Finance

5 Government Loan Schemes for Small Businesses in India

The number of small businesses is growing at a rapid speed. This growth is highly beneficial for the national economy and for employment creation. Hence, to encourage the growth of small businesses, the Government of India has launched various mudra loan schemes for Micro, Small and Medium Enterprises (MSMEs). These schemes aim to facilitate the growth of existing small businesses and to help entrepreneurs open their new start-ups successfully.

Pradhan Mantri Mudra Yojana (PMMY)

The PMMY scheme offers loans to different service and business sector enterprises under MUDRA or the Agency of Micro Units Development and Refinance. Usually, this scheme provides loans up to Rs. 10 lakh by banks without any collateral.

Eligibility

Non Corporate Small Business Segments (NCSBs) are eligible to apply for this Mudra Loan. Some NCSBs in India are listed here.

  • Service sector enterprises
  • Small manufacturing units
  • Artisans
  • Shopkeepers
  • Small industries
  • Repair shops
  • Machine operators and others

Fiscal Incentives 

The incentives offered by MUDRA is distinguished in three divisions-

  • Shishu PMMY loan: Loans up to Rs. 50,000
  • Kishor PMMY loan: Loans from Rs. 50,000 to Rs. 5 lakh
  • Tarun PMMY loan: Loans from Rs. 5 lakh to Rs. 10 lakh

MSME Loan for start-ups

This MSME loan is provided to MSME units by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). The scheme aims at the automation of loan application and approval procedure in such a way that the applicant gets eligibility letter along with the loan approval within 59 minutes to ensure quick financial assistance to those who need it.

Eligibility

Borrowers must comply with GST and IT. They should have a bank statement of at least 6 months to be eligible for this loan. Banks or NBFCs check the borrower’s repayment capacity, existing credit facilities, etc. before determining his eligibility.

Fiscal Incentives

The loan amount provided to business start-ups under this scheme ranges from a minimum of Rs. 1 lakh to a maximum of Rs. 5 crores. The interest rate on this scheme starts from 8.50% onwards.

Credit Guarantee Scheme

This loan scheme was launched by the government to strengthen the credit delivery system to MSMEs. The lending institutions under this scheme include public, private, rural as well as foreign banks and the State Bank of India along with its associate banks. This scheme is granted by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).

Eligibility

MSMEs involved in manufacturing or service sector activities are eligible to avail this loan. However, retail trade, educational institutions, self-help groups, agriculture and training institutions are not eligible for this scheme.

Fiscal Incentives

The incentives offered by this MSME loan are-

  • Working capital loan of up to Rs. 2 crores to entrepreneurs.
  • 75% of credit facility, up to Rs. 1.5 crore as a guarantee cover.
  • 85% of credit facility, up to Rs. 5 lakh to micro-enterprises
  • 80% of credit facility to women-owned MSMEs and to the North Eastern Region.

SIDBI Make In India Soft Loan Funds for MSMEs (SMILE)

Headed by Small Industries Development Bank of India (SIDBI), the SMILE scheme is offered to MSMEs to meet their financial requirements in running their business. This scheme was launched in 2015 with the aim to meet the debt-equity ratio of enterprises. The rate of interest on the SMILE scheme is from 8.36%. 

Eligibility

New and existing manufacturing and service sector units can avail this loan. Existing enterprises starting other projects or undertaking up-gradation can also apply for this scheme. 

Fiscal Incentives 

This scheme offers a loan amount starting from Rs. 25 lakh to borrowers.

Stand-Up India

Stand-up India scheme has been launched with the aim to provide financial help to entrepreneurs who come from SC and ST category or to women entrepreneurs. This initiative is governed by the SIDBI and offers loans of up to Rs. 1 crore.

Eligibility

All manufacturing, trading and service sector units can apply for this loan. For group enterprises, at least 51% of the company’s shares must be with a woman or an SC/ST entrepreneur.

Fiscal Incentives

The scheme offers the following incentives to entrepreneurs.

 

  • It offers term loan and working capital between Rs. 10 lakh to Rs. 1 crore.
  • The loan amount is expected to cover 75% of the project cost of the borrower
  • The rate of interest on this scheme would be the lowest applicable rate, that is, calculated as, (Basic Rate(MCLR)) + 3% + Tenor Premium

 

You can apply for the MSME loan scheme that suits your need for capital requirements to give a kickstart to your business. These loan schemes launched by the Indian Government can be a strong backbone to help small businesses run successfully.

 

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