Top 5 Government Loan Schemes For Small Businesses In India

According to a Q1 2020 World Economy report, the International Monetary Fund has cited India as the fastest-growing economies in the world. A major part of this growth can be attributed to micro and small business houses and medium enterprises. In fact, SMEs are currently contributing about 40% of the nation’s GDP. To fuel further development of such enterprises, the Government of India has introduced several schemes through which business owners can avail necessary financing.

If you are looking to secure your business’s future via smooth operation and sustainable growth, the following government loans can be the perfect options to maintain a steady flow of capital. 

Take a look!

• Pradhan Mantri Mudra Yojana (PMMY)

Eligibility Criteria:

• Non Corporate Small Business Segment (NCSB) like small-scale manufacturing units, service sector units, small industries etc.
• Small business owners holding proprietorship in rural and urban areas can apply for this loan.

PMMY offers government loan schemes to fund different business activities and entrepreneurial segments under the Micro Units Development and Refinance Agency (MUDRA).

Under this scheme, small business houses can avail a loan up to Rs.10 lakh without any mortgage, hypothecation or pledge. Some examples of loan schemes under MUDRA Loan are:

Tarun loans: Rs. 5 Lakh to Rs. 10 Lakh

Kishor loans: Rs. 50,000 to Rs. 5 Lakh

Shishu loans: Up to Rs. 50,000

• Credit Guarantee Scheme (CGS)

Eligibility Criteria:

• Existing MSMEs dealing in manufacturing.
• Start-ups dealing in manufacturing.
• Self-Help Groups (SHGs).

The government launched the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to provide affordable loans to the MSME sector. Under this scheme, MSMEs can avail term loans or working capital loans of up to Rs. 2 Crore to fund their business operations. 

Besides that, the scheme also provides guarantee cover of up to 75% of the credit and up to a maximum of Rs. 1.5 Crore.

• MSME Business Loans For Start-ups In 59 Minutes

Eligibility Criteria:

• The borrower must be registered under GST and IT compliant.
• The borrower must have the last 6 months’ account statements.

Also headed by CGTMSE, this scheme strives to provide eligibility as well as loan approval to borrowers within 59 minutes, hence the name.

Under this scheme, small business owners can avail a loan starting from a minimum of Rs.1 Lakh to Rs. 5 Crore with interest rates starting from 8.50%.

• SMILE (SIDBI Make In India Soft Loan Fund For MSMEs)

Eligibility Criteria:

• New MSMEs belonging to the services or manufacturing sector.
• Existing small business enterprises that are willing to expand.

Small Industries Development Bank of India (SIDBI) launched this government loan scheme in 2015. It aims to help new small business houses to meet their debt-equity ratio. The minimum loan amount offered under SMILE is Rs. 25 Lakh. It also offers flexible loan repayment tenure of up to 10 years.

• Stand-Up India

Eligibility Criteria:

• Businesses dealing in training, manufacturing and services
• Non-enterprise SC/ST individuals and women holding at least 51% of shareholder stake can also apply for this loan

This is another brilliant government loan scheme facilitated by SIDBI. Stand-Up India is aimed to fund entrepreneurs belonging to the SC/ST categories as well as women entrepreneurs.

The minimum amount offered by this scheme is Rs. 10 Lakh and a maximum of Rs. 1 Crore per branch to at least one woman and one SC/ST borrower. Stand-Up India covers 75% of the project’s total cost, inclusive of machinery and equipment cost and working capital.

Thus, you can leverage such government loan schemes to expand your business sustainably. Choose the one that suits your requirement and then take it from there.