Know Best Small Business Loans for Startups in 2024

Funding is like oxygen for businesses, especially during the initial stages. It helps a business stand on its feet and get wings to fly. The startup ecosystem in India has really boomed in the recent few years courtesy of a thriving market and the Government’s business-friendly policies. Thousands of Small and Medium Enterprises (SMEs) are popping up on a regular basis. As a result, several banks and non-banking financial companies (NBFCs) have started offering business loans to feed their need for capital.

Know Best Small Business Loans for Startups in 2023

Among this vast ocean of lenders, the prominent banks include HDFC, ICICI, and SBI, while some of the leading NBFCs are Bajaj Finserv, Lendingkart, and India Infoline Limited (IIFL). IIFL business loans in particular are favoured by a large number of small business owners due to the wide variety of benefits that they offer. If you are considering taking a business loan, then you should first know its key features and the different situations they can be used in.

Key Features of a Small Business Loan

To get the best small business loan you must evaluate the different offers on these key parameters:

  • Ease of applying – Traditional banks require a lot of forms to be filled out and multiple visits to the lender’s branch office. Online lenders, on the other hand, can complete this process in a very short while. Some of the top products like the IIFL business loan are entirely paperless, requiring just the bare-minimum supporting documents, and can be conveniently applied for in a matter of few minutes. 
  • Quick processing and disbursal – In the offline mode, there is a lot of paperwork involved. This slows down the process and the final amount can take 8-10 days to be credited to your account. IIFL business loans and other similar 100% digital loan products are usually approved within 24 hours and the amount is disbursed in 2-3 working days. This speed is of added value when you need to make quick business decisions and need the funds to act on them speedily.
  • Interest rates and processing costs – The rate of interest and other costs have a direct impact on the amount you will need to eventually pay back to the lender. Many online small business loan providers offer competitive interest rates and a clear breakdown of the additional charges. Before you make your decision, be sure to compare the costs. You can also make use of a business loan EMI calculator to aid you in this process.
  • Flexible repayment terms – The borrowed money needs to be repaid within the stipulated duration and terms. Failure to do so can lead to added penalty charges as well as a negative impact on your credit score which will make it difficult for you to seek funding in the future. The longer and more flexible repayment tenors that you can get reduce the strain on your finances and allow you to repay on time. IIFL business loans allow you to choose your tenor from 12 months to 60 months.

Uses of a Small Business Loan

Now that you are more informed about the prominent features of a business loan, here are the main aspects of business where you can use them.

  • To start a new business 
  • To expand a new business organically or by making an acquisition
  • To hire staff
  • To purchase equipment and machinery
  • To buy inventory and goods for sale
  • To fund marketing campaigns and advertising activities
  • To pay off outstanding debts

Benefits of a Small Business Loan

The best small business loans for startups come with a host of benefits, such as:

  • Hassle-free and paperless application process with quick disbursals to support your business decisions
  • Being an unsecured loan, there is no requirement for any security or collateral. This also preserves the ownership of your assets
  • The interest you pay on your business loan is tax-deductible under the Income Tax Act of India. This is because only the income generated from the business is taxable and the money borrowed is not considered income. Hence, entrepreneurs can use this benefit to increase the cash flow of their business while reducing their tax liability.   

Eligibility for a Small Business Loan

As you can see, a business loan can help you in several scenarios, however, you need to be eligible to receive one. While the specific nuances can vary among different lenders, in general, here are the eligibility criteria of the best small business loans.

  • Status - Indian citizens, HUFs, Propiertorships, Partner firms, Private or Public Ltd. companies,  limited liability partnerships, etc.
  • Age - For individuals: 18 to 65 yrs, For businesses: minimum 2 years old. 
  • Credit Score - 650 or above

One of India’s top credit products, the IIFL business loan has slightly different criteria. The minimum individual age is 23 years, the preferred credit score is 700 and above, and the loan is only offered to proprietorships.

Documents Required for a Small Business Loan

  • To support your eligibility claim, the best small business providers require you to furnish the requisite documents. Typically, these include:
  • Mandatory Documents (as applicable): PAN/TAN Card, certification of incorporation, attested copy of partnership deed, sole proprietorship declaration, attested copy of memorandum & articles of association (AOA) 
  • Identity Proof Documents (one of the following): Aadhaar Card, Passport, Ration Card, Voter's ID Card, Driving Licence
  • Address Proof Documents (one of the following): Aadhaar Card, Passport, Voter's ID Card, Driving Licence
  • Income Proof Documents: ITR filing for the recent financial year, certified balance sheet, CA audited Profit & Loss account for the previous 2 years, and bank statement of the previous 6 months
  • Compliance Documents (as applicable): Certified copy of ITR, GST filings and tax certificate, registration or trade licence, proof of ownership of the establishment, etc.
Disclaimer: This is not a financial advice article and we are not recommending you pay any upfront payment for getting loans, you should do your due diligence and always go with a trusted company.