Supreme Court rejects Airtel’s entertainment tax plea, upholds Rs- 585 crore liability
09 Jun, 2025
By Online Legal India
Published On 09 Jun 2025
Category Startup
Bank loans play a key role in helping startups grow by providing the funds needed for setup, operations, and expansion. Many new businesses struggle to raise capital in the early stages due to limited credit history or lack of assets. Accessing the right loan at the right time can ease financial pressure and support long-term success. In this blog, you will learn about the Bank Loan for Startup Business, including different types of bank loans available to startups, eligibility criteria, key documentation, top lending institutions, guidance on how to apply, and more.
Understanding bank loans is crucial for startups aiming to secure funding in India. These loans can be categorized into various types, each serving different business needs.
Here are the types of bank loans for Startup Business in India:
A term loan is a fixed amount that a bank gives for a defined time. The borrower repays the loan in regular monthly installments with interest. The bank decides the interest rate and tenure based on the loan amount and risk profile. Startups use this loan to buy property, build infrastructure, or expand their operations. It is suitable for long-term investments that increase business capacity.
A working capital loan helps a startup manage its day-to-day expenses. It covers costs such as employee salaries, rent, bills, raw materials, and short-term obligations. This type of loan maintains smooth business operations when regular income falls short. Banks decide the loan amount based on the business's turnover, current assets, and repayment capacity.
Equipment financing supports startups that need to buy tools, machines, or technology for their business. The loan covers the cost of essential assets without using business capital. The machinery serves as collateral for the loan. Banks approve this loan after reviewing the equipment's value and the borrower’s repayment record. This loan is common in manufacturing, food processing, and construction industries.
An overdraft facility allows a business to withdraw more funds than the balance in its account. The bank sets a withdrawal limit based on the business’s creditworthiness and account history. Interest is charged only on the extra amount used, not the full limit. This facility helps in sudden cash shortages or delays in receiving payments. It offers flexible short-term funds without needing a formal loan.
These loan types offer structured solutions for startups at different phases of growth. They allow startups to manage both operational and capital needs with the right financial support.
Startups in India seeking bank loans must meet specific eligibility criteria to access various government-backed schemes and financial support. Below are the eligibility criteria to obtain a bank loan for a startup business:
Startups must obtain recognition from the Department for Promotion of Industry and Internal Trade (DPIIT) to qualify for most government loan schemes. The entity should register as a Private Limited Company, Registered Partnership Firm, or Limited Liability Partnership. It must not be older than 10 years from the incorporation date. The total annual turnover must remain below Rs. 100 crore in every financial year since the company was established. The startup should be an original entity, not formed by splitting or reconstructing an existing business. The business must focus on innovation, development, or scalable models with strong potential for employment and wealth creation.
Under the CGSS, startups can secure credit guarantees up to Rs. 20 crore without collateral. Eligibility requires DPIIT recognition. The startup must maintain good financial health and should not be classified as a Non-Performing Asset (NPA) under RBI rules. The lending institution must certify the startup's eligibility to receive the guarantee cover under this scheme.
This scheme offers financial support for early-stage startups to develop a proof of concept, prototypes, product trials, market entry, and commercialization. Eligible startups must have DPIIT recognition and be incorporated for less than two years at the time of application. The business idea should aim to develop products or services with market potential, scalability, and viable commercialization plans.
Startups registered as Micro or Small Enterprises (MSEs) can access collateral-free loans up to Rs. 5 crore under CGTMSE. Eligibility requires registration on the Udyam Registration Portal. The scheme applies to new and existing micro and small enterprises engaged in manufacturing or service sectors, excluding agriculture. It enables startups to secure credit without pledging assets.
There are various top banks offering Startup loans in India. Some are mentioned below:
Bank of India provides the "Star Start-Up Scheme" designed specifically for new businesses. This scheme offers term loans and working capital facilities to meet various financial needs. The application process is straightforward with minimal paperwork, helping startups access funds quickly. Interest rates remain competitive, making it an affordable option for early-stage companies. To qualify, startups must have recognition from the Department for Promotion of Industry and Internal Trade (DPIIT).
