Starting a business requires more than just an innovative idea; it demands capital, resources, and the right financial tools to bring that idea to life.
Whether you need funds for hiring staff, purchasing equipment, or expanding your operations, business loans can be a game-changer for new startups.
However, choosing the right loan for your startup can be overwhelming due to the plethora of options available in the market.
In 2025, the business landscape is rapidly evolving, with more lenders offering specialized loan products tailored for startups.
Whether you’re a first-time entrepreneur or a seasoned business owner looking to launch a new venture, the right funding can help you establish a strong foundation and grow your business sustainably.
In this blog post, we will explore the top 10 business loans for new startups in 2025, analyzing each loan’s benefits, eligibility criteria, and suitability for your startup.
By the end of this article, you will be equipped with the knowledge to make an informed decision about which loan option is best for your business.
1. Government-Backed Schemes (MUDRA Loan)
The Micro Units Development and Refinance Agency (MUDRA) loan is one of the best options for new startups in India. Launched by the Government of India, the MUDRA scheme is designed to provide financial support to micro and small businesses, especially those in the manufacturing, trading, and service sectors.
Why MUDRA Loan is Ideal for New Startups:
- Loan Amount: The MUDRA loan offers three categories of loans: Shishu (up to ₹50,000), Kishore (₹50,001 to ₹5 lakh), and Tarun (₹5 lakh to ₹10 lakh).
- Interest Rate: Typically ranges from 8% to 12%.
- Collateral: No collateral required for loans up to ₹1 lakh.
- Eligibility: Available to micro and small businesses in manufacturing, services, or trading sectors.
- Repayment Terms: Flexible repayment options with a tenure of 3 to 5 years.
Best For: Entrepreneurs in the early stages of their startup journey looking for a low-interest, collateral-free loan to kick-start their business operations.
2. Startup India Scheme
Launched by the Government of India, Startup India provides various incentives for startups, including financial assistance through several schemes. One of the main features of this initiative is the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which offers collateral-free loans to startups.
Why Startup India Scheme is Suitable for New Startups:
- Loan Amount: Startups can get funding of up to ₹10 lakh to ₹1 crore.
- Interest Rate: Competitive interest rates.
- Collateral: Collateral-free loans.
- Eligibility: New startups in any sector, including technology, healthcare, and manufacturing.
- Repayment Terms: Flexible repayment schedules.
Best For: Entrepreneurs looking for government-backed financial support, especially those who are in the initial phase of their startup and need quick access to capital.
3. Business Line of Credit (BLOC)
A Business Line of Credit (BLOC) is a revolving loan that provides startups with access to a fixed amount of capital that can be used at any time. This flexible financing option is ideal for new businesses with fluctuating cash flow or those in need of working capital for short-term expenses.
Why Business Line of Credit is Ideal for Startups:
- Loan Amount: Typically ranges from ₹50,000 to ₹5 crore, depending on the lender.
- Interest Rate: Usually ranges from 10% to 24%, depending on the creditworthiness of the business.
- Collateral: Can be unsecured or secured.
- Eligibility: Startups with at least 6 months to 1 year of operational history are eligible.
- Repayment Terms: Interest is only paid on the amount used.
Best For: Startups with unpredictable cash flow or those who need flexibility in their financing. It is suitable for short-term working capital needs or to cover operating expenses.
4. Term Loans for Startups
A term loan is one of the most traditional forms of financing for businesses. It is a lump sum loan amount that you repay with interest over a fixed period. Term loans are suitable for startups that need capital for long-term investments, such as purchasing equipment, expanding inventory, or funding a new project.
Why Term Loans are Beneficial for Startups:
- Loan Amount: Can range from ₹1 lakh to ₹50 crore, depending on the business requirements.
- Interest Rate: Typically ranges from 10% to 18%.
- Collateral: May require collateral, especially for larger loan amounts.
- Eligibility: Available to startups with a stable income or business history (1–2 years).
- Repayment Terms: Fixed monthly installments over 1 to 5 years.
Best For: Startups needing long-term funding for significant investments like capital expenditure, infrastructure, or expansion.
5. Invoice Financing
Invoice Financing is a type of loan where a startup can borrow money against its outstanding invoices. This loan type is ideal for startups with delayed payments from customers but a strong sales pipeline. It provides quick access to capital based on the value of unpaid invoices.
Why Invoice Financing is Suitable for New Startups:
- Loan Amount: Depends on the value of your outstanding invoices.
- Interest Rate: Typically ranges from 1% to 5% of the invoice amount.
- Collateral: No collateral required, as the loan is based on outstanding invoices.
- Eligibility: Startups with a consistent invoice flow.
