Best Loan Schemes for Indian Startups in 2026

In the dynamic landscape of India’s burgeoning startup ecosystem, securing funding remains a pivotal challenge for entrepreneurs. Consequently, as we step into 2026, the Indian government, in alignment with its “Atmanirbhar Bharat” vision, continues to bolster initiatives that empower innovators and small businesses. Furthermore, with over 100,000 DPIIT-recognized startups as of late 2025, and projections estimating a 20% annual growth in the sector, access to affordable credit is more crucial than ever. Moreover, business loan schemes for startups in India are not just financial lifelines; they are strategic tools designed to fuel innovation, scale operations, and drive economic inclusion.

Thus, this comprehensive guide delves into the best loan schemes for Indian startups in 2026, highlighting government-backed programs, eligibility criteria, application processes, and emerging trends. For instance, whether you’re a tech whiz in Bengaluru launching an AI-driven app or a rural entrepreneur in Uttar Pradesh pioneering sustainable agriculture, these schemes offer collateral-free options, low-interest rates, and flexible repayment terms. Additionally, drawing from the latest updates in the Union Budget 2025-26, which allocated an additional ₹10,000 crore to deeptech funds, the ecosystem is poised for unprecedented support. Therefore, by the end of this article, you’ll have actionable insights to navigate these opportunities, optimize your funding strategy, and position your startup for long-term success.

Best Loan Schemes

Importantly, India’s startup journey has evolved remarkably since the launch of Startup India in 2016. Specifically, from humble beginnings with a handful of unicorns, the nation now boasts the third-largest startup ecosystem globally. However, funding gaps—particularly for early-stage ventures—persist, with 70% of startups citing capital constraints as a primary hurdle. In response, the government has rolled out targeted loan schemes under ministries like MSME, Finance, and Commerce & Industry. Moreover, these initiatives prioritize underserved segments, including women-led ventures, SC/ST entrepreneurs, and deeptech innovators, aligning with Sustainable Development Goals (SDGs) for inclusive growth.

Looking ahead, key trends include digitalization of applications via portals like Startup India Hub, integration of AI for credit scoring to expedite approvals, and enhanced credit guarantees to mitigate lender risks. For example, the Reserve Bank of India’s (RBI) recent relaxation on Loan-to-Value (LTV) ratios for gold-backed loans—up to 85% for amounts below ₹2.5 lakh—further eases collateral burdens. Additionally, the expansion of the Fund of Funds for Startups (FFS) to ₹20,000 crore signals a robust push towards venture debt and equity-linked instruments.

Therefore, this article will break down the top schemes, offering detailed eligibility, benefits, and tips. In fact, if you’re searching for “best startup loans in India 2026” or “government funding for MSMEs,” read on to unlock these resources and transform your business idea into a thriving enterprise.

Why Loan Schemes Matter for Indian Startups in 2026

Firstly, before diving into specifics, it’s essential to understand the broader impact. Notably, traditional bank loans often demand collateral, deterring 60% of early-stage founders. However, government schemes bridge this gap by offering guarantees, subsidies, and simplified norms. For instance, in 2025 alone, schemes like PMMY disbursed over ₹3 lakh crore to micro-enterprises, fostering 1.5 crore jobs. Furthermore, for 2026, expect streamlined Udyam registrations and blockchain-based verification for faster DPIIT approvals.

Additionally, these programs promote sector-specific growth: fintech in Mumbai, agritech in Punjab, and edtech nationwide. Consequently, with India’s GDP projected to hit $5 trillion by 2027, startups leveraging these loans will play a starring role in this narrative.

Top Government Loan Schemes for Startups in 2026

Here, we spotlight the premier schemes, categorized by focus areas. Specifically, each includes key features, eligibility, and application steps, based on 2025-26 guidelines from official sources.

1. Credit Guarantee Scheme for Startups (CGSS): The Collateral-Free Powerhouse

Importantly, launched under DPIIT, CGSS is a game-changer for risk-averse lenders, providing guarantees up to 85% on loans for DPIIT-recognized startups. Moreover, in 2026, the scheme’s corpus expands to cover up to ₹20 crore per borrower, with enhanced coverage for deeptech ventures.

Key Features:

• Notably, Guarantee Cover: 85% for loans up to ₹5 crore; 75% for ₹5-10 crore; 65% above ₹10 crore (up to ₹20 crore max).
• Furthermore, Interest Rates: 8-12% (bank-dependent), with no processing fees for startups.
• Additionally, Tenure: Up to 10 years, including moratorium.
• Purpose: Working capital, term loans, or venture debt for prototype development and scaling.