SBI offers various loan options suitable for Micro, Small, and Medium Enterprises (MSMEs), including startups. The loans start from ?10 lakh, enabling startups to meet their capital requirements. The bank provides flexible repayment plans tailored to business cash flows. Interest rates begin at 10.30% per annum, which varies according to the applicant’s profile. SBI requires startups to meet its criteria concerning business age and turnover before sanctioning loans.
Axis Bank offers business loans with flexible terms suited to startups. Interest rates range from 11.50% to 19% per annum based on creditworthiness. The bank emphasizes quick loan processing and minimal documentation to support ease of access. Eligible startups must demonstrate a sound business plan and maintain a good credit record to receive approval.
HDFC Bank provides business loans tailored for startups needing financial support. The interest rates start at 10.50% per annum. Loan amounts and repayment tenures remain flexible to suit individual business needs. The bank allows startups to apply online, simplifying the borrowing process. Eligibility depends on the startup’s financial stability and business potential.
ICICI Bank offers loan products aimed at startups with viable business models. Interest rates start at 16% per annum and vary with the applicant's financial background. The bank ensures a quick approval process to help startups access funds without delay. It customizes loan solutions to match specific business requirements.
These banks provide diverse loan options that cater to various funding needs of startups. Startups should approach these banks directly for the most accurate details and choose loans that fit their growth plans.
Below are the government schemes supporting bank loans for startup businesses:
This scheme provides startups with loans without requiring collateral. It offers a credit guarantee of up to Rs. 20 crore for loans given through approved banks, NBFCs, and venture debt funds. The scheme helps startups secure funding even if they lack assets to pledge. Lending institutions take the guarantee, reducing their risk and encouraging more loans to startups.
This scheme supports startups at early stages such as product development and market entry. Startups receive financial help through government-recognized incubators, which evaluate their business ideas and recommend funding. The aim is to enable startups to develop concepts, test products, and prepare for commercial launch.
This scheme targets entrepreneurs from Scheduled Castes, Scheduled Tribes, and women. It offers loans between Rs. 10 lakh and Rs. 1 crore to start new enterprises in manufacturing, services, or trading. The scheme ensures that each bank branch supports at least one SC/ST and one woman entrepreneur. It promotes inclusion and helps these groups access formal credit.
This scheme offers collateral-free loans up to Rs. 5 crore to micro and small businesses. The government and lending institutions share the risk of these loans. Enterprises registered under the Udyam Registration system qualify for this benefit. This scheme helps small businesses access working capital and term loans without providing security.
Udyam Registration is an official process introduced by the Indian government to register micro, small, and medium enterprises (MSMEs). It replaces previous registration systems to make compliance easier. Registered MSMEs get access to benefits such as government subsidies, credit facilities, and loan schemes including CGTMSE. Registration helps startups and small businesses avail financial and non-financial support from the government.
These schemes work together to make funding accessible to startups and small enterprises in India. Entrepreneurs can leverage these programs to overcome financial barriers and grow their businesses confidently.
Below is the list of documents required to apply for a Bank Loan for a Startup Business:
Certificate of Incorporation, Partnership Deed, GST Registration Certificate, or Shop & Establishment Certificate.
A detailed plan outlining your business model, objectives, market analysis, and financial projections.
Trade License, Sales Tax Certificate, or other relevant documents indicating the ongoing nature of the business.
Here is a step-by-step process to apply for a bank Loan for a Startup business:
Step 1: Obtain DPIIT Recognition
Startups must get recognition from the Department for Promotion of Industry and Internal Trade (DPIIT) to access many government-backed loan schemes. This recognition confirms that the business is a genuine startup working on innovative products or scalable models. The company should not be older than ten years and must not exceed Rs. 100 crore in annual turnover. The startup must be an original entity, not created through the division or reconstruction of an existing business.
