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Top Government Business Loan Schemes in India

Top Government Business Loan Schemes in India
The MSME sector is a key contributor to the Indian economy. It is accountable for 29% of the country's total GDP. Yet, the industry frequently cites the difficulty in securing funds. According to a report prepared by the Reserve Bank of India's MSME expert committee, the MSME sector has an estimated credit deficit of around Rs. 20-25 trillion. To deal with this, the government, in recent years, has come up with various business loan schemes. These initiatives provide significant financial assistance to MSMEs, allowing them to focus on enhancing their business operations and planning expansion. Here are the top 6 business loans given by the government.
 

Top 6 Business Loans By Government 

 

  1. PMMY (Pradhan Mantri Mudra Yojana)

    The Government of India introduced this scheme in April 2015. The scheme's primary objective is to provide funding for business to the underserved sections of society. The government aims to boost economic growth and regulate microfinance institutions with this scheme. Mudra loans are unsecured loans. It is available in three different loan forms. 
     
    Loan Type Loan Amount Interest Rate
    Shishu Loans Up to Rs 50,000 1% to 12% p.a.
    Kishore Loans Rs 50,001 to Rs 5,00,000 8.60% to 11.15% p.a.
    Tarun Loans Rs 5,00,001 to Rs 10,00,000 11.15% to 20% p.a. 
     

    Eligibility:

    • The minimum and maximum age limits for applying for a Mudra loan are 18 and 65, respectively.
    • Mudra loan is available to shopkeepers, traders, vendors, and other businesses involved in service activities.
    • The loan is available for the purchase of commercial vehicles.
    • You can also use it to finance equipment or meet your business's working capital needs.
     

  2. MSME Loan in 59 Minutes

    This government small business loan scheme was launched in 2018 to improve credit facilities for small and medium-sized businesses. It allows you to avail a loan of up to 5 crores within an hour. The minimum loan offered under this loan is Rs 1 lakh.  You can apply for this loan through an online portal managed by SIDBI.
     

    Eligibility:

    • The loan is available to individuals over the age of 18 years.
    • If you are a business entity (non-individual), you must have a GST registration certificate, Income Tax Return (ITR) for the last year, and the last six months' bank account statement.
    • Before approving this loan, the lender evaluates your existing credit facilities, income and business revenue, and repayment capacity.
     

  3. Stand-Up India Scheme

    The Government of India introduced this scheme in 2016. The main goal of this loan is to help women and Schedule Caste (SC) and Schedule Tribe enterprises get funding assistance. If you wish to apply to this scheme, make sure your company has at least 51% of its shares held by women or SC/STs. In addition, you must be involved in the trading, service, manufacturing, or agri-allied industries.
     
    Note:
    • The Stand-up India scheme offers funds for the value ranging between Rs. 10 lakhs and Rs 1 crore. The repayment period of this scheme is seven years.
    • Another key feature of this scheme is that it is unsecured, requiring no collateral or guarantor.
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  1.  

  2. CGFMSE (Credit Guarantee Fund Scheme for Micro and Small Enterprises)

    This scheme is a joint initiative between the Government of India, the Ministry of Micro, Small & Medium Enterprises, and the Small Industries Development Bank of India (SIDBI). Under this scheme, you can apply for the maximum amount of Rs. 200 lakhs. The guaranteed cover available under this scheme ranges from 75% to 85% for SMEs.  But, the coverage drops to 50% when it comes to retail activity. 
     
    Note: According to the scheme guidelines, existing or new businesses can apply for this loan only if they are engaged in manufacturing and services, including retail trade. However, if you run an educational institution, training institute, agriculture business or belong to self-help groups, you are not eligible for this loan. 
     

  3. National Small Industries Corporation Subsidy

    It is an enterprise of the Government of India that aims to facilitate the growth of the MSME sector. The support provided under this scheme is not limited to financial aid. It also assists you with marketing, IT, and other issues. Here is how.
     

    • Consortia and Tender Marketing:

      The procurement of raw materials and obtaining bulk orders are the two most significant challenges you encounter as a small firm. To help you in this case, NSIC submits a tender on your behalf. Once it receives the order, it will assign you the same, based on your manufacturing capability.
     

    • Exhibition and Technology Fairs:

      NSIC organises  fair every year to showcase the potential of MSME in India. It also highlights the underlying opportunities that you can catch as a small business owner.
       

    • Credit Support from banks:

      NSIC also provides you assistance in getting the  financial assistance for raw materials procurement, managing your marketing campaigns, and more from various nationalised & private bank.
       

  4. SMILE (Make in India Soft Loan Fund for MSMEs)

    SMILE is a flagship scheme of the Small Industries Development Bank of India. This government scheme aims to promote the Government of India's Make in India mission with the help of the MSME industry.
     
    Note: The minimum funds offered under this scheme is Rs 50 lakhs for new businesses. Whereas; existing businesses can apply for a minimum of Rs 25 lakhs. SMILE is a kind of soft government business loan scheme meant for meeting the debt-equity ratio of enterprises. SIDBI's SMILE scheme currently serves 25 sectors. Some of them are listed below.
     
    • Defence Manufacturing
    • Media & Entertainment
    • Pharmaceuticals
    • Wellness Sectors
    • Aviation
    • Bio-Technology and Chemicals
    • Tourism & Hospitality
     

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Eligibility:

  • To apply for this loan, a minimum business experience of five years is necessary.
  • You must furnish documents such as GST for the financial year, the last six months' bank account statement, and the latest audited financials. 
  • The business loan interest rate is determined by your business financials and existing debts.
 
Also Read: A Quick Guide To Finding The Right Loan For Your Business
 

To Conclude:


As an MSME, it is vital to get financial support at the right time. And this is where government lending schemes can help. The government offers these schemes keeping all the business requirements in mind. However, before applying for the one, make sure you understand the nature of the loan and go through the minimum eligibility criteria.
 


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Did You Know

Disbursement

The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.

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