If you are a women entrepreneur, it becomes difficult to run a business sometimes because of the lack of support form the family. Another major issue is finding funds to run your business efficiently. The initial method would be to ask for some capital from family and friends, venture capital or use personal savings. Contacting a bank, an NBFC or making use of government schemes like the Mudra Yojana scheme for loans are other options for women entrepreneurs in India.
Here are the various sources for a business loan in detail:
1. Friends and family
Some women might approach their families or friends for funds at the initial stage. This reduces the burden of repayment and the interest rates for the loan.
2. Venture Capital
A venture capitalist is an individual or a firm who invests money in a startup, for investment with some returns on the same, and also wants involvement in strategic planning. It can be seen as a reliable source of funding for women.
Some venture capitalists might consider male entrepreneurs over female entrepreneurs, but there are a few who would be willing to help. An initiative like the Saha Fund invests and promotes businesses that are run by women.
3. Personal Savings
Some women also rely on their personal savings to start with a business of their own because of the fear of debts in the future, high-interest rates, and the fear of business failure. Also, another reason can be that most of the women do not have an asset in their own names, which makes it difficult for them to approach banks for funds because if in case of business failure, it will not be easy to pay the loan amount or to recover the funds.
There are some banks in India who offer specialized business loans for women entrepreneurs. They have more flexible terms and conditions with regards to the security they ask, the interest rates, etc.
Here are some schemes that are offered by some banks:
Shree Shakti Package
This scheme is offered by SBI to women who have a 50% share in the business and are a part of the Entrepreneurship Development Programmes (EDP), run by the state agencies. According to this scheme, if the amount of loan goes more than Rs. 2 lakhs, a discount of 0.50% is offered in the interest rate.
Dena Shakti Scheme
This scheme by Dena bank is for women entrepreneurs who are in the field of agriculture, manufacturing, retail stores, or other small enterprises.
Rate of interest is also decreased by 0.25% for a maximum loan amount of Rs. 2o lakhs in retail trade.
Cent Kalyani Scheme
This scheme is offered by the Central Bank of India and can be availed by women who are in the village cottage industries, any micro, small, and medium enterprise, are self-employed, in agriculture, and any government-sponsored programs. According to this scheme, no collateral is needed and there is no processing fee. The loan can be granted to a maximum value of Rs. 100 lakhs.
NBFCs or Non-banking financial companies provide loans to businesses without security. Their application process is mostly online, the documents required are minimal, and the loan disbursal is also quick. These NBFCs also have flexible terms and conditions, and as in case of a bank loan, they can not seize your assets and sell them to get the loan amount.
6. Mudra Yojana scheme
Mudra scheme or Micro Units Development and Refinance Agency Ltd. can be used for the development of small enterprises/businesses. Under this, there are three schemes that can be used to meet the funding needs based on the various stages of business development. These are namely:
- Shishu (for loans up to Rs. 50,000)
- Kishor (for loans above Rs. 50,000 and up to Rs. 5 lakh)
- Tarun (for loans above Rs. 5 lakh to Rs. 10 lakh)
Let us look at the eligibility criteria for loans from banks, NBFCs, and Mudra scheme respectively.
Some basic eligibility criteria required for a loan from banks and NBFCs:
Age of the applicant should be a minimum of 21 years at the time of loan application, and 65 years at the time of loan maturity.
For the Mudra scheme, the applicant has to be at least 18 years of age.
2. Business turnover
Turnover or how quickly a business can collect cash is another criteria. The minimum turnover of a business to be eligible for a small business loan should be between Rs. 15 lakh to Rs. 1 crore.
3. Business activity
Number of years the business has been in operation is another important criteria. Most of the lenders only consider businesses who are at least 3 years old, but a few also consider businesses who are just a year old.
4. Credit score
The credit score is one of the most important criteria for a business loan, whether it be from a bank or an NBFC.
The credit score and the credit history describe the repayment ability of the lender and the past loan history.
A credit score between 750-900 is considered to be good, but it depends from lender-to-lender. Apart from the criteria mentioned above, in order to take a Mudra loan, one has to also tell the type of business. The business should fall under any one of the following categories:
- Activities related to agriculture like beekeeping, fisheries, agro-processing units, etc.
- Fruits and vegetable vendors.
- Textiles and handicrafts business.
- Food products.
- Services like salons, medical shops, courier, etc.
Documents required for the business loan:
- Identity proof and address proof (Aadhar & PAN Card details of the proprietor).
- Bank statement of the past 12 months.
- Latest Balance sheets and P&L.
- Income Tax Returns of the previous 2-3 years.
- Compliance and licenses required to run the business
- GST registration receipts and challans.
Few other documents required for a Mudra loan:
- Utility bill
- Domicile certificate
- Photo of business owner/ partner
- Partnership deed
If you are a women entrepreneur looking for unsecured quick loans for your business, you can contact Gromor Finance for loans at affordable interest rates!