Step 2: Prepare Essential Documentation
Startups need to collect and organize important documents for the loan application. These include identity and address proofs of the business owners, company registration certificates, tax filings, bank statements, and a clear business plan. A well-documented application helps banks verify the authenticity and potential of the startup. Accurate and updated documents ensure a smooth evaluation process.
Step 3: Choose the Appropriate Loan Scheme
Startups should select the loan type that fits their needs. Term loans suit businesses that want to invest in infrastructure or expand operations. Working capital loans support daily expenses. Equipment financing targets machinery purchases. Overdraft facilities help manage short-term cash flow gaps. Additionally, government schemes offer collateral-free loans to reduce financial risks for startups.
Step 4: Approach Eligible Financial Institutions
Startups must contact banks or financial companies that participate in government loan schemes. Scheduled commercial banks and registered Non-Banking Financial Companies (NBFCs) provide various loan products under government-backed programs. Selecting an institution registered under the scheme increases the chances of loan approval and simplifies the process.
Step 5: Submit the Loan Application
After selecting a lender, startups complete the loan application form and attach the required documents. Some banks provide online portals for application submission, making the process convenient. Accuracy in filling out the form and attaching all necessary papers ensures no delays in processing.
Step 6: Await Evaluation and Approval
Lenders review the startup’s credit history, financial status, business plan, and eligibility under the loan scheme. They verify whether the startup meets all criteria and assess the risk involved in lending. After careful examination, banks decide on loan approval and communicate the terms and disbursement details.
Step 7: Utilize the Loan Responsibly
Once the loan amount is disbursed, startups must use funds strictly according to the approved plan. Proper use and timely repayment build trust with lenders and improve creditworthiness. Maintaining clear financial records helps in managing repayments and aids future loan applications.
Here are the key benefits of securing a bank loan for a startup:
Startups that receive DPIIT recognition can apply for collateral-free loans. The Credit Guarantee Scheme for Startups (CGSS) allows eligible startups to secure loans up to Rs. 20 crore without pledging assets. Scheduled commercial banks and NBFCs provide this support. The Indian government offers this guarantee to reduce the financial burden on new businesses.
When a startup chooses debt funding through bank loans, it does not have to part with ownership or equity. The founders retain full control over the business. Unlike venture capital, banks do not seek shares in the business. This helps maintain long-term decision-making authority and ownership benefits.
Interest paid on bank loans qualifies as a deductible business expense under the Income Tax Act. This reduces the taxable income of the startup. As a result, the effective tax liability decreases. Startups can improve their cash flow and reinvest the savings into operations.
Banks offer loans with fixed repayment terms. Startups receive a clear schedule with defined interest rates and monthly installments. This structured plan helps founders manage financial planning. Predictable repayments also reduce financial stress and improve discipline in fund allocation.
When a startup repays its bank loan on time, it builds a positive credit history. A good credit score helps secure larger loans in the future. Lenders trust businesses that demonstrate financial responsibility. A strong credit profile also improves credibility with vendors and investors.
The Indian government runs schemes like the Startup India Seed Fund Scheme (SISFS). Under this scheme, eligible startups receive early-stage financial assistance for product development, testing, and market entry. These funds complement bank loans and reduce the initial capital requirement.
Bank loans for startups do not restrict the end use of funds. Startups can use the money for purchasing raw materials, building infrastructure, hiring employees, or launching products. This flexibility helps businesses respond to market demands and invest in areas that support growth.
Conclusion
Bank loans play a vital role in helping startups grow and achieve long-term success. It is important for founders to prepare carefully, understand loan terms, and research available options before applying. Making the right choice in financial partners can make a big difference in managing funds and achieving business goals. A well-informed decision reduces financial risks and strengthens the foundation of a startup’s journey. If you have any queries about applying for a bank loan for your business, contact Online Legal India to get assistance.
