Bank Loan Schemes for Startups 2026 – Compare Options

Startups often require external capital to grow, develop products, and scale operations. In India, several bank loan schemes and government-linked financing options are available in 2026 that are tailored to help new and early-stage businesses access affordable credit.

 

This comprehensive guide explains all major loan options, eligibility, interest rates, features, application steps, and comparison to help founders choose the best financing option.

 

Why Bank Loans Matter for Startups

 

Bank loans provide:

 

• Working capital

• Funds for equipment and technology

• Expansion capital

• Cash flow management support

 

Unlike equity funding, bank loans allow founders to retain full ownership of their company (if repayment terms are met).

 

Major Bank Loan Schemes for Startups in 2026

 

 

• PM Mudra Loan – Seed & Small Business Credit

 

The Pradhan Mantri Mudra Yojana provides collateral-free loans through partner banks and NBFCs

 

Loan Categories

1. Shishu: Up to ₹50,000

2. Kishore: ₹50,001 to ₹5 lakh

3. Tarun: ₹5 lakh to ₹10 lakh

Eligibility

1. Indian citizen

2. Business entity (non-farm, non-corporate)

3. Age 18–65 years

Key Features

1. No collateral

2. Quick processing in many banks

3. Flexible usage: working capital or business purposes

• Stand-Up India Loan – Women & SC/ST Focus

 

The Stand-Up India Scheme helps women and SC/ST entrepreneurs start greenfield enterprises.

 

Loan Details

1. Loan Amount: ₹10 lakh – ₹1 crore

2. Purpose: Manufacturing, services, trading, agriculture-related

Eligibility

1. Woman or SC/ST entrepreneur

2. New business (greenfield)

3. First-time borrower

Benefits

1. Credit guarantee cover

2. Long repayment tenure (up to 7 years)

3. 10–18 months moratorium

• CGTMSE-Backed Loans – Credit Guarantee Support

 

The Credit Guarantee Fund Trust for Micro and Small Enterprises enables collateral-free loans by providing credit guarantee coverage to banks.

 

Features

1. Loan Limit: Up to ₹2 crore

2. No collateral required

3. Suitable for startups and MSMEs with business plans

Benefits

1. Banks take less credit risk

2. Easier approval for startups with limited assets

• Bank Startup Loan – Standard Bank Financing

 

Most public and private banks offer startup-friendly business loans personalized for new companies.

 

Typical Features

1. Loan Range: ₹10 lakh – ₹5 crore

2. Loan Purpose: Machinery, technology, office setup

3. Sometimes collateral may be required for higher amounts

Eligibility

1. Registered company or Limited Liability Partnership (LLP)

2. Business plan and financial projection

3. Good promoter track record

Interest Rates

1. Floating, linked to MCLR/Repo + Bank’s spread

• Priority Sector Lending (PSL) Startup Loans

 

Under the Reserve Bank of India’s Priority Sector Lending norms, banks are required to lend a portion of credits to small businesses including startups.

 

Key Aspects

1. No special collateral up to certain limits

2. Preferred pricing in some banks

3. Includes working capital and term loans

Advantage

1. Encourages banks to support SMEs and startups

2. Broad eligibility if the business meets small enterprise criteria

• Credit Linked Capital Support (CLCS) & Other Linked Support

 

Various banks and financing partners link government-subsidized support with bank loans (especially for technology or manufacturing startups).

 

Example: Subsidy support under technology missions or industry associations that reduce effective cost of borrowing.

 

Detailed Features Comparison

 

 

Eligibility – Startup Requirements (General)

 

Most bank loans require:

 

• Company registration – Private Ltd, LLP, or partnership

• PAN & GST registration

• Business plan & projections

• Bank statements (if existing business)

• Promoter identity docs

 

Some require:

 

• Collateral (for higher limits)

• Personal guarantors

 

Interest Rates (Indicative for 2026)

 

Bank loan interest rates vary by lender, credit history, and risk profile. Typical ranges:

 

 

Documents Checklist

 

Identity & Address

• Aadhar Card

• PAN Card

• Voter ID/Passport/Driving License

 

Business Info

• Registration certificates

• Memorandum/Articles of Association

• GST certificate (if applicable)

• Business plan and projections

 

Financial

• Bank statements (6–12 months)

• Loans or credit history

• Collateral documents (if applicable)

 

Application Steps – Generalised Process

 

• Step 1: Prepare complete business plan
• Step 2: Select suitable bank or financing partner
• Step 3: Fill loan application form (online/offline)
• Step 4: Submit documents
• Step 5: Bank conducts appraisal
• Step 6: Approval & loan contract
• Step 7: Funds disbursed

 

Tips to Increase Approval Chances

 

• Maintain a clean credit history

• Prepare a professional business plan

• Provide realistic projections

• Offer detailed cash flow forecasts

• Include potential market traction

• Choose lenders with startup focus

 

Common Loan Rejection Reasons

 

• Incomplete documentation

• Weak or unclear business plan

• Poor credit score

• Limited financial history

• Lack of collateral (for higher loans)

• High risk sector perception

 

Comparison with Equity Funding

 

 

When to Choose Which Scheme?

 

 

Conclusion

 

In 2026, Indian startups have a wide range of bank loan options for growth, working capital, asset purchase, and expansion. By understanding eligibility criteria, interest costs, and documentation requirements, founders can choose the most suitable financing solution.

 

Bank loans help maintain ownership, reduce dependency on investors, and assist startups at every stage from launching to scaling.

 

Disclaimer

 

The information provided in this blog is purely for general informational purposes only. While every effort has been made to ensure the accuracy, reliability and completeness of the content presented, we make no representations or warranties of any kind, express or implied, for the same. 

 

We expressly disclaim any and all liability for any loss, damage or injury arising from or in connection with the use of or reliance on this information. This includes, but is not limited to, any direct, indirect, incidental, consequential or punitive damage.

Further, we reserve the right to make changes to the content at any time without prior notice. For specific advice tailored to your situation, we request you to get in touch with us.