Starting a business in India is exciting but equally challenging, especially when it comes to securing funds. While traditional banks often demand collateral for business loans, many entrepreneurs—especially new startups—do not have significant assets to pledge. This is where unsecured loans for startups in India play a vital role.
In this article, we’ll explore everything you need to know about unsecured startup loans, their benefits, eligibility, best lenders, government schemes, and tips to improve approval chances.
What is an Unsecured Loan for Startups?
An unsecured loan is a type of credit where the borrower does not need to pledge any collateral such as property, equipment, or fixed deposits. The lender relies on the applicant’s creditworthiness, income, and business model rather than physical assets.
For startups, this type of funding is extremely useful as most new ventures lack fixed assets during the early stages.
Key Features of Unsecured Loans for Startups in India:
- No collateral or asset required
- Shorter approval process compared to secured loans
- Flexible repayment options
- Interest rates vary depending on credit profile and lender policies
- Loan amounts generally range from ₹50,000 to ₹2 crores
Why Startups Prefer Unsecured Loans
| Factor | Unsecured Loan Advantage |
|---|---|
| Collateral | No need to mortgage property or assets |
| Speed | Faster approval compared to traditional secured loans |
| Accessibility | Ideal for startups without tangible assets |
| Flexibility | Can be used for working capital, hiring, marketing, or expansion |
| Risk | Business owners don’t risk losing personal assets in case of default |
Types of Unsecured Loans Available for Startups in India
- Business Term Loans
Fixed amount of money borrowed and repaid in installments with interest. - Business Credit Cards
Useful for managing day-to-day business expenses with flexible repayment. - Line of Credit
Allows startups to withdraw funds as needed up to a pre-approved limit. - Peer-to-Peer (P2P) Lending
Online platforms connecting startups with individual investors. - Government-Backed Schemes
Schemes like MUDRA, CGTMSE, and Stand-Up India offer collateral-free credit.
Eligibility Criteria for Unsecured Startup Loans
Although requirements vary by lender, here are some common eligibility benchmarks:
- Business Age: Minimum 6 months to 2 years (some lenders offer loans to newly registered startups)
- Turnover: ₹10 lakh – ₹50 lakh annually (depending on lender)
- Credit Score: Preferably 650+ for better chances of approval
- KYC Documents: PAN, Aadhaar, GST registration, business license
- Bank Statements: Last 6–12 months to prove financial activity
Top Banks and NBFCs Offering Unsecured Startup Loans in India (2025)
| Lender/Bank | Loan Amount | Interest Rate (Approx.) | Tenure | Special Features |
|---|---|---|---|---|
| SBI SME Loan | ₹50,000 – ₹2 Cr | 9.5% – 13.5% | Up to 5 years | Backed by CGTMSE, minimal paperwork |
| HDFC Bank Business Loan | ₹50,000 – ₹50 Lakhs | 10% – 20% | 12–48 months | Quick online approval |
| ICICI Bank Startup Loan | ₹1 Lakh – ₹40 Lakhs | 10.5% – 18% | Up to 5 years | Flexible repayment options |
| Bajaj Finserv | ₹50,000 – ₹45 Lakhs | 12% – 24% | Up to 7 years | Minimal documentation, instant approval |
| Tata Capital | ₹50,000 – ₹75 Lakhs | 11% – 24% | 1–6 years | Collateral-free, digital process |
Government Schemes Offering Unsecured Loans for Startups
The Indian government actively supports entrepreneurship through several schemes that provide collateral-free funding:
- MUDRA Loan under Pradhan Mantri Mudra Yojana (PMMY)
- Categories: Shishu (up to ₹50,000), Kishor (₹50,000 – ₹5 lakh), Tarun (₹5–10 lakh)
- Designed for micro and small enterprises
- Stand-Up India Scheme
- Loans from ₹10 lakh to ₹1 crore for women and SC/ST entrepreneurs
- Collateral-free with government guarantee
- CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises)
- Collateral-free credit up to ₹2 crore
- Supported by both banks and NBFCs
- Startup India Scheme
- Provides funding support, tax benefits, and easy credit access to registered startups
Documentation Required for Unsecured Startup Loan
| Document | Purpose |
|---|---|
| Aadhaar & PAN | Identity proof |
| GST Registration | Business proof |
| Bank Statements (6–12 months) | Financial health check |
| ITR of Business/Owner | Income proof |
| Business Plan & Cash Flow Statement | To evaluate repayment capacity |
Pros and Cons of Unsecured Startup Loans
Pros:
- No risk of losing assets
- Quick processing and disbursal
- Suitable for early-stage entrepreneurs
- Can be used for multiple purposes
Cons:
- Higher interest rates compared to secured loans
- Lower loan amounts than asset-backed funding
- Strict eligibility checks (credit score, income stability)
Tips to Improve Chances of Getting an Unsecured Loan
- Maintain a Good Credit Score – Aim for 700+ to increase approval chances.
- Show Consistent Cash Flow – Lenders prefer businesses with regular income.
- Keep Documentation Ready – Updated KYC, GST, and business licenses.
- Choose the Right Lender – Compare interest rates and processing fees.
- Build a Solid Business Plan – Demonstrates seriousness and repayment ability.
Comparison: Secured vs. Unsecured Loans for Startups
| Factor | Secured Loan | Unsecured Loan |
|---|---|---|
| Collateral | Required (property, FD, equipment) | Not required |
| Interest Rate | Lower (8%–12%) | Higher (10%–24%) |
| Loan Amount | Higher (₹5 Cr+) | Lower (₹50K – ₹2 Cr) |
| Processing Time | Longer | Faster |
| Risk | Risk of asset seizure | No asset risk |
Future of Unsecured Loans for Startups in India
With India’s startup ecosystem booming, unsecured financing is expected to grow exponentially. Digital lenders, fintech platforms, and government schemes are making collateral-free credit more accessible than ever. By 2030, India’s startup economy is projected to contribute $1 trillion to GDP, and unsecured credit will be a major enabler of this growth.
Conclusion
Securing funding is one of the biggest hurdles for new businesses in India. Thankfully, unsecured loans for startups provide a practical solution for entrepreneurs who lack collateral. While interest rates may be higher, the flexibility, speed, and accessibility make them a preferred choice for thousands of new ventures.
If you’re an aspiring entrepreneur, compare different lenders, explore government schemes, and prepare your documentation well in advance. With the right planning, an unsecured loan can fuel your startup dream without the burden of pledging assets.