Finance is the lifeblood of businesses and businesses, the lifeline of a country. Business financing is a crucial cog of the financial services sector and a prime driver of any economy. Businesses of all shapes and sizes are powering the country forward in a thriving and proliferating economy like India. There are more than 1.48 million registered corporations in the country and around 8 million registered MSMEs, with a total of 63 million as of 2021, which contribute immensely to the country’s GDP and offer huge opportunities for employment to different classes of skilled labour for years on end.
The Micro, small and medium enterprises sector in India contributes more than 30% of the country’s total GDP. Intending to further strengthen the sector and boost overall economic growth, the Government of India offers an array of convenient financing options through public sector banks, cooperative banks, regional rural banks, and micro-finance institutions.
Here, in this article, we take a look at seven prominent government loan schemes.
Business Loans by Indian Government
Government loans offer many beneficial features for businesses, such as attractive interest rates, zero-collateral requirements, refinancing options, comfortable loan tenures, and the like.
We begin with one of the most popular public sector bank loan schemes, MSME Business Loans, in 59 minutes.
Get the Best Deals on Government Business Loans
1. MSME Business Loans
The MSME loan in 59 minutes is a PSB loan designed specifically for quick disbursal. The Indian Government offers a simple and intuitive online portal for high-speed processing with minimal documentation.
The MSME Loan, in 59 minutes, automates the entire loan approval process with necessary human interaction occurring only at the last sanction stage. India uses the latest technologies for improved safety & security and faster processing.
Rate of Interest:
The interest rate varies according to the applicant’s business, with initial rates starting at 8.5%.
Loan Amount:
The loan amount ranges from Rs. 1 lakh to Rs. 5 lakhs.
Collateral-free Loans:
This government scheme disburses loan amounts instantly to the business’s bank account without the need for any collateral.
Fast access to financial assistance:
The MSME loan schemes offer instant access to government financial support to any eligible business without any hassle or red tape.
2. MUDRA Loans under PMMY
Next, we have the MUDRA Scheme under the Pradhan Mantri Mudra Yojana banner. The term MUDRA is an acronym for Micro Units Development and Refinancing Agency.
The MUDRA Scheme offers refinancing support to banks, non-banking financial companies, and micro-financing institutions that offer loans of up to Rs. 10 lakh to small-scale businesses. Eligible businesses can apply avail of these loans by applying at PSBs, NBFCs, and other kinds of financing institutions offering these schemes. They can also apply through the official MUDRA loan online portal and even through Yubi.
Features:
Collateral-free Loans
Businesses can avail of up to Rs. 10 lakhs in loan amount without putting anything up as collateral.
Competitive Interest Rates from Banks/NBFCs
Designed to aid the MSME sector, the rate of interest of these government credit facilities is well within the capabilities of small-scale industries.
Loan Amount up to Rs. 10 lakh
Three variations of the MUDRA schemes offer loan amounts from as low as Rs. 50000 to up to Rs. 10 lakhs.
Nil Processing Fee
To spur further growth & development, the Government offers a simple, hassle-free loan approval process with zero processing fees.
Zero Prepayment Charges
Enterprises are permitted to close the loan entirely before the end of the tenure without worrying about any penalties or prepayment charges.
Repayment Tenure from 12 months to 5 years
Lending institutions allow businesses to choose from various repayment tenures as per their expediency. Repayment tenures range from 12 months to 5 years per the MUDRA scheme.
Concessional Interest Rates for Women Entrepreneurs
The PMMY MUDRA Yojna also offers loans to women entrepreneurs at discounted interest rates.
Eligibility Criteria
Two key eligibility factors for availing of the s are:
- The loan applicant must be between 18 and 65 years of age during the time of application.
- The business has good creditworthiness with zero defaults and good repayment history.
