1) MSME Loan
Micro, Small, and Medium Enterprises (MSMEs) are vital to India's economic landscape, driving innovation, creating jobs, and accelerating growth. To support their development, the government has introduced specialised loan schemes designed to meet their unique financial needs. These MSME loans provide easy access to funding, helping businesses thrive and expand.
Key highlights
- Financial support – These schemes provide essential funding to help MSMEs launch, grow, or sustain their businesses.
- Affordable borrowing – Competitive interest rates make government business loans a cost-effective financing option.
- Simplified process – Streamlined application procedures ensure quick and hassle-free access to funds.
- Flexible repayments – Customised repayment options help MSMEs manage cash flow efficiently while focusing on expansion.
2) Pradhan Mantri MUDRA Yojana (PMMY)
The Pradhan Mantri MUDRA Yojana (PMMY) is an excellent government-backed loan scheme, particularly beneficial for women entrepreneurs and businesses in the service and trading sectors.
MUDRA (Micro Units Development and Refinance Agency Ltd.) serves as a refinancing body that supports banks and NBFCs in extending credit to small businesses.
One of the key advantages of this scheme is its collateral-free credit, allowing borrowers to access funds without pledging assets. Additionally, it offers flexible repayment periods, making it easier for businesses to manage finances.
S.No
|
MUDRA Loan Type
|
Loan Amount
|
Interest Rate
|
1
|
Shishu MUDRA Loan
|
Up to Rs. 50,000
|
1%-2% p.a.
|
2
|
Kishor MUDRA Loan
|
Up to Rs. 5 lakh
|
8.60%-11.15% p.a.
|
3
|
Tarun MUDRA Loan
|
Rs. 5 lakh - Rs. 10 lakh
|
11.15%-20% p.a.
|
3) National Small Industries Corporation
NSIC: A valuable support system for entrepreneurs
National Small Industries Corporation scheme is a game-changer for entrepreneurs seeking financial assistance in areas like technology, marketing, and finance. Recognised as one of the best government schemes for business owners, it provides essential support to help businesses grow and thrive.
NSIC schemes available
- Marketing support scheme – Businesses can leverage this scheme for marketing assistance through consortia schemes, tender marketing, and more. It helps in business promotion, brand visibility, and expanding market reach.
- Credit support scheme – This scheme offers financial assistance for essential business needs like raw material procurement, working capital, and marketing.
4) Credit-Linked Capital Subsidy Scheme (CLCSS)
The Credit-Linked Capital Subsidy Scheme (CLCSS) is a government initiative aimed at supporting MSMEs in modernizing their technology by easing the financial burden of acquiring new machinery and equipment.
- Subsidy Advantage: Offers a 15% upfront capital subsidy on the institutional finance obtained for technology upgrades.
- Maximum Subsidy Limit: Up to ₹15 Lakh for loans of a maximum of Rs. 1 Crore.
- Eligibility: Available to a broad range of MSMEs, including Sole Proprietorships, Partnership Firms, and Companies, within specified approved sub-sectors.
5) SIDBI Loan Schemes
SIDBI serves as the key financial institution supporting the growth, financing, and development of MSMEs, offering a variety of direct and indirect loan schemes.
- Direct Schemes: Includes loans such as SIDBI Make in India Loan for Enterprises (SMILE) and SIDBI Assistance to Response against COVID-19 (SARC), aimed at business modernization, expansion, and technology upgrades.
- Indirect Schemes: Provides refinancing for loans issued by banks, Small Finance Banks (SFBs), and NBFCs to MSMEs.
- Loan Amounts: Depending on the scheme, loans can range from Rs. 10 Lakh to Rs. 50 Crore or more, with flexible repayment options tailored to the borrower’s needs.
6) Udyogini Scheme
Udyogini scheme is a government-backed initiative designed to support women entrepreneurs in India. It provides financial assistance of up to Rs 15 lakh to help women-led businesses meet their operational and capital requirements.
To be eligible, applicants must be between 18 and 55 years old, with an annual income not exceeding Rs 15 lakh.