By Online Legal India
Published On 09 Jun 2025
Category Startup
Bank loans play a key role in helping startups grow by providing the funds needed for setup, operations, and expansion. Many new businesses struggle to raise capital in the early stages due to limited credit history or lack of assets. Accessing the right loan at the right time can ease financial pressure and support long-term success. In this blog, you will learn about the Bank Loan for Startup Business, including different types of bank loans available to startups, eligibility criteria, key documentation, top lending institutions, guidance on how to apply, and more.
Understanding bank loans is crucial for startups aiming to secure funding in India. These loans can be categorized into various types, each serving different business needs.
Here are the types of bank loans for Startup Business in India:
A term loan is a fixed amount that a bank gives for a defined time. The borrower repays the loan in regular monthly installments with interest. The bank decides the interest rate and tenure based on the loan amount and risk profile. Startups use this loan to buy property, build infrastructure, or expand their operations. It is suitable for long-term investments that increase business capacity.
A working capital loan helps a startup manage its day-to-day expenses. It covers costs such as employee salaries, rent, bills, raw materials, and short-term obligations. This type of loan maintains smooth business operations when regular income falls short. Banks decide the loan amount based on the business's turnover, current assets, and repayment capacity.
Equipment financing supports startups that need to buy tools, machines, or technology for their business. The loan covers the cost of essential assets without using business capital. The machinery serves as collateral for the loan. Banks approve this loan after reviewing the equipment's value and the borrower’s repayment record. This loan is common in manufacturing, food processing, and construction industries.
An overdraft facility allows a business to withdraw more funds than the balance in its account. The bank sets a withdrawal limit based on the business’s creditworthiness and account history. Interest is charged only on the extra amount used, not the full limit. This facility helps in sudden cash shortages or delays in receiving payments. It offers flexible short-term funds without needing a formal loan.
These loan types offer structured solutions for startups at different phases of growth. They allow startups to manage both operational and capital needs with the right financial support.
Startups in India seeking bank loans must meet specific eligibility criteria to access various government-backed schemes and financial support. Below are the eligibility criteria to obtain a bank loan for a startup business:
Startups must obtain recognition from the Department for Promotion of Industry and Internal Trade (DPIIT) to qualify for most government loan schemes. The entity should register as a Private Limited Company, Registered Partnership Firm, or Limited Liability Partnership. It must not be older than 10 years from the incorporation date. The total annual turnover must remain below Rs. 100 crore in every financial year since the company was established. The startup should be an original entity, not formed by splitting or reconstructing an existing business. The business must focus on innovation, development, or scalable models with strong potential for employment and wealth creation.
Under the CGSS, startups can secure credit guarantees up to Rs. 20 crore without collateral. Eligibility requires DPIIT recognition. The startup must maintain good financial health and should not be classified as a Non-Performing Asset (NPA) under RBI rules. The lending institution must certify the startup's eligibility to receive the guarantee cover under this scheme.
This scheme offers financial support for early-stage startups to develop a proof of concept, prototypes, product trials, market entry, and commercialization. Eligible startups must have DPIIT recognition and be incorporated for less than two years at the time of application. The business idea should aim to develop products or services with market potential, scalability, and viable commercialization plans.
Startups registered as Micro or Small Enterprises (MSEs) can access collateral-free loans up to Rs. 5 crore under CGTMSE. Eligibility requires registration on the Udyam Registration Portal. The scheme applies to new and existing micro and small enterprises engaged in manufacturing or service sectors, excluding agriculture. It enables startups to secure credit without pledging assets.
There are various top banks offering Startup loans in India. Some are mentioned below:
Bank of India provides the "Star Start-Up Scheme" designed specifically for new businesses. This scheme offers term loans and working capital facilities to meet various financial needs. The application process is straightforward with minimal paperwork, helping startups access funds quickly. Interest rates remain competitive, making it an affordable option for early-stage companies. To qualify, startups must have recognition from the Department for Promotion of Industry and Internal Trade (DPIIT).
