Can You Get a Business Loan for a New Business?

Most lenders prefer businesses that have run for two to three years, because they can see a track record. But a new business is not always shut out. Here is what usually works.

Why lenders are careful with new businesses

A business loan is repaid from business income. With only a few months of history, the lender cannot see whether income is steady. That is why vintage – how long the business has existed – is one of the first checks.

Options that often work

• Government-backed schemes. Schemes such as MUDRA loans (through banks) are designed for small and new businesses. Ask your bank about current schemes and conditions.
• Loan against property. If you or your family own property, a loan against property can fund a business, because the property reduces the lender's risk.
• Personal loan. If you are still salaried or recently left a job, a personal loan based on salary may be easier for small amounts.
• Equipment or machinery loans. The machine itself secures the loan.

How to make your case stronger

• Get Udyam and GST registration early and file returns on time.
• Run all business money through one current account.
• Keep your personal CIBIL score high – for new businesses lenders lean on the owner's credit history.
• Prepare a simple plan showing what the money is for and how sales will repay it.
• Start with a smaller amount; repay well; borrow more later.