Understanding the Tarun Loan: Features, Eligibility, and Application Process

When Indian entrepreneurs hear about a Tarun loan, they often wonder if it’s a gimmick or a genuine financing option. In reality, a Tarun loan is a type of business loan offered by certain NBFCs and fintech platforms aimed at micro, small, and medium enterprises (MSMEs) that need quick, flexible funding without the red‑tape of traditional banks.

Key Takeaways

• The Tarun loan is an unsecured or lightly secured business loan tailored for MSMEs.
• Eligibility focuses on cash flow, business vintage, and credit score rather than heavy collateral.
• Interest rates are usually higher than bank loans but lower than informal money‑lenders.
• Disbursement can happen within 24‑48 hours after approval.
• Repayment options include flexible EMIs, bullet payments, and revenue‑linked schedules.

What Exactly Is a Tarun Loan?

Tarun loan is a short‑term business financing product designed for MSMEs in India, typically ranging from INR 1 lakh to INR 5 crore. It was introduced in 2021 by a group of non‑bank financial companies (NBFCs) that wanted to fill the gap left by conventional banks, which often require extensive paperwork and high collateral.

The name “Tarun” doesn’t refer to a person; it’s a branding choice meant to convey youthfulness and agility in lending.

How Does the Tarun Loan Fit Into the Indian Lending Landscape?

India’s lending ecosystem is overseen by the Reserve Bank of India (RBI). While the RBI regulates banks, it also sets guidelines for NBFCs. Tarun loans operate under these NBFC guidelines, which allow more flexibility than the strict Basel III norms that banks must follow.

Compared to a traditional bank loan, a Tarun loan typically offers:

• Faster processing (often in under 48 hours).
• Lower documentation requirements.
• Eligibility based on cash‑flow projections rather than property collateral.

However, the trade‑off is a slightly higher interest rate-usually between 12% and 18% per annum, depending on borrower risk.

Eligibility Criteria: Who Can Apply?

Tarun loans target the MSME segment, defined by the Ministry of Micro, Small & Medium Enterprises as businesses with investment up to INR 50 crore or turnover up to INR 250 crore.

Typical eligibility factors include:

1. Business vintage: Minimum 1‑2 years of operation.
2. Monthly revenue: At least INR 2‑3 lakh, showing stable cash flow.
3. Credit score: A CIBIL score of 650 + is preferred, though some lenders consider alternative data.
4. Collateral (if any): While many Tarun loans are unsecured, lenders may ask for a modest asset, such as inventory or a post‑dated cheque, as a safety net.

Because the loan focuses on cash flow, businesses with seasonal spikes can still qualify if they can demonstrate repayment capacity during peak months.

Application Process: Step‑by‑Step Guide

1. Pre‑check eligibility: Use the lender’s online calculator. Input turnover, tenure, and credit score to get a quick estimate.
2. Gather documents: PAN, Aadhaar, GST registration, bank statements (last 6 months), and a basic business plan.
3. Submit online application: Fill the form on the lender’s portal. Most platforms allow DSLR‑style photo uploads of documents.
4. KYC and verification: The lender cross‑checks PAN/Aadhaar and may request a site visit for larger amounts.
5. Credit assessment: Using a mix of traditional scores and alternative data (e.g., payment history on trading platforms).
6. Approval and disbursement: Once approved, funds are transferred directly to the borrower’s bank account, often within 24‑48 hours.

If any document is missing, the process can be delayed by a day or two. Promptly responding to lender queries helps maintain the fast turnaround promise.

Interest Rates, Fees, and Repayment Options

Tarun loans employ a transparent fee structure. Common components are:

• Base interest rate: 12%‑18% per annum, fixed for the loan tenure.
• Processing fee: 1%‑2% of the sanctioned amount, deducted at disbursement.
• Pre‑payment penalty: Usually waived after the first 6 months; this encourages early repayment.

Repayment can be customized:

1. Equated Monthly Instalments (EMI): Fixed amount each month.
2. Revenue‑linked repayment: A percentage of monthly sales, useful for seasonal businesses.
3. Bullet payment: Interest‑only payments monthly, with the principal due at the end of the tenure.

Choosing the right schedule depends on cash‑flow predictability. For example, a garment exporter may prefer revenue‑linked repayments to match export cycles.

Pros and Cons of a Tarun Loan