SBI offers various loan options suitable for Micro, Small, and Medium Enterprises (MSMEs), including startups. The loans start from ?10 lakh, enabling startups to meet their capital requirements. The bank provides flexible repayment plans tailored to business cash flows. Interest rates begin at 10.30% per annum, which varies according to the applicant’s profile. SBI requires startups to meet its criteria concerning business age and turnover before sanctioning loans.
Axis Bank offers business loans with flexible terms suited to startups. Interest rates range from 11.50% to 19% per annum based on creditworthiness. The bank emphasizes quick loan processing and minimal documentation to support ease of access. Eligible startups must demonstrate a sound business plan and maintain a good credit record to receive approval.
HDFC Bank provides business loans tailored for startups needing financial support. The interest rates start at 10.50% per annum. Loan amounts and repayment tenures remain flexible to suit individual business needs. The bank allows startups to apply online, simplifying the borrowing process. Eligibility depends on the startup’s financial stability and business potential.
ICICI Bank offers loan products aimed at startups with viable business models. Interest rates start at 16% per annum and vary with the applicant's financial background. The bank ensures a quick approval process to help startups access funds without delay. It customizes loan solutions to match specific business requirements.
These banks provide diverse loan options that cater to various funding needs of startups. Startups should approach these banks directly for the most accurate details and choose loans that fit their growth plans.
Below are the government schemes supporting bank loans for startup businesses:
This scheme provides startups with loans without requiring collateral. It offers a credit guarantee of up to Rs. 20 crore for loans given through approved banks, NBFCs, and venture debt funds. The scheme helps startups secure funding even if they lack assets to pledge. Lending institutions take the guarantee, reducing their risk and encouraging more loans to startups.
This scheme supports startups at early stages such as product development and market entry. Startups receive financial help through government-recognized incubators, which evaluate their business ideas and recommend funding. The aim is to enable startups to develop concepts, test products, and prepare for commercial launch.
This scheme targets entrepreneurs from Scheduled Castes, Scheduled Tribes, and women. It offers loans between Rs. 10 lakh and Rs. 1 crore to start new enterprises in manufacturing, services, or trading. The scheme ensures that each bank branch supports at least one SC/ST and one woman entrepreneur. It promotes inclusion and helps these groups access formal credit.
This scheme offers collateral-free loans up to Rs. 5 crore to micro and small businesses. The government and lending institutions share the risk of these loans. Enterprises registered under the Udyam Registration system qualify for this benefit. This scheme helps small businesses access working capital and term loans without providing security.
Udyam Registration is an official process introduced by the Indian government to register micro, small, and medium enterprises (MSMEs). It replaces previous registration systems to make compliance easier. Registered MSMEs get access to benefits such as government subsidies, credit facilities, and loan schemes including CGTMSE. Registration helps startups and small businesses avail financial and non-financial support from the government.
These schemes work together to make funding accessible to startups and small enterprises in India. Entrepreneurs can leverage these programs to overcome financial barriers and grow their businesses confidently.
Below is the list of documents required to apply for a Bank Loan for a Startup Business:
Certificate of Incorporation, Partnership Deed, GST Registration Certificate, or Shop & Establishment Certificate.
A detailed plan outlining your business model, objectives, market analysis, and financial projections.
Trade License, Sales Tax Certificate, or other relevant documents indicating the ongoing nature of the business.
Here is a step-by-step process to apply for a bank Loan for a Startup business:
Step 1: Obtain DPIIT Recognition
Startups must get recognition from the Department for Promotion of Industry and Internal Trade (DPIIT) to access many government-backed loan schemes. This recognition confirms that the business is a genuine startup working on innovative products or scalable models. The company should not be older than ten years and must not exceed Rs. 100 crore in annual turnover. The startup must be an original entity, not created through the division or reconstruction of an existing business.