- Repayment Terms: Repayment is tied to the payment schedule of the client invoices.
Best For: Startups with a large volume of outstanding invoices looking for quick capital to meet their short-term operational needs without waiting for customers to pay.
6. Microfinance Loans
Microfinance loans are provided to startups that may not qualify for traditional bank loans due to lack of credit history or collateral. These loans are typically provided by microfinance institutions and are ideal for small businesses and startups with limited resources.
Why Microfinance Loans Are Good for Startups:
- Loan Amount: Generally small loans, ranging from ₹10,000 to ₹5 lakh.
- Interest Rate: Interest rates are typically higher than traditional loans but still affordable for small businesses (around 12% to 18%).
- Collateral: Often unsecured or require minimal collateral.
- Eligibility: Startups with limited or no credit history.
- Repayment Terms: Short to medium-term repayment options.
Best For: New startups or micro-enterprises in need of small capital to get started but lacking a credit history or assets to secure larger loans.
7. Angel Investors and Venture Capital
Angel Investors and Venture Capitalists (VCs) are individuals or firms that provide capital to startups in exchange for equity or convertible debt. While venture capital is more appropriate for startups with high growth potential, angel investors typically back early-stage startups.
Why Angel Investors and VCs Are a Good Option for Startups:
- Loan Amount: Investment amounts can range from ₹10 lakh to ₹10 crore or more, depending on the business.
- Interest Rate: No interest rate; instead, investors take equity or convertible debt.
- Collateral: No collateral is required.
- Eligibility: Startups with high growth potential in tech, biotech, and other innovative sectors.
- Repayment Terms: Repayment is not required, as investors expect a return on investment through equity growth.
Best For: Startups in high-growth sectors looking for funding in exchange for equity or a share in ownership. Ideal for businesses with disruptive ideas or scalable models.
8. Crowdfunding
Crowdfunding allows startups to raise capital from a large number of people, usually via online platforms like Kickstarter, GoFundMe, or Indiegogo. It’s a popular choice for new businesses that want to avoid taking on debt or giving away equity.
Why Crowdfunding Works for Startups:
- Loan Amount: Varies depending on the platform and campaign, but typically ranges from ₹50,000 to ₹5 crore.
- Interest Rate: No interest, as funds are raised as donations or in exchange for rewards.
- Collateral: No collateral required.
- Eligibility: Open to all types of startups, including product-based and service-based businesses.
- Repayment Terms: No repayment; backers typically receive rewards or early access to products.
Best For: Startups that have a compelling product or idea and want to test the market before launching. Ideal for creative projects, tech innovations, or social enterprises.
9. Business Credit Cards
A business credit card is a convenient way for startups to access working capital. Unlike traditional loans, credit cards offer a revolving credit line that allows businesses to pay for short-term expenses and manage cash flow.
Why Business Credit Cards Are Useful for Startups:
- Loan Amount: Credit limits typically range from ₹20,000 to ₹10 lakh.
- Interest Rate: High interest rates, ranging from 18% to 30%, if not paid in full.
- Collateral: Unsecured credit.
- Eligibility: Available to established startups with a good credit history.
- Repayment Terms: Monthly payments, with the option to carry a balance at higher interest rates.
Best For: Startups looking for short-term working capital and those with a stable cash flow who can manage credit card payments without accumulating too much debt.
10. Peer-to-Peer (P2P) Lending
Peer-to-peer lending platforms connect borrowers directly with individual investors. These platforms offer unsecured loans with flexible terms and competitive interest rates, making them an excellent option for startups that may not qualify for traditional bank loans.
Why Peer-to-Peer Lending is Ideal for Startups:
- Loan Amount: Typically ranges from ₹25,000 to ₹10 lakh.
- Interest Rate: Competitive rates, ranging from 10% to 24%.
- Collateral: No collateral required.
- Eligibility: Open to startups with limited credit history.
- Repayment Terms: Flexible terms with monthly repayments.
Best For: Startups that need quick, unsecured loans and are looking for flexible repayment options.
Conclusion
Securing funding for a new startup can be challenging, but with the right business loan, you can ensure that your venture has the financial backing it needs to succeed.
The options listed in this blog post represent some of the best business loans available to new startups in 2025, ranging from government-backed schemes like MUDRA to venture capital funding for high-growth startups.
When choosing a loan, it’s essential to consider factors like the amount of funding you need, the interest rate, repayment terms, and eligibility requirements.
Each loan type offers its own set of benefits, so it’s crucial to assess your business’s needs and long-term goals before making a decision.
By selecting the right loan and using the funds wisely, you can set your startup on the path to success and build a strong foundation for future growth.