The startups in India are getting global attention as more and more ventures in diversified areas are coming up the country and getting funded. The dynamic entrepreneurs or founders of these startups either use their own savings or borrow money from acquaintances to start their businesses (also called as bootstrapping or self-funding) or use various funding options available to start and run their business.
However an individual with no enough capital to start and run own company and are denied funding from venture capitalists, crowdfunding, angel investors often face tough time to raise money.
And if the individual is a low income earner then utilizing own money may not be always sufficient for starting a new one. So what can such individuals, who are currently doing job but want to raise money for starting a new venture do?
The answer is personal loan for business.
There are few private, public, or co-operative banks offering loan to poor salaried individuals. Listed below is the list of banks offering loans along with their income criteria:
|Name of Bank||Minimum Monthly Salary Required|
|City Union Bank||Rs. 6,500|
|Jammu and Kashmir Bank||Rs. 6,500|
|Abhyudaya Co-operative Bank||Rs. 8,000|
|Karnataka Bank||Rs. 10,000|
|Karur Vysya Bank||Rs. 10,000|
|Indian Overseas Bank||More than Rs. 5000|
|Oriental Bank of Commerce||More than Rs. 6000|
|State Bank of India||Rs. 24,000 - Urban
Rs. 10,000 - Rural and semi-urban
|HDFC Bank||Rs. 20,000 - Urban
Rs. 15,000 - Rural and semi-urban
|Axis Bank||Rs. 15,000|
|YES Bank||Rs. 25,000|
|ICICI Bank||Rs. 20,000-25,000 - Urban
Rs. 17,500 - Rural and semi-urban
|Allahabad Bank||Rs. 20,000|
|Canara Bank||Rs. 25,000|
|Dena Bank||Rs. 15,000|
|Punjab National Bank||Rs. 30,000|
|Dhanlaxmi Bank||Rs. 35,000|
|Federal Bank||Rs. 50,000|
|Nainital Bank||Rs. 25,000|
|Ratnakar Bank||Rs. 25,000|
|South Indian Bank||Rs. 25,000|
|Kotak Mahindra Bank||Rs. 25,000|
|IndusInd Bank||Rs. 25,000|
|Deutsche Bank||Rs. 25,000|
|Bajaj Finance Limited||Rs. 30,000 - Rs. 40,000 (Depending on the city)|
Since personal loan is an unsecured loan, banks charge high interest rate and application is scrutinized in detail to avoid any risks.
What if banks deny loan?
The very first thing to do is ask the bank about the reason for rejection. If a poor credit score is the reason then you should first improve it. This is because most of the banks will first check the CIBIL rating before approving the loan.
There are two more options to get personal loan for starting a new business:
Peer to peer lending – Although they have been present in India few years back but are now gaining attraction due to mainly because of lower interest rate, speedy approval, and minimal documentation. Most importantly borrower has an option to interact directly with the investor/lender and negotiate on the interest.
Private money lenders – The strict application process by banks and P2PL is very painful for the applicant. And this is a plus point for private money lenders who offer credit without asking for much documents but at a higher interest rate compared to banks or P2PL. Credit score is not checked by them, which is a biggest advantage. Though this option sounds very convenient, there are risks involved such as small repayment period, harassment in case of non-repayment of loan, not all are licensed lenders, illegal use of signed document and others.
Remember that using personal loan for business is different than a business loan and should ideally be taken for small business with a small loan requirement. For larger amount, business loan are highly recommended that are offered by many banks in India.