Starting a business is not easy, and it needs proper planning and arranging funds. Many businesses fail initially or later due to a lack of funds. Also, new entrepreneurs need help with having financial resources. Initially, you may have a shortage of money when planning a business and may need help figuring out where to get a startup business loan. The good news is that it is possible to start a business even if you don’t have money and can’t arrange the collateral for a loan. For this, you can consider collateral-free schemes for loans in India. This blog will discuss getting a startup business loan with no money.
Best Schemes For Startup Business Loan Without Collateral
Many government and private schemes can help you get a startup business loan without collateral. For your information, we have listed some of the best schemes to get a loan from banks and other financial institutions for business owners who don’t have money or funds.
1. The Credit Guarantee Scheme
It is a Government of India program or scheme that provides a loan to micro and small enterprises. Firstly, entrepreneurs can get a loan under the scheme even if they don’t have money, property, or other assets to show as collateral. Startups can take advantage of this scheme and get funding for their business. Secondly, you can apply for a startup business loan for a new startup under the program. In addition, you can get a loan for an existing business. The money you get under the loan helps you run your business. Also, you can use the loan to expand your business.
Another critical point is that the loan’s interest rate under this scheme is affordable. However, business owners must check the eligibility criteria before applying for a loan under the Credit Guarantee Scheme. Also, you need to check which banks and financial institutions are eligible to grant a loan. As far as the scheme is concerned, it can be the best for a micro or a small-scale business. In addition, you can get a loan if you want to open a manufacturing enterprise.
However, some categories of businesses are not included under the Credit Guarantee scheme. That includes businesses in the agriculture and retail sector. Also, educational organizations and self-help groups cannot apply for this scheme.
2. MUDRA Loan Scheme
If you are wondering how to get a startup business loan with no money, we can reassure you that you can apply for the MUDRA scheme. Interestingly, the scheme was started in 2015 and helps you get a loan if you need finance for a non-cooperative small business. In addition, micro units can apply for the loan. The Micro Units Development and Refinance Agency give you funding under the program as a loan.
As far as the objective of this scheme is concerned, the program’s motto or aim is “Fund the Unfunded.” Notably, the system is the best for small shopkeepers, artisans, repair centres, vegetable sellers, and mechanics. Moreover, there is no need for collateral or any money to get a loan. The MUDRA helps you get the following types of loans.
- Shishu Scheme – This scheme helps you get up to 50,000 Rs. as a startup business loan. Moreover, you have to pay an interest of one per cent monthly. Also, you need to repay the entire loan in five years.
- Kishore Scheme – This scheme helps you get a 50,000 to 5 Lacs Rs loan.
- Tarun Scheme – This scheme grants you a loan of Rs. 5-10 Lacs.
3. Standup India Scheme
People who come under SC/ST can get a loan for a greenfield enterprise under this scheme. SIDBI heads the Standup India program. You can get a startup business loan of up to Rs. 10 Lacs to Rs. 1 Crore if you apply for this scheme. Moreover, this is the best loan for the manufacturing and service sectors. In addition, businesses involved in trading can get a loan quickly.
The scheme aims to help women of the SC/ST category start their businesses and become independent. Furthermore, the loan is given to a minimum of one woman entrepreneur. Another critical point of the scheme is that you can repay the loan in seven years. In addition, the system gives a maximum moratorium duration of one and a half years.
4. Bank Credit Facilitation Scheme
It is the best scheme for MSMEs needing a business loan. National Small Industries Corporation (NSIC) offers loans to Micro, Small, and Medium Enterprises or MSMEs under this program. Also, you can repay the total amount of the loan in 5-7 years duration. However, the repayment duration can be extended to eleven years if needed.
5. NABARD Loan
The National Bank of Agriculture and Rural Development offers a loan to startups and businesses in villages and rural areas in India. If a business owner lives in a rural area and wants to launch a startup or establish an industry, they can get a loan from NABARD. It is the best loan for new startups.
6. Market Development Assistance Scheme for MSMEs
MSMEs or Micro, Small, and Medium Enterprises that need funding and finance for international exhibitions can get a loan under this scheme. Also, the system offers loans for study tours in foreign countries and trade fairs organized for the MSME sector. However, you must remember that only the businesses registered under DI/DIC get a loan for attending foreign exhibitions and fairs.
