Starting or growing a business? That’s awesome! But let’s be real—no matter how brilliant your idea is or how passionate you are, at some point, you’ll need money to keep things moving. And this is where the small business loan steps in like a superhero with a cape made of cash.
In this blog, we’re going to break down how to get a small business loan in India—but we’re keeping things super simple. No jargon. No banker-style talk. Just real advice, creative tips, and everything you need to know before applying for that loan.
💡 What Is a Small Business Loan?
Okay, let’s start at the beginning.
A small business loan is money you borrow from a bank, NBFC (Non-Banking Financial Company), or a government scheme to fund your business activities—this could be starting a new business, expanding it, buying equipment, hiring staff, or even managing your daily expenses.
You repay it over time, usually with interest. Think of it like planting a money seed—you get a lump sum now, and you grow your business so it can eventually pay back that seed with a little extra.
📋 What Can You Use a Business Loan For?
You can use the funds for pretty much anything related to your business. Here’s what most people use it for:
- Buying equipment or machinery
- Renting a new office or shop
- Marketing and advertising
- Paying salaries
- Inventory and raw materials
- Working capital
- Expanding into a new location
As long as it’s for business, you’re good.
🔎 Types of Business Loans You Can Apply For
This is where it gets interesting. There are different types of business loans—you don’t need to go to the biggest bank and beg. You’ve got options:
1. Term Loans
The classic one. You get a lump sum and repay it with interest over a fixed period.
2. Working Capital Loans
Need to manage cash flow? These short-term loans are ideal for keeping things running smoothly during slow months.
3. Machinery Loans
Specifically for buying equipment. Perfect for manufacturers, service providers, or anyone needing machines.
4. Overdraft Facility
If you have a current account, your bank might offer an overdraft facility—you can withdraw more than you have, up to a limit.
5. Government Business Loans (Stand-Up India, MUDRA, etc.)
Tailored for small entrepreneurs, women, SC/ST categories—low interest and minimal paperwork.
✅ Who Can Apply for a Small Business Loan?
Good question! You don’t need to be a big shot. If you fall into any of these, you’re likely eligible:
- A sole proprietor, partnership firm, private limited company, or LLP
- Someone with a business idea or an existing MSME (Micro, Small and Medium Enterprise)
- Have a minimum turnover (some banks have limits like ₹10 lakh or ₹50 lakh/year)
- A business vintage of at least 1–3 years (not always mandatory)
- Good CIBIL score (usually above 700 is preferred)
📑 Documents You’ll Need (Don’t Worry, It’s Not That Scary)
Nobody likes paperwork. But here’s what you’ll generally need:
- KYC documents (PAN, Aadhaar, etc.)
- Business registration proof (GST, Udyam Certificate, etc.)
- Bank statements (last 6–12 months)
- Income Tax Returns
- Financial statements (Profit & Loss, Balance Sheet)
- Business plan (especially for new businesses)
Pro Tip: Keep digital copies ready. Most lenders now allow online applications.
🏦 Where to Get a Business Loan From?
Here are your main options:
1. Banks
Trusted and established. But often more strict with paperwork and credit score.
2. NBFCs
Flexible and faster disbursals. Easier for newer businesses to get loans.
3. Fintech Lenders
Online platforms like Lendingkart, Indifi, and Razorpay Capital offer quick approvals with minimal hassle.
4. Government Schemes
Check out MUDRA, Stand-Up India, PMEGP, and CGTMSE. These are designed to support small businesses—often with lower interest and no collateral.
💰 How Much Loan Can You Actually Get?
This depends on your business revenue, credit score, and repayment capacity. Typically:
- Unsecured loans: ₹50,000 to ₹50 lakhs
- Secured loans (with collateral): Can go higher
But don’t borrow more than you can repay. Growth should be exciting, not stressful.
⚖️ Interest Rates: How Much Will It Cost You?
Interest rates vary based on the lender and your profile, but here’s a rough range:
- Banks: 8% – 16% p.a.
- NBFCs: 12% – 28% p.a.
- Government loans: 6% – 10% p.a. (subsidized)
The lower your credit risk, the better your rate. Improve your score and keep a clean financial record!
🚀 Steps to Get a Business Loan – Simple Walkthrough
Let’s make it a cakewalk:
Step 1: Know How Much You Need
Don’t borrow blindly. Calculate your actual need based on your business goals.
Step 2: Choose the Right Loan Type
Match your requirement to the loan type (working capital, machinery, etc.).
Step 3: Check Your Eligibility
Visit bank or NBFC websites and use their loan eligibility calculators.
Step 4: Gather Your Documents
Organize everything neatly, including scanned copies.
Step 5: Apply Online or Visit the Branch
Many lenders allow you to apply online—faster and easier.
Step 6: Wait for Approval & Disbursement
Once approved, the money is usually disbursed in a few days.
💡 Smart Tips to Boost Your Loan Approval Chances
- Maintain a good CIBIL score (pay your EMIs and credit cards on time!)
- File regular GST returns and ITRs
- Keep personal and business finances separate
- Avoid bouncing cheques—it hurts your credit profile
- Be honest in your application. Transparency builds trust.
🔍 Most Popular Government Loan Schemes You Should Know About
- MUDRA Loans – For micro and small businesses. Up to ₹10 lakh. No collateral.
- Stand-Up India – For women and SC/ST entrepreneurs. Loan between ₹10 lakh and ₹1 crore.
- PMEGP – Prime Minister’s Employment Generation Programme. Subsidy-based scheme.
- CGTMSE – Credit Guarantee Fund Trust. Offers loans without collateral up to ₹2 crore.
✨ Final Thoughts: You’ve Got This!
Getting a small business loan is not just about money—it’s about believing in your dream and backing it up with action.
Yes, paperwork is involved. Yes, it can take a little time. But the good news is: you don’t need to be rich, famous, or have a massive turnover to get funding anymore.
With the rise of digital lenders, government schemes, and alternative funding options, it’s your time to grow.
So go ahead—dream big, start small, act now. Your business deserves the boost!
🧲 Bonus: SEO-Friendly FAQs
Q1. What is the easiest small business loan to get?
Government schemes like MUDRA and NBFC loans tend to be more accessible for small businesses.
Q2. Can I get a loan without collateral?
Yes! Many lenders offer unsecured business loans. Government schemes like MUDRA also don’t require collateral.
Q3. How long does it take to get a business loan?
It can take anywhere from 2 days to 2 weeks, depending on the lender and documentation.
Q4. Is a CIBIL score required for a business loan?
Yes. A score above 700 is generally considered good. But some lenders might consider your business cash flow more than your score.
Q5. Can I get a loan for a startup?
Yes, especially under Start-Up India, PMEGP, and with certain fintech lenders that cater to new businesses.