Eligibility Criteria:

• Firstly, DPIIT-recognized startup (less than 10 years old, turnover < ₹100 crore).
• Secondly, Viable business plan and positive credit score (CIBIL > 650).
• Lastly, Excludes real estate, trading in transferable securities.

How to Apply:

1. Firstly, register on Startup India portal (startupindia.gov.in) for DPIIT recognition—takes 2-3 days.
2. Next, approach Member Institutions (MIs) like SBI, HDFC, or NBFCs (e.g., SIDBI).
3. Then, submit KYC, business plan, and financial projections; guarantee activates automatically upon approval.
4. Finally, track via NCGTC portal (ncgtc.in).

Significantly, in 2025, CGSS facilitated ₹15,000 crore in loans, empowering 5,000+ startups. Furthermore, for 2026, integrations with fintech platforms like Razorpay will speed up disbursals to under 30 days.

2. Pradhan Mantri Mudra Yojana (PMMY): Micro-Loans for Micro-Dreams

Specifically, PMMY, under the Ministry of Finance, targets non-corporate, non-farm micro-enterprises with three tiers: Shishu (up to ₹50,000), Kishore (₹50,000-₹5 lakh), and Tarun (₹5-₹10 lakh). Thus, it’s ideal for bootstrapped startups in retail, services, or light manufacturing.

Key Features:

• Notably, Collateral-Free: Up to ₹10 lakh without security.
• Furthermore, Interest: 7-9% for women/SC/ST borrowers.
• Additionally, Repayment: 5-7 years.
• Lastly, Add-Ons: Insurance cover and priority sector lending tag.

Eligibility:

• Firstly, Indian citizens aged 18+ with a viable business idea.
• Secondly, No existing defaults; Udyam registration for MSMEs.
• Lastly, Focus on new ventures or expansions.

Application Process:

1. First, visit mudra.org.in or any bank/MFI branch.
2. Next, fill online form with Aadhaar, PAN, and bank details.
3. Then, submit project report; approval in 7-15 days.
4. Finally, funds disbursed via DBT (Direct Benefit Transfer).

Notably, PMMY’s 2025 disbursals hit ₹4.5 lakh crore, with 40% to women entrepreneurs. Moreover, in 2026, expect AI-driven risk assessment for 90% digital approvals.

3. Stand-Up India: Empowering Women and SC/ST Founders

Importantly, this scheme promotes greenfield enterprises by SC/ST and women entrepreneurs, offering loans from ₹10 lakh to ₹1 crore. Additionally, backed by SIDBI, it’s a nod to inclusive growth in 2026’s diverse startup wave.

Key Features:

• Notably, Composite Loans: Term + working capital.
• Furthermore, Interest: 9-11%, with 0.5% concession for women.
• Additionally, Tenure: 7-10 years.
• Lastly, Guarantee: Via CGTMSE for collateral-free up to ₹100 lakh.

Eligibility:

• Firstly, At least 51% ownership by SC/ST or women.
• Secondly, Green field project in manufacturing/services/trading.
• Lastly, Age 18+; no prior defaults.

Steps to Apply:

1. First, register on standupmitra.in.
2. Next, select lender (banks like BoB or Canara).
3. Then, upload caste/income certificate, business plan.
4. Finally, handholding support via portal; disbursal in 30 days.

Significantly, with 1.2 lakh loans sanctioned by 2025, Stand-Up India aims for 50% digital processing in 2026.

4. Startup India Seed Fund Scheme (SISFS): From Idea to Prototype

Specifically, SISFS provides up to ₹50 lakh for proof-of-concept and market entry, channeled through incubators. Furthermore, in 2026, it integrates with the new Deeptech FFS for tech-heavy startups.

Key Features:

• Notably, Funding: ₹20 lakh (grant) + ₹30 lakh (convertible debenture).
• Furthermore, Zero Equity Dilution: Non-repayable for grants.
• Additionally, Focus: 300 incubators nationwide.

Eligibility:

• Firstly, DPIIT-recognized, <2 years old.
• Secondly, Innovative product/service with market potential.
• Lastly, Incubator tie-up required.

Application:

1. First, apply via seedfund.startupindia.gov.in.
2. Next, pitch to EAC (Experts Advisory Committee).
3. Then, selection in 4-6 weeks; funds via incubator.

Notably, disbursing ₹945 crore by 2025, SISFS will target 1,000 startups in 2026.

5. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): MSME Safety Net

Importantly, CGTMSE guarantees up to 85% on loans up to ₹5 crore for MSMEs, including startups. Additionally, its 2026 updates include higher LTV for hybrid models.

Key Features:

• Notably, Coverage: 75-85% guarantee.
• Furthermore, Loans: Up to ₹2 crore collateral-free.
• Additionally, Rates: 8-10%.

Eligibility:

• Firstly, Udyam-registered MSME.
• Secondly, Viable project; turnover < ₹250 crore.

Apply:

1. First, Udyam portal registration.
2. Next, approach MLI (e.g., SIDBI).
3. Then, auto-guarantee on sanction.

Significantly, over 70 lakh guarantees issued by 2025.

6. SIDBI Schemes: SMILE and MSME Loans

Specifically, SIDBI’s SMILE offers term loans up to ₹25 crore for expansion, with 15% subsidy. Moreover, direct loans for startups up to ₹10 crore.

Key Features:

• Notably, Moratorium: Up to 3 years.
• Furthermore, Rates: 9-12%.
• Additionally, Sectors: Manufacturing, services.

Eligibility:

• Firstly, MSME status; 3+ years experience preferred.

Process:

1. First, sidbi.in application.
2. Next, document submission.
3. Then, approval in 45 days.

Importantly, SIDBI’s FFS expansion to ₹20,000 crore in 2026 boosts deeptech.

7. Bank-Specific Schemes: SBI’s MSME Udaan and BoI’s Star Startup

Specifically, SBI’s MSME Udaan provides term/working capital up to ₹50 crore with CGSS cover. Similarly, BoI’s Star offers up to ₹10 crore for DPIIT startups.

Features: Notably, Collateral up to 25%; rates 8.5-11%.

Eligibility: Firstly, Startup recognition; business plan.

Apply: Specifically, Bank branches or online portals.

Notably, these schemes disbursed ₹50,000 crore in 2025.

Scheme	Max Loan (₹)	Interest Rate	Collateral	Target Group	2026 Update
CGSS	20 Cr	8-12%	Free up to 10 Cr	All startups	Deeptech focus
PMMY	10 Lakh	7-9%	Free	Micro-enterprises	AI approvals
Stand-Up India	1 Cr	9-11%	Free up to 100L	Women/SC/ST	50% digital
SISFS	50 Lakh	N/A (Grant)	N/A	Early-stage	1,000 slots
CGTMSE	5 Cr	8-10%	Free up to 2 Cr	MSMEs	Higher LTV
SIDBI SMILE	25 Cr	9-12%	Partial	Expansion	₹20K Cr FFS
SBI MSME Udaan	50 Cr	8.5-11%	Up to 25%	Startups	Fintech integration

How to Choose the Right Loan Scheme for Your Startup in 2026

Importantly, selecting the optimal scheme hinges on your stage, sector, and needs. For example, early-stage? Opt for SISFS or PMMY. Alternatively, scaling up? CGSS or SIDBI. Furthermore, assess via tools on startupindia.gov.in. Moreover, factor in rates (benchmark against RBI repo at 5.5%), tenure, and subsidies. Additionally, consult facilitators on the portal for tailored advice.

Emerging Trends in Startup Loans for 2026

Significantly, the Budget 2025-26 introduces PM Research Fellowship for innovators and expanded SAMRIDH for product startups. Moreover, green loans under Make in India will offer 1% rate concessions for sustainable ventures. Furthermore, digital platforms like OPL Loans will enable instant approvals.

Conclusion: Fuel Your Startup’s Future with Strategic Funding

Specifically, as 2026 unfolds, India’s loan schemes for startups stand as beacons of opportunity, blending financial support with policy innovation to nurture the next generation of unicorns. For instance, from CGSS’s robust guarantees to SISFS’s seed grants, these programs democratize access to capital, enabling diverse founders to thrive. Thus, by leveraging them, you’re not just securing funds—you’re contributing to a $1 trillion digital economy by 2028.

Therefore, take the first step: Register on Startup India today and craft a compelling business plan. Moreover, with persistence and the right scheme, your startup can soar. Importantly, remember, every global giant started small; in India, government backing makes the ascent steeper but surer. Hence, here’s to turning ideas into impact—cheers to your entrepreneurial journey in 2026!

Finally, for more financial insights, explore our guides on Home Loan Approval Tips 2026, Best Ways to Invest in Gold 2026, GST Reforms 2025, Smart Retirement Investment Planning 2026, and Life Insurance for Millennials and Gen Z in 2025-26. Additionally, for external resources, visit Startup India.