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How to get short-term business loans in India?

At present, there are about 39,000 startups in India, who have access to a number of private equity and debt funding options. However, it is a challenge for business owners to get funding when they start their short-term business loans in India and it is in the early stage. 

The Micro, Small, and Medium Enterprises (MSME) in India only has limited access to formal credit, that is why the Indian Government has decided to roll out business loan schemes for MSMEs and startup businesses.

Overview of short-term business loan

As we know that short-term business loan is an option to use various short-term financial needs of a business. The loan can be availed to cover any business expenses for example- working capital, covering the operational cost, expanding business, and more. One can repay the short-term loan in a year, with monthly installments. If the borrower will be failed to avail of their long-term credit from a bank or any financial institutions then, short-term loans can be useful.

Business loan details 

Loan amount  

Up to Rs. 75 lakh

Interest rate 

Up to 21% per annum 

Loan tenure 

Maximum 5 years 


One can avail of a short-term business loan for their startup business from a bank or a financial body in order to raise funds to expand their current business or meet their short-term financial needs. The rate of interest charged by the bank will depend on the loan amount you availed and the repayment tenure. 

Short-term loans for SMEs 

People borrow the loan for SMEs, the working capital is the main part for this type of loan approval. If there will be no working capital, SMEs avail short-term business loan at higher interest rates from the lenders. One can easily avail the loan for their short-term financial needs.

Startup Business loan scheme 

The Small Industries Development Bank of India (SIDBI) has also begun lending to startup businesses and MSMEs directly rather than channelizing it through banks. As the interest rates offered on these loans are lower than the ones offered by the banks. Some of the popular schemes offered by the Indian government for startups as well as MSMEs are mentioned under:

Pradhan Mantri Mudra Yojana (PMMY)

This scheme has been launched in 2015, and it is headed by the Micro Units Development and refinance Agency (MUDRA). The aims of the scheme offer loans to all kinds of manufacturing, trading, and service sector activities. It offers loans under three different categories- Shishu, Kishore, and Tarun in the loan amount starting from Rs. 50,000 up to Rs 10 lakh. This loan can be availed by artisans, shopkeepers, machine operators, vegetable vendors, repair shops, and more. 

Bank credit facilitation scheme 

This scheme is headed by the National Small Industries Corporation (NSIC) and targeted for meeting the credit needs of the MSMEs unit. The NSIC has also partnered with various banks to provide MSME loans to the customers. 

Credit Guarantee Scheme (CGS)

This scheme is offered by both new and existing MSMEs that are involved in service or manufacturing activities but excludes educational institutions, agriculture, retail trade, Self Help Groups (SHGs), etc. The borrower can borrow the loan amount up to Rs. 200 lakh under this scheme headed by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).

Stand up India 

This scheme has launched in April 2016 and headed by SIDBI, this extends loans to enterprises including- manufacturing trading, or services. This scheme offer loans starting from Rs. 10 lakh to Rs. 1 crore. It offers the repayment of loans in seven years while the maximum moratorium period allowed is 18 months. 

Sustainable Finance Scheme 

This scheme is also headed by SIDBI and aims to offer loans to industries that deal with green energy, renewable energy, technology hardware, and non-renewable energy. The government has started this scheme to offer the entire value chain of cleaner production/energy efficiency and sustainable development projects. The eligibility to get this loan, the ESCO must be an MSME or otherwise the unit to which it offers the services must be MSME. 


Features of short-term business loan 

Availing of funding under various startup business loan schemes offers multiple benefits as compared to getting funds through other schemes. Here are some features and benefits of short-term business loan in India as under: 

•Quick approval of the loan and fast disbursal directly into your bank account. 

•Startup business loans are flexible and for longer repayment tenure.

•Multiple loan schemes provided by several banks.

•Borrowers don’t need any collateral or security to get a startup business loan. 


Documents required to get short-term business loans

While completing documentation, it may vary from lender to lender who offers the loans. Here is the checklist of common documents required to get a short-term business loan. 

•Identity proof: Passport/Aadhar card/voter’s ID/driving license

•Address proof: Passport/driving license/Aadhar card/ utility bills (phone bill/electricity bill)

•PAN card of the business or owner 

•Proof of income: Bank statement for the last six months.

•Bank proof: Cancelled/scanned cheque, copy of front page of your passbook. 

•Signature proof: Passport, PAN card, bank verified signature. 

•Business continuity proof 

•Business paper 

Additional documents required for short-term business loan 

There are some additional documents required for short-term business loan. Here are the documents mentioned below. 

Sole proprietorship declaration 

Partnership deed/MOA, AOA and Board resolution certified copy 

Balance sheet, Profit & Loss account of partnership firms for last 2 years with all schedules audited by Chartered Accountant. 

Interest rate, fees, and EMI calculator for short-term business loan

For example: The repayment of short-term business loan through EMI calculator. If the loan amount will be Rs. 1,00,000. 

Bottom line: 

The described information offers short-term loans for individuals looking for instant financial help. It is very easy to choose the loans and related schemes offered by different banks. The banks offer ultra-small personal loans ranging up to Rs. 75 lakhs and short-term loans for their business. You can easily choose the loan that works for both of your short-term and startup business.

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Joined: January 19th, 2020
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