Are you looking for a reliable financial aid for your business idea? In this post, we will discuss a few government loans for business in India. As business owners, you should then check the available options to choose the perfect one.
Today, India has over 40 million registered and unregistered Small and Medium Enterprises in varied sectors including manufacturing, IT, food processing, packaging and more. This sector has been one of the major drivers behind the country’s progress. The Indian startup ecosystem is producing unicorns at double the speed than before, with multi-billion dollar findings from investors on the global level and celebrating high-profile exits. At the same time, the nation’s micro, small and medium enterprises sector comprising 577 Cr companies is beating challenges of setting up and building the consumer base, among others.
But there are many problems with this path. Owing to their small size, SMEs and MSMEs, as compared to big companies, are burdened with multiple problems that come in the way of their growth. One of the most important is accessing finance at the right cost. An idea remains just thought if it does not get the requisite working capital on time. As per many studies, presently less than 5% of MSMEs have access to formal credit, while others rely on informal sources to fund their idea. For Indian startups, while there are a lot of private equity and debt funding options available, to get funding at the ideas or initial stage is a challenge. Recognizing the problem, the government of India has taken steps to empower the small scale and home businesses.
And, in a much-needed move to address this gap, the Indian government has introduced many initiatives to provide business loans for MSMEs and startups through authorized channels. Here is a list of some of the most popular and notable schemes by the government that provides business loans for businesses in India:
Best Government Loan for Business in India
Credit Guarantee Fund Scheme for Micro and Small Enterprises
Launched in 2000, Credit Guarantee Fund Scheme for Micro and Small Enterprises or CGMSE was started to provide monetary support to micro and small enterprises. It provides collateral-free credit for new as well as existing business units that satisfy its eligibility criteria. Under it, one can work capital loan up to 10 lakh without any collateral.
The credit facilities over 10 lakhs and up to 1 crore, only primary security or mortgage of land and building associated with the building are obtained and such eligible accounts are covered under Credit Guarantee Fund Trust for Micro and Small Enterprises. An asset created through the credit facility associated with the business unit is also considered as security when the loan amount crosses 10 lakhs.
MUDRA (Micro Units Development and Refinance Agency Ltd)
Another government loan for business in India, MUDRA aims to provide loans to micro-units and the small business sector. This government scheme is designed to maintain the startup’s growth and funding needs of micro-units in mind. The process of this financial support is divided into three stages.
The first stage of MUDRA is Shishu, it has a loan amount of s. 50,000 and there are no collateral needs. The interest rate of this loan is 1% monthly and the loan is repayable for more than five years. The second stage is Kishor; here the loan amount ranges between Rs.50, 000 up to Rs. 5 lacs. On the third stage, the loan amount is from Rs. 5 lacs to s. 10 lacs.
MSME Business Loans in 59 Minutes
One of the most talked-about business loans in India, MSME Business Loans in 59 Minutes, and a unique scheme that was started in the year 2018. This scheme provides financial assistance to MSME growth in India. The actual process of this government loan for business in India takes 8-12 days to complete, while the approval or disapproval is granted within the first 59 minutes of application.
The interest rate varies as per the business type and credit raining. No data is provided on subsidizing the principal amount or interest subvention. To apply for this business loan, you need GST verifications, Income Tax verifications, bank statements, KYC details, and owners related documentation.
Consider these loan options when you are looking for the best Government Loan for Business in India. The Indian government is working effectively to ensure that small and medium scale industries benefit from the loans.
Stand up India, governed by Small Industries Development Bank of India provides funding to people who come under SC/ST category and women entrepreneurs. This loan scheme provides bank loans from Rs. 10 lakh to Rs. 1 crore.
The specification of the loan probably covers 75% of the project cost. And, it won’t be applicable if the borrower’s contribution besides the convergence support comes from any other schemes that cross 25% of the project cost.
Enterprises involved in manufacturing, trading, or service sectors are eligible for the Standup scheme. Non-individual enterprises at least 51% of the shareholding stake should be with SC/St o woman entrepreneurs.
Credit Link Capital Subsidy Scheme for Technology Upgradation
The Credit Link Capital Subsidy Scheme for Technology Upgradation is a great government loan for business in India that allows small businesses to upgrade their process by financing technological upgradation. The technological up-gradation can be regarded as multiple processes within the organization like marketing, manufacturing, etc. It is run by the Ministry of Small-Scale Industries.
The purpose of this program is to reduce the production cost of goods and services for small and medium enterprises and help them to stay price competitive in local as well as global markets. The CLCSS provides an up-front capital subsidy of 15% for eligible business but, there is a cap to the maximum amount, which can be availed as subsidy under the scheme that is set at Rs. 15 lakhs. Different types of businesses come under this scheme including partnership firms, sole proprietorships, co-operative, private and public limited firms.
National Small Industries Corporation subsidy
A unique scheme by the government of India, National Small Industries Corporation subsidy offers two types of financial advantages- Raw Material Assistance and Marketing Assistance. The Raw Material Assistance scheme under NSIC covers indigenous as well as imported raw materials. And, under the marketing support, funds are provided to Small and Medium Enterprises for enhancing their competitiveness and the market value of their products along with services.
This is a perfect government loan for business India mainly focused on financing SMEs who want to grow their manufacturing quality and quantity.
SIDBI, Make in Indian Loan for Entrepreneurs (SMILE)
SIDBI is intended to take forward the Government of India’s Make in India campaign. It supports micro; small and medium enterprises take part in the campaign by taking a loan from a Small Industry Development Bank of India.
This loan scheme is focused on to be favourable for the borrower to meet the debt-equity ratio of any enterprise. It has an objective to boost the growth of small business ventures by making products in India with our resources. Since the terms of this government loan for business in India are in favour of the borrower so it is also called a soft loan. The interest rate is low and there is a longer payment period.
Sustainable Finance Scheme
Sustainable Finance Scheme supports the whole value chain of energy efficiency/cleaner production (CP) and sustainable development projects that lead to significant enhancements in EE/CP/sustainable development in the MSMEs and which are currently not covered under the existing sustainable financing lines of credits.
Renewable energy projects like wind energy generators, mini hydel power projects, biomass gasified power, etc. for captive/non-captive use generated are sold/supplied to the grid/off-grid.
Udyogini means women empowerment, this government scheme is focused on promoting the interest and welfare of women in India. This scheme is started by the Women Development Corporation under GOI. It supports women in achieving their capital needs for the business.
The maximum loan amount provided under the Udyogini scheme is three lakhs. The applicant should be in the range of 18 years to 55 years for applying for the scheme. The annual family income should not exceed Rs. 15, 00,000 and there is no income for physically challenged and widowed women.
These governments’ loans for businesses in India are a handful of the many initiatives taken by the government of India to boost the ease of doing business in the nation.
The government is striving hard and working at a macro level to promote entrepreneurship and opening up international startup corridors between India and the global market.
Great ideas need efficient funding to become reality. The Indian government has implemented certain loan schemes through which SMEs and MSMEs can opt for. We hope with these options you will get good ideas of financial support options available for businesses in India. Hopefully, you found this post helpful and make your business successful with this guide.
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