to be Indian to apply for the loan.

Documentation

1. A copy of any of the documents for identity proof is mentioned down below:

• Aadhar Card
• Passport
• Voter's ID Card
• Driving License
• Pan Card

2.  A copy of any of the documents for address proof mentioned down below:

• Passport
• Telephone Bill
• Electricity Bill
• Bank Statement with a cheque

3.  Last 2 years' Income Tax Return documents

4.  Banks Statement for the last 6 months

5.  Proof of the establishment of the business.

6.  The last 2 years' financial reports which include Profit and Loss Statement and Balance Sheet.

Interest Rate & Charges

• The interest rate is 10.99% to 21%.
• The processing fee is up to 2% of the loan amount that has been requested + Taxes applicable.

Benefits

• No collateral or security is needed.
• Least amount of documentation.
• The application process for the loan is simple.
• The tenure for the repayment is flexible.

Conclusion

The majority of entrepreneurs running businesses try to make funds on their own and invest them in their businesses and move forward. If you go back in time to those who have loans, only a few can use the money they have been granted. The issue of bank loans is a huge issue for some however the only requirement is how to utilize the facility in the right way. The startup culture is growing day by day, therefore the need for business loans is also increasing.

FAQs

Which bank is best for business loans?

The best bank for loans to startup businesses are:

• HDFC Bank Business Loans
• Citi Bank Business Loans
• ICICI Bank Business Loans
• Axis Bank Business Loans

What is a good credit score to get a business loan?

A credit score above 650 can be an excellent score to qualify for a business loan.

For a collateral-free business loan: A credit score above 700.
For a secured business loan: A credit score is 650 to 700.

How do I qualify for a business loan?

To qualify for a business loan a few requirements are needed.

• Business Credit Score.
• The annual revenue of your business.
• New Business Plan that includes forecast financial statements.
• Additional financial collateral is needed to secure the loan.

Can I take a loan from a bank for business?

Absolutely. You can get a startup company loan through a bank to begin and grow your company. The rate of interest would be contingent upon the size of your loan as well as the time frame for repayment.