How to Get a Business Loan up to Rs.10 Lakh in India: The Complete Guide

Why Opt for a Rs.10 Lakh Business Loan?

A loan of Rs.10 lakh is ideal for small businesses due to:

• Flexibility : It can be used for multiple purposes, such as working capital, machinery purchase, or expansion.
• Low Risk : Loans up to Rs.10 lakh often don't require collateral, reducing risks for MSMEs.
• Supportive Policies : Initiatives like the MUDRA Yojana and NBFC lending make it easier to access loans without complex documentation.

Stats Highlighting MSME Growth Potential

• India has over 63 million MSMEs, contributing 30% to GDP and creating 11 crore jobs.
• 92% of these MSMEs rely on informal credit, highlighting the gap formal business loans can fill.

Steps to Secure a Rs.10 Lakh Business Loan

Here's a step-by-step guide to ensure your loan application gets approved smoothly:

Step 1: Determine the Purpose of Your Loan

Understanding why you need the loan will help you craft a stronger application. Common purposes include:

• Working Capital: Cover day-to-day expenses, such as inventory restocking or paying salaries.
• Equipment Purchase: Invest in tools, machinery, or technology upgrades.
• Expansion: Open a new branch, hire staff, or upgrade infrastructure.
• Marketing & Branding: Boost visibility through ads, promotions, and e-commerce platforms.

Pro Tip: Clearly define your loan purpose during the application process to build trust with the lender.

Step 2: Choose the Right Type of Loan

• 1. MUDRA Loan (Pradhan Mantri Mudra Yojana):
  • Loan Amount: Up to Rs.10 lakh.
  • Categories:
  • Shishu: Up to Rs.50,000 (ideal for startups).
  • Kishor: Rs.50,000–5 lakh (for growing businesses).
  • Tarun: Rs.5 lakh–10 lakh (for scaling ventures).
  • Interest Rate: Starts at 8.5% per annum.
  • Eligibility: MSMEs, startups, artisans, and service providers.
• 2. NBFC Loans (Non-Banking Financial Companies):NBFCs like Lendingkart and Tata Capital offer quick disbursal loans.
  • Loan Amount: Up to Rs.10 lakh.
  • Interest Rate: 12–18%.
  • Features: Collateral-free, fast approvals (within 48 hours).
• 3. Digital Lending Platforms: Online lenders like Razorpay, KreditBee, and Indifi simplify loan applications.
  • Loan Amount: Up to Rs.10 lakh.
  • Features: Flexible repayment options, minimal documentation, and digital applications.
• 4. Private Bank Loans: Banks like HDFC, ICICI, and Axis Bank offer tailored loans for small businesses.
  • Interest Rate: 11–18% per annum.
  • Tenure: 1–5 years.

Step 3: Check Eligibility Criteria

Although eligibility varies by lender, these are the common requirements:

• Age: Applicant must be between 21–65 years.
• Business Tenure: At least 1 year for most private lenders.
• Turnover: A minimum annual turnover of Rs.5 lakh.
• Credit Score: 650+ is ideal for easy approval.
• Business Type: Registered MSMEs, startups, and sole proprietors are eligible.

Pro Tip: If you don't meet these criteria, consider government-backed schemes like MUDRA Loans.

Step 4: Gather Required Documents

Here's a detailed checklist to ensure a smooth application process:

• For Proprietors:
  • Identity Proof: Aadhaar card, PAN card.
  • Address Proof: Utility bill, rental agreement.
  • Income Proof: Last 6 months' bank statements.
  • Business Proof: GST registration, shop license.
• For Registered MSMEs:
  • Certificate of Incorporation or MSME Registration.
  • Financial Statements: Audited balance sheet and P&L statements.
  • IT Returns: For the last 2 years.
  • GST Returns: For the last 6 months.

Step 5: Submit Your Application

Online Application Process:

• Visit the official portal of your preferred lender or government scheme (e.g., mudra.org.in)
• Fill out the application form, and upload documents.
• Track your application status online.

Offline Application Process:

• Visit the nearest branch of your bank or NBFC.
• Submit the documents and explain your loan requirements.

Step 6: Use the Loan Wisely

Once approved, use the funds for the purpose outlined in your application to maintain credibility and build trust for future loans.

Repayment Plans for Rs.10 Lakh Loans

Most lenders offer flexible repayment options, typically ranging from 12–60 months. Here's an example of EMI calculations:

• Loan Amount: Rs.10 lakh
• Interest Rate: 12% per annum
• Tenure: 3 years
• Monthly EMI: Approx. Rs.33,200

Challenges You May Face

• 1️⃣ High Interest Rates: NBFCs may charge higher interest than banks. To reduce costs, compare lenders and negotiate terms.
• 2️⃣ Hidden Fees: Processing charges, prepayment penalties, and late fees can add up. Always read the fine print.
• 3️⃣ Document Verification Delays: Ensure all your documents are up-to-date to avoid delays during the approval process.

Success Stories

• 🌟 Urban Treads
  • A footwear startup in Bengaluru secured a Rs.10 lakh MUDRA loan to expand its operations, increasing revenue by 35% in one year.
• 🌟 Eco Harvest
  • An agritech company in Punjab used NBFC financing to purchase modern farming equipment, boosting productivity by 40%.

Conclusion

A business loan of Rs.10 lakh can unlock immense opportunities for growth and innovation. Whether you're applying under a government scheme or opting for NBFC/private bank loans, preparation is key.

By meeting eligibility criteria, submitting the right documents, and using the funds strategically, you can scale your business sustainably.