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The Different Types of Business Loan for Startups in India: What Are They?

Any firm, no matter how small, medium-sized, or huge, will always need more cash flow to cover daily expenses. Getting a loan has different goals based on whether you need it to start, fund, or grow your company. Not every firm operates in the same way. To address various company scenarios, financial institutions must therefore provide different types of business loans.

In India, startups are growing in popularity. Under Prime Minister Narendra Modi’s direction, the government launched and supported Startup India. The Startup India project aims to create a robust environment that is supportive of the development of entrepreneurs. It strives to provide startups with the tools they need to use innovation and technology to grow.

Startup India is a flagship initiative of the Government of India, planned to catalyze startup culture and create a robust and inclusive ecosystem for entrepreneurship and innovation in India. The Startup India Initiative, which was established on January 16th, 2016, has introduced several initiatives to assist entrepreneurs, create a strong startup ecosystem, and change India into a nation of job creators rather than job seekers. There are many benefits provided under “Startup India” for launching their businesses in India.

Benefits Provided under Startup India

Simple process

To make it simple for startups to register, the Indian government has released a mobile app and website. Anyone interested in starting a business can fill out a brief online form and provide the necessary paperwork. Everything about the process is done online.

Cost Reduction

Additionally, the government offers a list of trademark and patent facilitators. They will offer affordable, high-quality intellectual property rights services, such as quick patent examination. Only the statutory fees will be paid by the startup; all facilitator fees will be covered by the government. They will benefit from an 80% reduction in patent filing fees.

Easy access to Funds

The government established a fund worth 10,000 crore rupees to give money to entrepreneurs as venture capital. To encourage banks and other financial institutions to offer venture capital, the government is also providing guarantees to the lenders.

3 years of tax holidays

If startups obtain accreditation from the Inter-Ministerial Board, they will be exempt from income tax for three years (IMB).

Request a bid

Applicants seeking government contracts can be startups. They are not subject to the “previous experience/turnover” requirements that apply to regular businesses that respond to government tenders.

R&D facilities

To provide facilities to startups in the R&D sector, seven new research parks will be created.

No lengthy compliance procedures

For startups, certain regulations have been streamlined to save time and money. Startups are permitted to confirm their compliance with 3 environmental regulations and 9 labor laws via the Startup mobile app.

Saving on taxes for investors

People who invest their capital gains in government-established venture funds are exempt from paying capital gains tax. This will encourage investors to invest in startups.

Decide on an investor

After implementing this strategy, companies will have the freedom to select their investors from among the VCs.

Easy exit

In the event of an exit, a startup may close its doors 90 days after filing for winding up.

Meet other entrepreneurs

To allow the numerous stakeholders of a company to interact, the government has proposed holding two startup fests annually on both a national and international level. Significant networking opportunities will result from this. The government strongly supports startups. They are immensely beneficial, which is why more people are starting startups.

Different Types of Loans to Startups

Traditional financial institutions are cautious about offering loans to startup companies. The reason is that these businesses are still young and are exposed to a number of financial dangers. Therefore, to address this issue, the government has launched different types of business loans for startups

FFS: The government maintains a reserve of Rs 10,000 crores with the Small Industries Development Bank of India (SIDBI). FFS is authorized by Alternative Investment Funds registered with SEBI (AIFs). If you are a start-up and wish to apply for FFS, you must invest at least twice as much as you borrow.

Mudra Loans: Micro, small, and start-up firms can apply for low-interest loans under Mudra. You are permitted to borrow up to Rs. 10 lakhs. This loan requires borrowers to be at least 18 years old.

Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE): These loans are the Ministry Of Micro, Small, And Medium Enterprises (MSME) signature program (MSME). Up to Rs 1 crore in unsecured loans is available.


With the revision to the Companies Act, India’s corporate environment saw several changes. A significant accomplishment is the launch of the Startup India initiative by the Indian government. The Startup India initiative has many benefits provided under startup india and has played a significant role in the development of India’s entrepreneurial culture.

Starting businesses can better manage their finances thanks to government tax breaks, credit programs, and different types of business loans at low-interest.


As a content strategist and marketer, I help companies reach their target audiences through compelling stories and powerful marketing techniques. My experience ranges from developing long-form blog posts to crafting tailored email campaigns. I've also worked as an editor for a magazine, which has given me the skills to understand complex writing structures and how to craft engaging content that resonates with readers.

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