How to Get a Small Business Loan for a Start-up?

How to Get a Small Business Loan for a Start-up?

Working Capital is vital for any business, as it determines its initial growth and smooth flow of operations. A small business loan will help you in fulfilling your working capital requirements. It is a loan that is availed by the customer from lenders, be it banks or an NBFC. There might be different needs for each business-like:

  1. Buying machinery/equipment: When you are already owning a business that needs new machinery or equipment for enhancing its productivity.
  2. Giving a new look for your office: If you want to change your interior or infrastructure of your office.
  3. Expanding your business: When you want to open another branch or increase your business portfolio.
  4. Employing more people: Recruiting new individuals for enhancing your business productivity.
  5. Getting an online presence: When you want to have an online presence for your current business.
  6. Purchasing inventory: When you are on seasonal business, you will get a loan to stock up your inventory.

If you want to expand or are short of funds, that’s when you might benefit from a small business loan. However, before that, you need to know your requirements before opting for a loan. Having a solid business plan will help you in using those funds wisely.

So, how to get a small business loan? Know the way:

Choosing the right financing option for you:

There are a lot of options from where you can get a small business loan for your start-up like

  1. Consultancies: There are a lot of consultancies that can give you counselling and assist you with the exact loan type which might suit you. Poor choices will land you in more debt
  2. Equipment/Machinery finance: Many financing companies have separate options that provide funding for equipment or machinery purchase.
  3. Credit cards for business: It is a great alternative for a small business start-up to have a credit card; it will help them with their interim financial needs. They also offer exciting rewards and bonuses.
  4. Microloans & Micro lenders: They are non-profit organizations and community development financial institutions that offer business loans for small businesses.
  5. Finance Invoicing: If you have an invoice due from a customer, you can seek a loan based on that invoice for your working capital crunch.
  6. Friends/Family: Alternatively, you can reach out to your friends and family for your financial requirements.
  7. Personal Loans: Personal loan is a type of unsecured loan that can be used for any purpose, including your business needs. Personal loans don’t require any collateral from the borrower. Even if you have a low credit score, NBFC’s do offer personal loans if you give them collateral.
  8. Small Business Loans: Banks and Non-Banking Financial Institutions offer customized small business loans for start-ups.

Applying for Start-up Business Loan:

  • You should explain to them how you are planning on using the fund for your business and also let them know about your repayment plan.
  • Give the lenders a well-chartered business plan that holds all the details of your operations and your plan for future growth.
  • Sit with your accountant and arrive at the quantum of the loan you require from the lender.
  • Before choosing one lender, compare the business loan offered by various lenders in the market and see who suits your needs.
  • Have all your documents, including the balance sheet, accounts receivables, and cash flow chart, along with other materials before approaching a lender. You can know the eligibility requirements when visiting the lender’s website.
  • You can apply for a business loan online or walk into your nearest branch with all your documents.

What documents are required for a business loan?

  • Business plan with your growth and marketing strategies
  • Credit Report (It shows how financially responsible you are)
  • Your future goals for your business operations.
  • Business registration license and other related documents
  • Tax and ITR filings reports of the owner and the business
  • Financial invoices like bank statements, invoices and credit cards dues
  • Existing EMI payments (if applicable)
  • Loan applicant’s personal and professional id proofs.

Credit Score & its importance for a small business loan:

A credit score is a three-digit number that is given to a business by Credit Information Bureau, India Limited. The score ranges between 300 to 900. Having a healthy credit score is vital for availing a loan. However, there are certain factors that can lower your credit score like:

  1. A higher credit utilization ratio
  2. Not repaying loans on time
  3. No credit card/loans
  4. Credit limit getting higher
  5. Credit report status pull by financial institutions

So, timely repayment, low credit utilization ratio, and so on are essential for a good credit score.

Qualifications needed for a start-up business loan:

  • Should be an Indian citizen
  • Should have been doing this business for a year or so.
  • Should have registered their business
  • If you have any previous loans or not (if so documents which are related to the earlier loans)
  • Business bank account history
  • ITR documents for the company and the individual
  • ID proof of the individual who is applying for a loan
  • Address proof

Submission of these documents will automatically start the processing of your loan and then sanction of your funds.

Final word:


Managing a small business is hectic and costly, and when you are a start-up, it might be tough to handle finances. Getting a start-up loan can help in easing those worries and smoothly conducting your business. Most of the money lenders and financial institutions will look out for your credit score and other important factors if you are a start-up loan borrower. So be prepared on all aspects if you want to get your desired small business loan.


Don’t try to minimize your search for loans within banks, and you can try with NBFC’s as well. NBFC’s are also a good option when you have low or no credit history. They require less documentation and offer competitive interest rates along with flexible tenure.

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