Types of 3 Mudra loan schemes along with offered loan amount:
Shishu: Loan Scheme: Up to Rs. 50,000
Avail small-scale loans for working capital or equipment upgrades with the Shishu loan scheme, which offers loans of 1% to 12% per annum.
Kishor: Loan Scheme: From Rs. 50,001 and up to Rs. 5,00,000
The Kishor loan scheme provides a credit facility of up to Rs. 5 lakhs at interest rates of 8.6 to 11.5 % per annum.
Tarun: Loan Scheme: From Rs. 5,00,001 and up to Rs. 10,00,000
The third version of the MUDRA Yojna is the Tarun scheme, with loan offerings from Rs. 5 lakhs to up to Rs. 10 lakhs.
3. Stand-Up India
The Stand Up India Scheme is another loan scheme offered by the Indian Government’s Small Industries Development Bank of India. Designed to offer financial support to the scheduled castes & tribes and female entrepreneurs, the scheme allows applicants to avail of loans from Rs. 10 lakhs to Rs. 1 crore from partner banks.
Interest Rate & Features:
The loan clubs’ interest rate, the bank’s base rate, the loan tenure, and an additional 3%. The total interest rate applicable thus varies across bank branches per the loan amount & tenure.
Loans are offered to a minimum of one SC/ST borrower and a single female applicant per bank branch.
Eligibility Criteria
- Eligible businesses include those belonging to the manufacturing, trading, and services sector.
- Only Greenfield projects or brand new ventures in the above sectors are eligible for this scheme.
- The borrower must not have any history of default with any financing institution.
- Applicants must be above 18 years of age.
- In the case of partnership firms or joint ventures, the loan applicant must have at least a 51% ownership stake in the business.
4. Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGFMSE)
CGFMSE is a Government of India initiative for micro and small-scale businesses. This fund scheme was designed to speed up and facilitate the injection of government funds into the budding startup & the MSME sector.
Numerous public sector banks, rural, regional banks, and even certain foreign & private banks are partnership firms for this scheme. The Ministry of Micro jointly developed the Credit Guarantee Fund Trust, Small and Medium Enterprises and the Small Industries Development Bank of India.
Features:
- Term loans and working capital loans of up to Rs. 2 crores can be availed by MSMEs.
- The scheme offers guarantee cover for up to 75% for loans up to Rs. 1.5 crore, 85% for loans up to Rs. 5 lakhs and 80% for women-led entrepreneurship & MSMEs from Sikkim & North-East India.
- Retail MSMEs can enjoy loan guarantee cover of up to 50% of the default amount for loans within Rs. 50 lakhs.
- Businesses can avail of loans without any security.
- Trust fund fees are charged at 1% of the total sanctioned amount; 0.75% for loans up to Rs. 5 lakhs and 0.85% for loans within Rs. 5 lakhs to 1 crore.
Eligibility Criteria:
MSMEs in the services and manufacturing sector, educational institutions, training institutions, and self-help groups are eligible for this scheme.
5.National Small Industries Corporation Subsidy
The National Small Industries Subsidy Scheme is an ISO-certified scheme of the Indian Government that aims to boost the growth of small-scale businesses & industries. This holistic development scheme offers aid for different aspects of existing businesses, such as financing, marketing, technology, etc. and extends support to all small enterprises & industries all across India.
Marketing Support Scheme: The NSIC offers significant marketing support through different consortia for tender marketing, exhibitions, and trade & technology fairs, as well as providing marketing intelligence support by delivering information regarding different schemes & opportunities for MSMEs.
Credit Support Scheme: The credit guarantee scheme offers financing support for supply chain & equipment procurement, marketing, and financing through partnered lending institutions.
Features:
Cost-free Tenders:
Small-scale industries availing of this scheme can access tenders completely free of cost.
No Security Deposit Required:
Businesses availing of the credit support scheme of the NSIC do not have to make any security deposit.
Land and Building Financing:
For projects below Rs. 25 lakhs, the scheme offers real state and building infrastructure development support.
