How to apply for a startup business loan from the Government of India in 2023
The startup ecosystem in India will be thriving by leaps and bounds in 2023. Every day new innovative startups are emerging from not only the metro cities by the smallest towns of India as well. Factors like access to better technology, innovative marketing techniques, a rising number of investors, and government support are some driving factors of this growth. From all these factors, the encouragement and support offered by the Indian government to new startups mainly catalyzed the growth of startups. The fundings provided by the Indian government empower budding entrepreneurs through a favorable startup ecosystem. It also boosts the growth of ventures that aspire to grow into new territories and introduces new products and services.
Though many government loan schemes are currently available, many entrepreneurs are unaware. A startup that successfully secures funding from the government will go a long way in its growth and development. But obtaining government funding for your startup isn’t easy as it sounds. The founders need help to connect with the right people and communities who can help them secure funding from the Indian government. Applying for a government business loan involves various crucial steps, and it’s best to have some help in the process. This article will help you know how to apply for a startup business loan from the Government of India in 2023.
Know different types of government startup funding
The Government of India is taking active steps to strengthen the presence of the startup ecosystem in India and help homegrown startups to grow and bring their ideas into reality. Therefore, it offers various government loan schemes to startup founders and small business owners to expand their businesses further. Government funding can help startups in product development, team hiring, working capital, legal services, raw material sourcing, marketing and sales, and other expenses. Before you ask how to apply for these various schemes, you need to understand what government funding schemes are currently available.
Here are some fundings offered by the Indian government in 2023:
- Stand Up India Scheme
- Coir Udyami Yojana
- Sustainable Finance Scheme
- Bank Credit Facilitation Scheme, etc.
You can choose from any of these schemes that fit your business models and needs and apply for them.
Understand the eligibility criteria for the government funding
Though the Government of India offers various government funding for startups, you need to understand that each scheme is different. Different startup funding from the government focuses on a particular industry or business size. For example, the government of India has dedicated schemes to offer agricultural and social businesses. The terms and the nature of schemes can also change depending on the geographical area, the current growth of the business, and the loan amount required by the company.
Each scheme has its eligibility criteria along with various terms and conditions. The business looking for government funding must fulfill these criteria to secure financing. As each funding can be different, the eligibility criteria can also change. To help you get a rough idea about the eligibility, here are some essential eligibility criteria the startup must fulfill to secure government funding.
- The startup must be operating in India for a period of fewer than five years
- The annual turnover should not be more than 25 crores.
- The business must be registered as an LLP or private limited company.
- You have a proper business plan and roadmap for your business
- It also helps to know that you are already creating a social impact or have the potential to generate more employment
- The applicant must have approval from the DIPP (Department of Industrial Policy and Promotion)
- A patron guarantee provided by the Indian Patent and Trademark Office
The eligibility criteria can be different for different schemes. Make sure you check the criteria for the scheme for your plan to secure before applying.
Collect the necessary documents
Now that you know about various Indian government funding schemes and common eligibility, it’s time to collect multiple essential documents required for the loan. These documents will help the officials validate your identity and authenticity. Don’t submit fake or wrong documents; your loan application might be held or rejected altogether.
Though different schemes require a specific set of documents, here is a common list of documents that you would need to apply for a government startup funding scheme:
- Proof of identity like Aadhar card, PAN card, passport, driving license, voter’s ID
- Two passport-size photographs
- Address proof like Aadhar card, passport, PAN card, voter’s ID, driving license
- Bank statement for the last six months
- Proof of income such as salary slips, income tax returns
- Signature proof
- IFSC code proof – Canceled/scanned cheque
Securing a startup business loan from the government can be complicated, mainly because of the turnover and incorporation criteria. If you find the process too daunting, consider alternative funding options like revenue-based financing. It is a highly flexible, scalable funding method, and the application process is very straightforward. With revenue-based funding, the founders don’t have to dilute their equity to raise funding; they can repay the investor some percentage of monthly revenue in return for their investment.
Funding offered by the Indian government can be a great push for your startup operations and growth. Make sure you choose the suitable scheme that suits your business needs and is aligned with your goals. This way, you don’t have to compromise your business vision to acquire funding.