How to Avail Unsecured Business Loans for Start-up?

small business loan

One of the most important aspects of running a start-up is to ensure that the wheels of operations never cease to move. One of the primary reasons why start-ups falter is because of liquidity issues or paucity of funds. Being a start-up, it also becomes a tad difficult to arrange for business loans, since most banking activities are focussed on established players and start-ups may not always be at the forefront of the scheme of things. However, there are ways that, as a founder of a start-up, one can get hold of a loan. 

Here is how to avail unsecured business loans for a start-up? 


It is essential that before a source is approached for funds, thorough research needs to be carried out regarding all options. There are quite a few banking institutions that provide collateralfree loans and at competitive interest rates. These loans fall under the category of MSME loans since business loans are supposedly larger in size. The loans can be meant for a variety of reasons and that needs to be mentioned.

Review the financials 

 A term sheet needs to be created before a financial institution is approached for an MSME loan. The type of loan is based on the turnover and the number of years of existence. There are CGTMSE loans that financiers provide to startups. Checking for personal and business credit scores is an important step. While it is great to have a good credit score, do not sweat if it’s not the best around. Most banking institutions have brackets for loans with stated credit scores. Updating balance sheets and creating profit and loss statements are important activities that need to be undertaken. 

Read the terms and conditions 

More often than not, loan seekers overlook the fine print and in their haste end up in a soup. It is extremely important that the terms and conditions need to be read carefully. The loan agreement needs to be reviewed and the annual percentage rate and the loan interest looked into keenly. The document will have all the fees mentioned. Check and recheck them. All financial entities talk about transparency and no hidden costs. This must be ascertained through careful examination of all the loan documents. Also, do check for the prepayment penalty, in case you pay off the loan beforehand. 

Types of loans one can avail of 

There are quite a few Government aided loans targeting the Start-up community of the country. These loans are mostly collateralfree and come with no extra charges other than the usual monthly interest. 

MUDRA loan 

Under the aegis of PMMY, MUDRA or Micro Units Development Refinance Agency provides collateralfree loans to start-ups. These loans are given under three categories, namely: ShishuKishor and Tarun. 

The categories are dependent on the funds loaned.  

  1. Stand-Up India  – This is another Government Scheme that aims to empower the SC/ST and women entrepreneurs of the nation. It is aimed at uplifting the weaker sections of society by providing them with business opportunities. 
  2. CGTMSE Loan  – Under the CGTMSE loan scheme, both new and old businesses will be covered. It is a collateralfree loan and is based on the criteria as set by the Government of India.  
  3. Bank Credit Facilitation Scheme  – This is a scheme begun by the National Small Industries Corporation (NSIC) to fund start-ups in the country. 

Lastly, apart from the Government schemes, numerous private schemes keep appearing from time to time. The most important aspect of availing of an unsecured loan is the way the proposal has been written. Get the documents in order and start applying, now.