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.
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:
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:
Note:
4. 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.
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.
Also Read: A Quick Guide To Finding The Right Loan For Your Business
Yes, startups fulfilling the eligibility criteria can apply for a 10 lakh business loan under these schemes. They may need to provide a detailed business plan and financial projections to demonstrate viability.
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