6. Credit Link Capital Subsidy Scheme for Technology Upgradation
An innovative financing and credit support scheme, the Credit Link Capital Subsidy is the first of its kind in India. This credit facility primarily aims to lend working capital support to MSMEs in rural and semi-urban areas for technology upgradation.
The subsidy scheme enables a business to buy and upgraded equipment & acquire new technologies at subsidised prices. Companies can avail of up-front subsidies of up to 15 % on capital purchases. The subsidy scheme helps keep production costs down allowing MSMEs to offer their products & services at competitive prices.
The maximum subsidy amount is capped at Rs. 15 lakhs, and the scheme can be availed by sole proprietorships and private & public limited companies in the MSME sector.
7. Udyogini
An innovative financing and support scheme for women entrepreneurs, Udyogini helps female-led businesses meet their capital requirements.
Businesswomen can borrow up to Rs. 15 lakhs for business operations and capital requirements. To be eligible, they should be between 18 & 55 years of age during the application, and their annual income must be at most 15 lakhs.
Unique features of this scheme include zero processing fees and no need for any collateral. The official government website of the Udyogini scheme lays down other details and requirements, such as necessary documentation and other critical criteria.
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FAQs
What minimum loan amount can be availed under government loan schemes?
Rs. 10000 is the minimum amount a business can avail of from central loan schemes.
How many government loan schemes are for MSMEs or startup businesses?
The Indian Government offers 100+ loan schemes for MSMEs and startups; seven of the most prominent ones are listed in this article.
How can I get a government small business loan to start a new business in India?
You can visit the Start UP India home page (https://www.startupindia.gov.in/content/sih/en/home-page.html ) or a bank or micro-financing institution that offers these schemes as a partner body.
How do I get a government loan under PMMY to start a business?
Apply for the PMMY loan scheme online or visit the nearest bank that offers this scheme.
How to contact the person behind the schemes?
The official page of any government loan scheme has contact details with phone numbers & e-mail addresses that connect businesses with support teams.
How can I get a government loan for a business in India?
There are different government loan schemes for MSMEs in India. Go through this article to learn about seven of the most popular ones.
How much loan can I get for a small business under Mudra Yojana?
You can get up to Rs. 10 lakhs under the Mudra Yojna.
How do you get a Startup loan for beginners that banks or financial institutions do not support?
In these cases, micro-financing institutions, non-banking financial institutions, and government loan schemes are the best financing avenues.
How to avail of loans for a startup?
If banks do not offer loans to a startup, then the Indian Governments startup loan scheme is the best way to get debt financing.
How do Government Business loan schemes work?
Brought forth to strengthen the MSME & startup sector, these schemes offer a variety of loan amounts at attractive rates & comfortable tenures, offer subsidies, provide hassle-free approval processes, have zero processing fees and collateral needs, and offer guarantee cover.
What are the requirements to avail of a government business loan?
Requirements and eligibility vary from one scheme to another. Typical factors looked into are business turnover, credit amount sought, nature of business, credit score, capital invested, and age of the applicant.
Can grocery businesses or businesses relating to organic farming apply for government loans?
Yes, they can if they meet the eligibility criteria.
Are any special government loan schemes introduced for women who want to start their businesses?
Udyogini and Stand Up India are two path-breaking loan schemes introduced for women entrepreneurs.
What is the minimum amount of loan granted by the Government under the various schemes introduced by the Government to grant loans to small businesses?
Rs. 10000 is the minimum loan amount that can be availed.
What is the maximum amount of loan an individual can avail of under the government loan schemes for small businesses?
Maximum loan limits vary across different schemes.
How can I pay my small-scale business loan?
Electronic clearing services and direct debits are preferred repayment avenues for small-scale businesses.
Do I need to provide any collateral or security to avail of a government loan for a small-scale business?
No, all Government sponsored loan schemes are collateral free.
