A shop loan is a credit facility used to purchase a shop anywhere in India. You can use the shop loan to open any type of shop, such as grocery store, clothing store, kirana store, retail outlet, coffee shop, medical store, mobile, coffee house, wine, pharmacy, or any other type of business. Loan amounts can vary depending on the nature of the business. The interest rate will also vary depending on the lending institution and the profile of the applicant.

Features and benefits

• Rate of Interest: Depends on the business needs.
• Loan amount: Rs 10,000 to Rs 2 crore
• Processing Fee: Up to 4% of the sanctioned loan amount
• Collateral: This is not required for unsecured loans
• Repayment period: 12 months to 5 years
• Foreclosure Rates: Varies from bank to bank

Eligibility criteria

• Age: Minimum 18 years and maximum 65 years
• Don't be a blacklisted business
• The business address should not be in a negative location.
• The business must be at least 6 months old.
• The applicant should not have defaulted on the loan taken from any financial institution

Required documents

• Passport size photographs
• Proof of the applicant's identity, age, address and income
• Business Address
• The duration of the business if it is already established
• Bank statements for the last 6 months

Steps to apply for a loan

Check and compare the various loan deals offered by different lenders. Once selected, applicants can choose the loan deal that best suits the business requirements by filling and submitting the loan application form online. The concerned lender will proceed with the loan proceedings. After verifying the documents and approving the loan, the loan amount will be disbursed in the bank account provided by the applicant. Applicants can also opt for government loan schemes to purchase the shop (s).

Government loan schemes

Pradhan Mantri Mudra Yojana (PMMY)

The Pradhan Mantri Mudra Yojana (PMMY) is designed to provide financial assistance to micro and small businesses, including shopkeepers. The scheme offers loans in three categories: Shishu (up to ₹50,000), Kishore (₹50,000 to ₹5 lakh) and Tarun (₹5 lakh to ₹10 lakh). Loans can be used for various purposes such as purchasing machinery, raw materials and setting up shop. The best part is that no collateral is required for loans up to ₹1 lakh. Interest rates are generally low, and the application process is fairly simple, which small business owners can access.

Stand-Up India Project

The main objective of the Stand Up India scheme is to promote entrepreneurship among women and individuals belonging to SC / ST communities. It offers loans ranging from ₹10 lakh to ₹1 crore for setting up greenfield enterprises, including opening a shop or small business in sectors such as manufacturing, services or trade. The scheme ensures that at least one woman and one SC / ST borrower gets the benefit of the loan in every bank branch. This is a great initiative for individuals from these particular categories to get funding to start their own shops or businesses.

Prime Minister's Employment Generation Programme (PMEGP)

The PMEGP scheme is an initiative to help individuals start new businesses, including shops, by providing financial assistance. Under this scheme, loans up to ₹25 lakh will be available for manufacturing units and up to ₹10 lakh for service units. In addition to the loan, the government offers a subsidy of 15% to 35%, depending on the region and the category of the applicant. This is an attractive option for anyone who wants to open a shop or small business, especially if they are SC, ST or women. The scheme has a simple eligibility criteria, which allows entrepreneurs to get the necessary funding to start their businesses.

Other Government Schemes

• Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
• National Small Industries Corporation (NSIC)
• Atmanirbhar Bharat Abhiyan - MSME Loan
• Small Industries Development Bank of India (SIDBI)
• Kishore Vikas Yojana