Key points to remember
- Loan opportunity: Women entrepreneurs can avail of loans up to Rs 15 lakh for business expansion and working capital.
- Financial benefits: With zero processing fees and no collateral requirement, the scheme makes funding more accessible for women-owned businesses.
7) Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
The CGTMSE is a key initiative designed to help Micro and Small Enterprises (MSEs) access credit without the need for collateral. It offers a third-party guarantee to lending institutions, ensuring coverage of a substantial portion of the loan in case of default.
- Loan Limit: Provides collateral-free term loans and/or working capital loans up to ₹2 crore.
- Objective: To support and encourage first-generation entrepreneurs to pursue self-employment ventures.
- Guarantee Coverage: Offers guarantee protection ranging from 75% to 85% of the approved loan amount, with enhanced coverage available for micro-enterprises, women entrepreneurs, and borrowers from the North Eastern Region (NER).
8) Prime Minister’s Employment Generation Programme (PMEGP)
The PMEGP is a credit-linked subsidy program designed to promote self-employment by supporting the creation of micro-enterprises in the non-farm sector.
- Maximum Project Cost: Up to Rs. 50 lakh for manufacturing units and up to ₹20 lakh for service-based enterprises.
- Subsidy: Provides a Margin Money subsidy ranging from 15% to 35% of the total project cost, depending on the category of the borrower (General or Special) and the enterprise’s location (Urban or Rural).
9) The Stand Up India Scheme aims to foster entrepreneurship among women and individuals from marginalised communities.
- Target Group: SC/ST and women entrepreneurs seeking to establish a Greenfield enterprise (a first-time venture) in manufacturing, services, trading, or allied agricultural sectors.
- Loan Range: Offers composite loans (including both term loan and working capital) ranging from ₹10 lakh to ₹1 crore.
- Key Provision: Each bank branch is expected to support at least one SC/ST borrower and one woman borrower. In the case of non-individual enterprises, the majority ownership must rest with an SC/ST or woman entrepreneur.
Other important government loan options for businesses
Apart from the schemes mentioned above, several other government-backed loan programs are available to help strengthen and expand your business. Some notable ones include:
- NABARD Loan Scheme: Designed to support rural enterprises, agricultural activities, and allied sectors by offering long-term credit and refinancing facilities.
- PM SVANidhi Scheme: Provides phased working capital loans of up to Rs. 50,000 to street vendors and micro-business owners, with an emphasis on encouraging digital payments and financial inclusion.
More government loan options for businesses
In addition to the options mentioned earlier, there are several other government-backed loan schemes that can help boost your business. Here are a few to consider:
- Credit Guarantee Fund Scheme (CGTMSE) – The CGTMSE scheme provides financial assistance to small businesses without requiring collateral. It helps businesses access loans easily to manage and expand operations.
- Stand Up India loan scheme – Stand Up India loan scheme is designed to support entrepreneurs from SC/ST and women categories, this scheme provides loans for setting up greenfield projects.
- NABARD loan scheme – The NABARD loan scheme is aimed at supporting rural businesses, this scheme provides funding for various agriculture and allied activities, boosting businesses in rural India.
- Prime Ministers' Employment Generation Programme (PMEGP) – The Prime Ministers' Employment Generation Programme aims to create new jobs and self-employment, this scheme offers financing for setting up micro-enterprises.
These schemes offer flexible terms, making it easier for businesses to access much-needed funding for growth and expansion.
Benefits of government loan schemes
- Lower interest rates: Government loan schemes usually offer lower interest rates.
- Collateral-free: Many government loan schemes are collateral-free, making it easier for new or small businesses to obtain financing.
- Simplified application process: The application process for government loan schemes is relatively straightforward, with fewer bureaucratic hurdles.
- Longer repayment tenure: Repayment tenure for government loans is often longer than for private lenders, resulting in lower EMIs and less burden on businesses.
In conclusion, government loan schemes offer significant benefits to small businesses, including lower interest rates, simplified application procedures, and collateral-free business loans. By understanding the available schemes and choosing the right one that meets their business requirements, small businesses can secure the financing necessary to grow their businesses.
Helpful resources and tips for business loan borrowers
