Top 5 Government Loan Schemes for Small Business in India
India has about 40 million Micro Small and Medium Enterprises (MSMEs), including registered and unregistered ones. MSMEs fall under the categories of both the organized and the unorganized sectors. These MSMEs contribute to about 40% of the total GDP of India, and it remains a critical source of employment. The MSMEs provide solutions to critical issues in the country like poverty, unemployment, income inequality, regional imbalances, etc. The government for this purpose has introduced various schemes to sanction loans to MSMEs to boost their business and their economy. The entrepreneurs who run such MSMEs can borrow money in the form of a loan through any one of the schemes that suit their requirements.
Some of the most significant kinds of Government loan schemes for small businesses are explained.
MSME Business Loans in 59 Minutes
MSME business loan in 59 minutes is one of the most loan schemes introduced by the government in September 2018. The loans sanctioned under this scheme are to boost financial assistance to the growth of the country and to also encourage their growth in the country. The scheme allows new and existing businesses to utilize the financial assistance that is provided by the scheme. The loans provided under these schemes extend up to Rs. 1 crore and take about 8 to 12 days to complete the process, wherein the approval for the loan is received within 59 minutes which is primarily why the name of the scheme is known as MSME business loan in 59 minutes. The rate of interest depends on the nature of the business that is carried on by the applicant of the loan. The interest on such loans begins at 8.5%, and the loan amount granted under this scheme can range from 1 lakh to 5 lakh. The following are the requirements for obtaining a loan under this scheme:
- GST verifications
- Income tax verifications
- Bank account statements for the last 6 months
- Ownership related documentation
- KYC details
The MUDRA loans are sanctioned by the Micro-Units Development and Refinance Agency organization that has been established by the government of India for providing finance to units of micro-business. The theme behind MUDRA loans is to “fund the unfunded”. All bank branches across India provide MUDRA loans. Such loans have created the low-cost credit concept for micro and small businesses. The MUDRA loans are categorized as under:
Up to Rs. 50,000
50,000 to 5,00,000
5,00,000 to 10,00,000
All businesses including proprietary concerns, partnership firms, Private Ltd., Public companies and other legal entities are eligible to apply for a loan under this scheme.
Stand-up India scheme was introduced by the Government to provide loans for businesses run by Scheduled Castes/ Scheduled Tribes and women. Small Industries Development Bank of India (SIDBI) governs this scheme. The loan granted under this scheme can range from Rs. 10 lakhs to Rs. 1 crore. Every bank must provide this loan to a minimum of one Scheduled Caste/Scheduled Tribe or woman entrepreneur. According to this loan, the fund is expected to cover about 75% of the cost of the total project.
Those businesses engaged in trading, manufacturing, or other sectors relating to services are eligible to avail of loans under this scheme. If the business is not an individual undertaking, a minimum of 51% of the shares must be held by an individual who is a woman or belongs to a Scheduled Caste/ Scheduled Tribe.
Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGFMSE)
This is a loan scheme that is launched by the government of India that allows for funding through loans without collateral to those businesses that fall under the MSME sector. The loans under the scheme can be granted to both new and existing enterprises. The Credit Guarantee Fund Trust is a trust that has been established by the Ministry of MSMEs and the Small Industries for the purposes of implementing the CGFMSE scheme. The funding under this scheme can provide for working capital loans up to Rs. 200 lakhs with a preference for eligible women entrepreneurs.
Undertakings who are into manufacturing activities like retail trade, educational institutions, self-help groups, and training institutions. Further, businesses which are in the service sector are also eligible to avail of funding under this loan scheme.
National Small Industries Corporation Subsidy
The NSIC is a Government enterprise under the MSMEs, and it is ISO certified. One of its primary functions is to aid the growth of MSMEs by providing services including finance, technology, market, and other services across the country. The NSIC has initiated two schemes in order to promote the growth of MSMEs, which are:
- Marketing Support Scheme – The scheme supports in the development of any business by devising schemes such as Consortia and Tender Marketing. Such a scheme is crucial as the MSMEs must be aided in order for them to grow in the current competitive market.
- Credit Support Scheme – The NSIC provides for financial aid to procure raw materials, for activities in relation to marketing and for financing with banks through syndication to MSMEs.
The benefit of this scheme is that it offers small-scale industries access to tenders without them having to bear any costs, and the MSMEs also do not have to pay the security deposits for availing of financial aid under this scheme.
Credit Link Capital Subsidy Scheme for Technology Upgradation
This scheme allows small businesses to upgrade their process by financing technological upgradation. Technological upgradation can be related to numerous processes within the organization, such as manufacturing, marketing, supply chain, etc. Through the CLCSS scheme, the government aims to reduce the cost of production of goods and services for small and medium enterprises, thus allowing them to remain price competitive in local and international markets. The scheme is run by the Ministry of Small-Scale Industries. The CLCSS offers an up-front capital subsidy of 15% for eligible businesses. However, there is a cap to the maximum amount that can be availed as a subsidy under the scheme, which is set at ₹ 15 lakhs. Sole proprietorships, partnership firms, co-operative, private, and public limited companies come under the ambit of this business loan scheme.