Other Resources to Get a Startup Business Loan Without Collateral
Business owners who want to know how to get a startup business loan with no money must consider other funding sources. Apart from the government and other loan schemes we have listed above, there are many other financial resources from which you can get money to start your business.
1. Line of Credit
Banking and non-banking financial organizations give financial aid called a Line of Credit. The fact is that you don’t get the total loan amount in this. Rather than that, the scheme gives you a loan only for your business needs. Notably, you have to pay interest only on the money you use for your business. Furthermore, it is the best loan for a startup that is struggling with financial management in its business.
2. Microfinance Loans
It is a type of loan that offers collateral-free funding to small-scale businesses in backward and underdeveloped regions of India. Business owners who don’t have traditional financing options can apply for microfinance loans. Furthermore, this category offers three types of loans: microloans, micro-savings, and micro insurance. For your information, if anyone has a low income but wants to start a business, they can get a microfinance loan. Moreover, the loan is given for a short duration for a small amount of money, not large amounts. However, a loan you take under this category has a high-interest rate.
3. Small Business Credit Cards
You can get a loan quickly with a small business credit card. However, it would be best if you remembered that your CIBIL score should be good. The excellent point is that the small business credit card option helps save money. In addition, the money you save can help you expand your business.
4. Machinery Financing
If a business owner wants funds to buy costly machinery for their factory or industry but doesn’t want to take a loan, they can get money through this scheme. The financing option is best if you don’t have any funds but need to buy equipment. With this in mind, you need to check which dealers in your area or online offer the option of equipment financing and apply for the same.
Furthermore, you can buy machinery without full payment to the dealer. Instead, you can make the full payment as the business starts getting profits. At the same time, the dealer will give you a loan according to the cost of the machines that you want to buy. The fact is that they will not consider your business revenue. You don’t need collateral in such loans. The machinery you buy itself serves as the guarantee.
5. External Fundings
These are the loans that you get from private lenders. At the same time, lenders are ready to provide financial aid to business owners who have a business idea with a scope to become successful in the future. However, the lenders may charge a high-interest rate from you if you apply for a loan to them.
How To Get A Startup Business Loan With No Revenue
If you want to launch your business but need help getting a startup business loan with no money, you must understand the procedure of getting a loan from a bank. We have explained the process of applying for a loan below. Follow all the steps correctly if you want your loan application to succeed.
1. Understand Lender Requirements
Firstly, people who plan to apply for a startup business loan that doesn’t ask for money or property as collateral must understand the terms and conditions of the lending bank. Remember that lending financial institutions have their needs and scrutinize the borrower before granting a loan. In addition, they may check your credit history and ability to repay the loan. Moreover, the banks may check if you have collateral and whether your business is worthy and has scope for success. Know all these terms and conditions of banks before you apply for a loan.
2. Analyze Your Financial Resources And Assets
Secondly, you need to make a business plan and a financial budget for your business, clearly explaining the source of revenue and profit in the future. Also, you should make a list of assets and resources you have. That may include liquid money, shares, bonds, investments, cars, or property. Moreover, the lending bank may need to determine how you will pay the interest.
3. Provide A Personal Guarantee
In addition, business owners may need to provide a duly signed personal guarantee to the lending institution. This may put your property and savings you show as a guarantee in danger in case you don’t repay the money you have taken from the bank.
4. Analyze You Ability To Repay The Loan
You must choose a loan that is affordable and one that you can repay. Don’t go for a loan that you can’t pay back. Furthermore, the lending bank may consider your business risky and hesitate to give the loan if you need more money. Remember to check the rate of interest and the duration of repayment before you apply for a loan.
5. Submit Your Application To The Bank
Lastly, if you have followed all the above steps, you must prepare the required documents and submit them to a bank. Fill out the application form and enter the personal and business details asked in it. Finally, the bank will check your application, and if they are satisfied, they will approve your loan.
In conclusion, startups must be calm about getting funds to start their business. Various resources and schemes offer loans to business owners who need more money to pay as collateral to a bank. We hope you got some ideas to get a startup business loan with no money. Do consider the schemes of loans we have listed in this blog and apply for the same. New entrepreneurs can be reassured that they can get a startup business loan even if they lack funds and confidently launch their businesses.