Last Updated on December 31, 2021 by rida
An increasing difficulty faced by most start-ups is the scanty availability of funding options. New businesses lack sales volume, business vintage, and credibility to avail of funds from most Collateral Free Loans providers.
Added to that is a lack of assets to pledge. To solve this crisis, several public and private bodies have come up with startup business loans, the best of which have been discussed here in detail.
Table of Contents
Leading Collateral free loans/Commercial Loan Schemes
Following are some of the most viable commercial loan schemes for MSMEs and start-ups.
Credit Guarantee Fund Scheme/ Collateral Free Loans
In collaboration with Small Industries Development Bank of India (SIDBI), the Government of India launched the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) in 2000. This was to make viable funds up to Rs.1 crore available to existing as well as new businesses. Finances are distributed among qualifying applicants via Member Lending institutions. Note that for loan amounts exceeding Rs.10 lakh, borrowers need to pledge some form of asset procured via this funding scheme.
MUDRA loan/ a Collateral Free Loans
The Micro Units Development and Refinance Agency (MUDRA) loan is one of India’s government business loan schemes introduced to “fund the unfunded”. Under this scheme, any non-farm and non-corporate enterprises can avail funds depending on their category of progress as explained below.
- SHISHU: Offers start-up business loans up to Rs.50,000.
- KISHORE: Companies in the early stages of development can avail anywhere between Rs.50,000 to Rs.5 lakh.
- TARUN: Eligible enterprises willing to expand business operations can benefit from loans worth Rs.5-10 lakh under this scheme
Market Development Assistance Scheme for small businesses
The Ministry of Commerce set up the Market Development Assistance Scheme as a means to provide local businesses with increased exposure and recognition. This is done by providing financial assistance with registration for international trade fairs and foreign study tours. This way, MSMEs can gain access to a wider marketplace by participating in international exhibitions and demonstrating their potential.
This is another government-aided scheme to aid in the production growth of small, micro, and medium enterprises. This scheme assists MSMEs by providing start-up business loans under 2 categories, as stated below.
- Raw material assistance scheme: Under this scheme, entrepreneurs can get funds for both local and imported raw materials.
- Market assistance scheme: With this financing, MSMEs can boost their products and services’ market value which, in turn, will help in enhancing competitiveness.
Also Read : How to connect bluetooth headphones to xbox one
Coir Udyami Yojana (CUY)
This is a credit-linked subsidy scheme designed to help individuals and businesses establish coir manufacturing units with an optimum project cost of Rs.10 lakh. This scheme is a combination of loan and subsidy that also funds one cycle of working capital worth up to 25% of the project cost. Willing individuals can avail one by applying on the official portal or any coir board or any specified institution.
Stand-up India scheme
This scheme was launched by the government, especially to provide a business loan to women entrepreneurs, and the ones belonging to scheduled castes and scheduled tribes. This scheme also has special provisions for business women belonging to backward castes. Eligible individuals can avail of financial assistance ranging from Rs.10 lakh to Rs.1 crore to start businesses in service, trading, or manufacturing sectors.
Business loans from NBFCs
A major issue with government-aided schemes is that individuals might have to wait for a long time to get funds transferred to their accounts, given the large volume of applications. A faster alternative to such collateral free loans is commercial loans offered by notable NBFCs like Bajaj Finserv. Loan-seekers can get such means of credit approved within as early as 24 hours. Additionally, these financial products come with a load of other benefits such as:
- Adequate loan amount: Applicants can avail of loans up to Rs. 45 lakh depending on their eligibility. They can utilise acquired credit to finance all sorts of business requirements, short-term or for extensive expenses. Borrowers can refer to a businessman’s guide to working capital loans to determine their required loan amount.
- Online access: Individuals can visit the lender’s website to apply for start-up business loans with just a few clicks.
- Flexible requirements: These financial products come with relaxed eligibility criteria and minimal documentation.
Additionally, Bajaj Finserv also provides pre-approved offers on certain types of credit, including business finance, personal loans and credit cards to speed up loan disbursal even further. Individuals can submit name and contact details to check their pre-approved offer before applying.
Note that availing of a certain loan amount under any of the above schemes depends on the borrower’s eligibility and business details. Consider all requirements before proceeding.