Udyogini, meaning women empowerment, is a scheme that has been initiated for empowering Indian women. The scheme has been introduced by the Government of India by the Women Development Corporation. The funding under this scheme is granted in order to support women in meeting their capital requirements for starting a business.
The maximum loan that can be granted under this scheme is Rs. 15,00,000. For a woman entrepreneur to be eligible to apply for this scheme, the woman must be between the age of 18 years to 55 years and the annual income of the family of the woman must not be above Rs. 15,00,000.
There is no limit on income for women who are physically challenged or widowed. There is no processing fee or collateral that is required for availing loan under this scheme.
Women who apply for this loan will have to provide passport-sized photographs, birth certificates, Below Poverty Line Card, Aadhar Card, Caste Certificate, passbook or bank account, ration card, and certification of income to avail of the loan. There are about 88 categories of businesses that are mentioned for which loans can be availed by eligible women.
An Alternative: Quick Business Loans from Lendingkart
While all these schemes display the commitment of the past and present Indian governments to develop the nation’s economy, there is much that needs to be done to make the schemes effective. For example, the refinancing and subsidy model used by the government takes away the ‘quick’ factor from unsecured business loans touted by the schemes.
Since these loans are essentially funded by government-sponsored banks, the turnaround time is in weeks or even months, which is detrimental for a small business owner looking for quick business finance. Even the most ambitious of all these schemes, the 59 Minutes Loan for MSMEs, takes up to 2 weeks in reality.
On the other hand, MSME finance by non-banking financial companies like Lendingkart is approved and disbursed within 72 hours. This is done by combining business analytics and online technologies for loan approval and disbursal instead of relying on paperwork and age-old processing techniques. For instance, Lendingkart offers business loans online through its website or mobile app.
Simply log in to apply for a business loan, get same-day approval, accept the quote and upload your documents digitally for verification. The entire process hardly takes 10 minutes of your time and the verification is completed within 3 working days by Lendingkart. So, you have the funds ready for use within a quarter of the time it takes a government scheme to disburse a loan.
To apply for a business loan with Lendingkart in 3 simple steps, visit us at www.lendingkart.com.
Government Loan Schemes for Small Business FAQs:
1. What is an MSME?
2. How to avail loans for a startup?
3. How do Government Business loan schemes work?
4. What are the requirements to avail a government business loan?
5. Can grocery businesses or businesses relating to organic farming apply for government loans?
6. Are there any special government loan schemes introduced for women who want to start their businesses?
7. What is the minimum amount of loan that is granted by the government under the various schemes introduced by the government in order to grant loans to small businesses?
8. What are the documents that are required for availing government business loans?
9. What is the maximum amount of loan that an individual can avail under the government loan schemes for small businesses?
10. How to register for loan schemes introduced by the government of India?
Government Loan Schemes News
Increase on interest rate subsidy for MSME exporters: Govt says
The government is thinking about increasing the interest equalization or subsidy advantages provided to small and medium exporters in the yearly budget for 2023–2024. The Reserve Bank of India’s tightening monetary policy would be partially alleviated by the action, easing some of the load on them from interest rates. If the interest subsidy is increased from 3% to 5%, the government is analyzing the cost to the exchequer. As demand in important markets slows, Indian exporters are having difficulty. The finance ministry and the department of commerce are said to have spoken about the suggestion.
Updated Date: 12th January 2023
PM Modi inaugurates 13 Credit-linked Schemes through the OneStop Jan Samarth Portal
With the launch of the Jan Samarth Model, PM Modi has given access to millions of people to get a government loans. The portal has 13 different government programs of which only four are functioning for the present stage. Since it is in the incubation stage, applicants can only apply for education, Company start-up, agricultural infrastructure, and living loans.
The Jan Samarth Portal boasts of a centralized repository in which beneficiaries can get access to 13 different government schemes for credit purposes. The popular loans given to beneficiaries are livelihood loans, business activity, and agri-infrastructure. In addition to this, beneficiaries can instantly know their credit loan eligibility by following a series of easy steps. Beneficiaries can apply online for the schemes to which they are eligible and wait for digital approval.
The Jan Samarth portal encompasses all aspects of the loan process that is from application to approval. Also, the functionality of the portal enables applicants to verify the current status of their loan applications. Also, a provision is made in the portal for the applicants to send in complaints about the redressal of their grievances.
Updated Date: 17th June 2022
Credit Guarantee Scheme for the MSME sector extended till the end of March 2022
The Credit Guarantee Scheme for Subordinate Debt (CGSSD) for the Covid-hit MSME sector, which was approved by the Government on June 1, 2020, has been extended upto 31st March 2022. The scheme was launched with the aim of providing credit to the MSME sector through lending institutions thus assisting in their recovery.
At the request of various stakeholders of the scheme, the Government decided to extend the scheme by a period of 6 months. The scheme has helped in the survival of various businesses belonging to the MSME sector in these tough times and hopefully will continue to do so.
Updated Date: 14-10-2021