Government Loan Schemes for Small Business in India


India recently got recognition as an emerging market of the world in terms of business expansion and growth. The SME sector of India contributes to over 40% of the total Gross Domestic Product rate of the country. Thus, SME growth is a pivotal part of Indian economic growth. To foster the growth of the Indian economy, the Government of India promotes several Business Loan schemes for small business firms.

1. MSME Business loan

This is one of the most popular business loan schemes in the market which was announced in September 2018. The loan under the MSME business scheme is provided for encouraging the small businesses. Five authorized banks of the public sector provide these funds. When you Apply for Business Loan, interest rate depends on the credit health and nature of the business.
The eligibility for this MSME loan is assessed after verification of the GST, the bank account statements of the last 6 months, tax verification, and KYC details.

2. MUDRA Loans

MUDRA stands for Micro-units Development and /Refinance Agency. This is an organization which was established by the Government of India for the micro-business units. The Business Loans under this scheme are provided to small companies and specifically, start-ups. These loans are usually distributed through the private and public sector banks, co-operative societies, small banks, scheduled commercial banks, and the rural banks. The loans are offered for the units working in the trading, services, and manufacturing sector. The MUDRA loans are given under the following structure:

• Sishu Loans: up to an amount of Rs, 50,000

• Kishor Loans: up to Rs. 5, 00,000

• Tarun loans: up to Rs. 10,00,000

3. Credit Guarantee Fund Scheme for the Small Micro Enterprises

This scheme was launched in the year 2000 to act as a monetary support scheme for the small enterprise and the micro enterprises. It offers collateral free loan scheme for new as well as existing businesses. The scheme provides for the working capital up to an amount of Rs.10 Lakh, without any collateral. For loan above the amount of Rs 10 Lakh up to an amount of Rs 1 Crore is given on the basis of value of building or land. The loans are financed by the various private sector as well as public sector banks.

4. National Small Industry Corporation Subsidy

The NSIC subsidy for small business offers mainly two kinds of financial benefits. The two kinds of financial benefits are mainly Raw Material Assistance and Marketing Assistance. The NSIC scheme mainly focuses on funding the medium-sized and small-sized enterprises who wish to grow their manufacturing quality.

5. The credit link capital subsidy scheme for the technological upgradation

These loans are extended for sole proprietorship properties, partnership firms, private and public limited companies, and co-operatives. The CLCSS scheme aims at reducing the production cost of the services and goods for the medium-sized enterprises as well as the small-sized enterprises. This scheme is operated under the Ministry of Small Scale business. The maximum amount of loan which can be availed under this scheme is Rs 15 Lakh.

6. SIDBI Make in India Loan for Enterprises (SMILE)

The SMILE scheme is designed to foster innovation and protect the intellectual property, as well as skill development. Under the SMILE government loan scheme, the Business Loans are offered in two forms, namely soft loans and term loans. To be eligible for this business loan, the applying unit needs to be a new enterprise in the manufacturing sector.

7. Pradhan Mantri Mudra Yojana

PMMY is an extended loan scheme to foster employment and aims at generating more income for sectors like retail, agriculture, services, and manufacturing. Under this scheme, no collateral or security needs to be pledged for the loan. The loans under this scheme are transacted by the Co-Operatives, Public Sector Banks, Private Sector Banks, and Non-Banking Financial Corporations.

There are three kinds of loans which can be offered under these loan facilities. These include Shishu, Tarun, and Kishore according to the stage of the business.

8. Credit Guarantee Scheme for Micro and Small Enterprises

The CGSMSE are collateral-free loans for micro and the small enterprise sectors. Under this scheme, the loan can be provided for a 75% credit facility. The microenterprises can seek a loan amount up to Rs.5 Lakh.

9. Bank Credit Facilitation Scheme

The Bank Credit Facilitation scheme is launched and facilitated by the National Small Industry’s Corporation which signed a memorandum of understanding with the various banks to offer loans to SME units. Capital Loans and Term Loans are provided under this scheme. This scheme fosters loans at affordable rate with hassle free documentation process.

10. Stand-Up India Scheme

This loan scheme is specially designed to meet the requirement of the funds of the Scheduled Class and the Scheduled Tribe. The business loan eligibility is simple; the unit should be working in the trading sector, services sector, or the manufacturing sector. The ownership stake of 51% or more should be a Scheduled Caste or a Scheduled Tribe or a women owner.