Starting a business in India usually kicks off with the hunt for capital, but picking the best loan scheme can really shape your startup’s growth path. Here’s a straightforward, genuine guide to the top startup loan options, their perks, and the best times to use them:
1. Pradhan Mantri MUDRA Yojana (PMMY)
This flagship initiative offers collateral-free loans of up to ₹20 lakh for micro and small enterprises, divided into four tiers: Shishu (₹0–50k), Kishore (₹50k–5 L), Tarun (₹5 L–10 L), and Tarun Plus (₹10 L–20 L). It’s perfect for working capital, machinery, or stock, and you can access it quickly through banks, NBFCs, and 59-minute portals.
Why it matters: With zero collateral, the risk for founders is low; it’s flexible and fast—ideal during the ideation phase or early launch when those small, nimble investments are crucial.
2. CGTMSE (Credit Guarantee Fund for MSMEs)
CGTMSE allows for collateral-free loans up to ₹5 crore, with guarantee coverage of:
- 85% (for micro, women-led, and Northeast businesses)
- 75% (for loans between ₹5 L and ₹1 Cr)
- 75% (for loans between ₹5 L and ₹1 Cr)
With support from over 140 lending institutions, you can expect quick approvals—often within 48 hours. This is a great option for scaling up when you need more working capital or financing for fixed assets.
3. PMEGP (Prime Minister’s Employment Generation Programme)
PMEGP provides funding for launching micro-enterprises with loans up to ₹25 lakh for manufacturing and ₹10 lakh for services, plus a subsidy of 15–35% based on your region and category.
Best for: New ventures looking to hire or set up production, especially in those early growth stages where cost relief is essential.
4. Stand-Up India Scheme
This initiative is all about boosting entrepreneurship among women and SC/ST founders. It provides loans ranging from ₹10 lakh to ₹1 crore for new businesses, with a repayment period of up to 7 years and an 18-month grace period.
When to consider it: If you fit the eligible criteria and are just starting out in manufacturing, services, or trade, this scheme can be a fantastic resource for early-stage entrepreneurs.
5. Startup India Seed Fund Scheme (SISFS)
For startups recognized by DPIIT that are in their early stages, SISFS offers grant-based funding of up to ₹20 lakh for proof-of-concept and up to ₹50 lakh for product development and scaling.
Best time to apply: If you're in the prototype or MVP development stage, especially in tech or innovation-heavy fields, this funding can provide you with non-dilutive capital to test and refine your ideas.
6. Credit Guarantee Scheme for Startups (CGSS)
This scheme allows DPIIT-recognized startups to receive loan guarantees, making banks more willing to issue collateral-free loans, sometimes up to ₹10 crore, depending on the specific scheme and lender.
Ideal for: Securing working capital or expanding after stabilizing your revenue, especially when you need larger funding amounts but want to keep equity dilution to a minimum.
7. Additional Benefits through Startup India
In addition to loans, DPIIT-recognized startups enjoy 3 years of tax exemptions, expedited IPR processes, and access to venture capital from Fund-of-Funds.
Which Loan, and When?
| Stage | Best Scheme(s) | Reason |
|---|---|---|
| Ideation / Prototype | MUDRA (Shishu/Kishore), SISFS | Affordable, fast, flexible or grant-based |
| Product Development / Early Validation | SISFS, Startup India benefits | Non-dilutive funding, IPR support |
| Initial Operations | PMEGP, Stand-Up India | Subsidies, affordable long-term capital |
| Scaling / Working Capital | CGTMSE, CGSS | High funding with collateral-free access |
| Growth / Tax Optimization | Startup India tax incentives | Improves cash flow and margins |