Startup Business Loans: Everything you know about Bank, NBFCs Loans

What are Startup Business Loans?

A Startup Business Loan is a financial product designed to help new and emerging businesses (startups) access capital for growth and operations. Unlike equity funding, loans mean borrowers must repay the principal with interest over time. These loans can be for working capital, purchasing machinery or inventory, expanding infrastructure, product development, or other business needs. They often come from banks, NBFCs (Non-Banking Financial Companies) loan, or via government-backed schemes.

Top Banks and NBFCs Offering Business Loans for Startups in India

If you’re looking for quick, collateral-free startup business loans, several top banks and NBFCs in India provide customized options for new entrepreneurs:

1. Union Bank of India – Start-Up Loans for Entrepreneurs
   • Special scheme for startup founders.
   • Competitive interest rates and easy documentation.
   • Designed to turn business ideas into reality.
2. Axis Bank – Business Loan up to ₹75 Lakh
   • Instant online approval with minimal paperwork.
   • Flexible repayment options for new and small businesses.
3. HDFC Bank – Business Loan at Lowest Interest Rate
   • Offers up to ₹50–₹75 lakh without collateral or guarantor.
   • Ideal for traders, small businesses, and startups in expansion mode.
4. PSB Loans in 59 Minutes – For 6-Month-Old Startups
   • Quick approval under CGTMSE and MSME UDAAN schemes.
   • Loans up to ₹50 lakh for DPIIT-recognized startups.
5. Shriram Finance – Business Loans up to ₹10 Crore
   • Suitable for MSMEs, supply chain finance, and women entrepreneurs.
   • Fast online application and EMI calculator available.

Credit Guarantee Scheme for Startups (CGSS)

The government of India has introduced the Credit Guarantee Scheme for Startups (CGSS). Key features:

• Loans extended to DPIIT-recognised startups by Scheduled Commercial Banks, NBFCs, Venture Debt Funds under SEBI-registered Alternative Investment Funds are eligible.
• The guarantee cover ceiling per borrower has been raised from ₹10 crore to ₹20 crore.
• For loans up to ₹10 crore, guarantee covers 85% of amount in default; for loans above that, covers 75% of defaults.
• Annual Guarantee Fee (AGF) for startups in 27 “Champion Sectors” under “Make in India” is reduced from 2% to 1% per annum.

Some usage statistics (as of 31 October 2024) under CGSS:

Why a Startup May Require a Loan Instead of (Or Along With) Government Funding?

experts thoughts

When a business is starting and growing, it requires funds. At such times the startup owner looking for funding. instead of government or investor funding, often chooses to apply for a loan to run the Startups level business. Even though they might get a slightly higher interest or may not receive subsidies, loans are more accessible through banks/NBFCs at rates around 10.5% in many cases. We at StartupFlora provide proper guidance and easy access options for startups for business loans. We have tie-ups with 50+ banks and MSMEs, and also provide options and guidance for government funding. For early-stage startups, we guide startup owners.

• Number of startups for which loans were guaranteed: 235
• Value of loans guaranteed: ₹555.24 crore
• Women-led startups among these: 18 startups, with guaranteed loan value of ₹24.60 crore

(The numbers you provided “Guaranteed loans: 260, Total value: ₹604.16 crore, Number of startups: 209, Loans to women-led startups: 17, Value of loans to women-led startups: ₹27.04 crore” We might mention both for context.)

Expanded reasoning:

1. Speed and control: Loans allow founders to retain full ownership/control, unlike equity funding where investors take part ownership. For founders who want to maintain control, loans are preferable.
2. Predictability: Loan repayment schedules are more predictable than the uncertainties in raising investment (which depends on pitching, valuations, external market conditions).
3. Availability: Sometimes government grants/subsidies have strict eligibility, delays, or heavy documentation. Loans, particularly via schemes like CGSS, can be more accessible.
4. Flexibility: Loans can be used for a variety of purposes working capital, assets, etc., depending on terms. Sometimes grants are tied to very specific activities or milestones.
5. Cost: While interest is to be paid, with good terms and guarantee schemes the cost of loans can be reasonable. Also, some startups may not be ready or able to comply with investor demands for dilution, or may not want to give up equity early.
6. Credit history & leverage: Using debt wisely helps build creditworthiness. Also, leveraging loans can magnify growth if returns exceed interest costs.

So, while government funding is very valuable, often for early-stage needs, or for grants/prototype development, loans play a complementary or sometimes primary role.

At StartupFlora, we aim to help startups navigate both paths loans and grants/funding by providing guidance, helping with documentation, connecting with 50+ banks and MSME channels, etc.

Government Funding Schemes for Seed / Early-Stage Startups

Some of the key government schemes for seed or early stage funding in India:

How Many Startups Are Raising in India? Key Data

Some recent statistics (2025/2024/ FY data) about Indian startups:

• DPIIT recognized startups in India are around 159,157 as of early 2025.
• From 2016 to 2025, this is massive growth from ~400-500 start ups to over 1.5 lakh.
• These startups have generated over 1.6 million (16 lakh +) direct jobs since 2016.

Contribution of Startups to India’s GDP

Here are figures on how startups are contributing to India’s economy:

• From FY16 to FY23, startups contributed about 10-15% to India’s GDP growth.
• In FY23, they contributed around USD 140 billion to the Indian economy.
• The projection is that by FY30 (or by 2030), the startup ecosystem may contribute USD 1 trillion to the Indian economy.

Summary & Takeaways

• The CGSS provides startup loans backed by government guarantee, easing access to collateral-free debt up to large sums (₹20 crore).
• Loans are often chosen alongside or instead of government funding because of flexibility, speed, and lesser dilution, even if interest is involved.
• There are several grants and seed-funding schemes, which are ideal in early proof of concept / prototype phases.
• The startup ecosystem in India has grown dramatically over the past decade, generating jobs and contributing significantly to GDP. Projections are optimistic.

FAQs

Q1. What is a Startup Business Loan?
A Startup Business Loan is financial support offered by banks or NBFCs to help new businesses meet working capital, infrastructure, or expansion needs.

Q2. Which banks offer startup business loans in India?
Top banks like Union Bank of India, Axis Bank, HDFC Bank, PSB Loans, and Shriram Finance offer startup business loans with flexible terms and minimal paperwork.

Q3. What is the Credit Guarantee Scheme for Startups (CGSS)?
CGSS is a government scheme that provides collateral-free loans to DPIIT-recognized startups with guarantee coverage up to ₹20 crore.