Is your business eligible for government start-up fund? A-Z of Small business loan

Is your business eligible for government start-up fund? A-Z of Small business loan

A start up loan especially a government backed loan is one of the promising ways to go ahead when you think of starting a business of your own. They are available to individuals looking for opportunities to grow their existing business or start a new business. Before you start off, there are few points to be borne in mind:-

-Documentation and plan: first, ensure that all your documents are in place and have all the details necessary. Have a detailed and solid business plan that can give an overview of the key objectives growth potential and returns expected

-Creditworthiness: have a good credit history and raise your credit worthiness as your past and current financial behaviour can Impact the score. while a good credit score stands good merit a poor credit history will not prevent you from securing a start-up loan but will have certain impediments along the way 

 -Personal Affordability and Funds: give a clear estimate of the funds required and your plan to repay and provide details of how you plan to utilise these funds to grow the business or to scale up

Options available for securing a Small Business loan

-Approaching a bank or financial institution

-Possibility of an NBFC or a state-run financial institution

-Crowd Funding or approaching angel investors or venture capitalists

One of the most conventional methods of the above is-approaching banks or Government approved/ State-run Financial institution.

Check whether you meet the eligibility criteria

Government loan schemes have their set of requirements to be fulfilled while the commercial banks are more open to lending. Several of the institutions have fast-track method to ensure that the loans come through without much hassle. Government start-up loans such as MSME 59, MUDRA loans, Credit Guarantee Fund for Micro and Small businesses provide faster loans to the deserving individuals. Check the eligibility criteria before applying for the government loans-

-You should be running a business for a period not exceeding 6 months preceding the date of application

-The minimum turnover of the business should be ₹ 90,000 or more for the past 3 months

-The business should not be registered under a trust, or an NGO or any charitable institution

-The business should not be categorized under the list of blacklisted/excluded businesses under for SBA Finance

-The place of business should not be in the negative location territory/zone

Some of the options available for Government-approved small business loans include-

Credit Link Capital Subsidy Scheme– for technological upgradation and to revamp the processes of businesses like marketing, supply chain, manufacturing.

National Small Industries Corporation Subsidy-provides assistance for procuring raw material and marketing assistance. Businesses qualifying under the EM Part II (Optional)/Udyog Aadhar Memorandum (UAM) are eligible to register

Credit Guarantee Fund Government Business Loan Scheme– collateral-free loans for MSEs and can be availed at any commercial bank and regional rural banks.

MUDRA Business loan– aims to provide funding for the unfunded and provide financial support in form of low-cost credit. The scheme has three subheads:

-Shishu loans upto Rs. 50,000

-Kishor Loans upto Rs. 5,00,000

-Tarun loans up to Rs. 10,00,000

Small businesses in a typical urban setup such as gyms, preschools and nursery, schools, fitness classes, transport operators, retail shops require capital to cover a gamut of needs. SBA government loans for MSMEs and SMEs provide loans which cover most of the needs, so long as they fulfil the required conditions of the loan. The key advantages here are-

-fast sanction and less paperwork

-possibility of collateral-free loan

-online application for quicker sanction

On the flip side,

-they come with a host of prerequisites

-conditions to be fulfilled

-may take lesser time for approval and longer time for sanction

-Start-up loans without collateral have higher rate of interest

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