Step 2: Prepare Essential Documentation
Startups need to collect and organize important documents for the loan application. These include identity and address proofs of the business owners, company registration certificates, tax filings, bank statements, and a clear business plan. A well-documented application helps banks verify the authenticity and potential of the startup. Accurate and updated documents ensure a smooth evaluation process.
Step 3: Choose the Appropriate Loan Scheme
Startups should select the loan type that fits their needs. Term loans suit businesses that want to invest in infrastructure or expand operations. Working capital loans support daily expenses. Equipment financing targets machinery purchases. Overdraft facilities help manage short-term cash flow gaps. Additionally, government schemes offer collateral-free loans to reduce financial risks for startups.
Step 4: Approach Eligible Financial Institutions
Startups must contact banks or financial companies that participate in government loan schemes. Scheduled commercial banks and registered Non-Banking Financial Companies (NBFCs) provide various loan products under government-backed programs. Selecting an institution registered under the scheme increases the chances of loan approval and simplifies the process.
Step 5: Submit the Loan Application
After selecting a lender, startups complete the loan application form and attach the required documents. Some banks provide online portals for application submission, making the process convenient. Accuracy in filling out the form and attaching all necessary papers ensures no delays in processing.
Step 6: Await Evaluation and Approval
Lenders review the startup’s credit history, financial status, business plan, and eligibility under the loan scheme. They verify whether the startup meets all criteria and assess the risk involved in lending. After careful examination, banks decide on loan approval and communicate the terms and disbursement details.
Step 7: Utilize the Loan Responsibly
Once the loan amount is disbursed, startups must use funds strictly according to the approved plan. Proper use and timely repayment build trust with lenders and improve creditworthiness. Maintaining clear financial records helps in managing repayments and aids future loan applications.
Here are the key benefits of securing a bank loan for a startup:
Startups that receive DPIIT recognition can apply for collateral-free loans. The Credit Guarantee Scheme for Startups (CGSS) allows eligible startups to secure loans up to Rs. 20 crore without pledging assets. Scheduled commercial banks and NBFCs provide this support. The Indian government offers this guarantee to reduce the financial burden on new businesses.
When a startup chooses debt funding through bank loans, it does not have to part with ownership or equity. The founders retain full control over the business. Unlike venture capital, banks do not seek shares in the business. This helps maintain long-term decision-making authority and ownership benefits.
Interest paid on bank loans qualifies as a deductible business expense under the Income Tax Act. This reduces the taxable income of the startup. As a result, the effective tax liability decreases. Startups can improve their cash flow and reinvest the savings into operations.
Banks offer loans with fixed repayment terms. Startups receive a clear schedule with defined interest rates and monthly installments. This structured plan helps founders manage financial planning. Predictable repayments also reduce financial stress and improve discipline in fund allocation.
When a startup repays its bank loan on time, it builds a positive credit history. A good credit score helps secure larger loans in the future. Lenders trust businesses that demonstrate financial responsibility. A strong credit profile also improves credibility with vendors and investors.
The Indian government runs schemes like the Startup India Seed Fund Scheme (SISFS). Under this scheme, eligible startups receive early-stage financial assistance for product development, testing, and market entry. These funds complement bank loans and reduce the initial capital requirement.
Bank loans for startups do not restrict the end use of funds. Startups can use the money for purchasing raw materials, building infrastructure, hiring employees, or launching products. This flexibility helps businesses respond to market demands and invest in areas that support growth.
Conclusion
Bank loans play a vital role in helping startups grow and achieve long-term success. It is important for founders to prepare carefully, understand loan terms, and research available options before applying. Making the right choice in financial partners can make a big difference in managing funds and achieving business goals. A well-informed decision reduces financial risks and strengthens the foundation of a startup’s journey. If you have any queries about applying for a bank loan for your business, contact Online Legal India to get assistance.
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