Small Business Loans Offered By The Government Of India

World Intellectual Property Organisation (WIPO) recently published that India is ranked as 57th most innovative country in the world. Initiatives such as ‘Make in India’ by the Government of India has spurred the growth of business across 25 sectors. India has also jumped to 77th place in the world in terms of ease of doing business. The country now looks forward to moving ahead to the list of first 50 countries. 

Starting a small business will certainly require credit to manage all the operational costs. Though there are plenty of avenues to get a loan for business growth, a business loan from the Government will come at better terms and flexible repayment options. The Government is currently routing the business loans through public and private banks, wherein the borrowers get the loans at subsidized interest rate. Let’s look in detail about the loans available for small businesses through Government initiatives.  

Mudra Loans 

This loan product is created under the flagship program of Pradhan Mantri Mudra Yojana (PMMY) to provide financing for micro enterprises in the country. The purpose of the loan is to promote income generation and employment creation. Mudra loans are offered to vendors, traders, shopkeepers and other service sector activities. The loan amount can be used for purchase of equipment, working capital needs and purchase of vehicles. The borrowers can also get MUDRA debit card which is issued against the loan account. The card can be used to manage the expenses in an efficient manner.  

The borrowers can get up to Rs. 10 Lakhs under this scheme. There are three variants, namely Shishu, Kishor and Tarun.  

 

For loans up to Rs. 1 Lakh for micro units, it is disbursed through Micro Finance Institutions (MFIs). Women entrepreneurs can also get loans under MFIs at reduced interest rate. Other finances can be obtained through commercial banks, regional rural banks and co-operative banks.  

Credit Guarantee Fund Scheme for Micro and Small Enterprises 

This loan scheme was launched by the Government of India in 2000 to provide funds for micro and small enterprises who otherwise would have no way to access credit. The loans provided under this scheme are collateral-free, and they are extended to new and existing micro and small enterprise units. The eligible borrowers can get up to Rs. 1 crore as the loan amount under this scheme.  

The Credit Guarantee Trust provides the guarantee cover to the lender for up to 75% of the loan amount in case the borrower defaults. The maximum repayment period is up to 5 years and the guarantee cover provided is also until the completion of the loan.  

MSME Business Loans in 59 Minutes 

It is an initiative launched by the Government of India to provide MSME business loan approval in 59 minutes. It aims to reduce the loan processing time and disbursal. The borrowers can get up to 1 crore through this initiative. Post the approval of the loan, it would take up to 7 to 8 working days for disbursal as it involves human intervention in checking the facts. The approval is done using advanced algorithm using data and technology. Sources such as IT returns, GST data, bank statements, etc. are used for approval. The borrower should provide any collateral for up to certain amount. However, it depends on the eligibility and lenders’ internal policies.   

Technology Upgradation Fund Scheme 

Individuals engaged in textile business can avail this loan facility. This scheme was launched with the vision of augmenting production and exports. Technology Upgradation Fund Scheme aids in purchase of machinery and for any other upgradation required for the machineries being used. Individuals, companies, partnership firms, medium and small enterprises registered under MSME act, companies having Industrial Entrepreneur Memorandum (IEM), etc. are eligible for this loan scheme.  

The loan scheme comes with the Capital Investment Subsidy (CIS) for eligible candidates. Up to 50% subsidy can be availed for machineries. CIS will be released only after examination, subject to satisfactory installation and commissioning of production.  

Stand-Up India 

This loan is exclusively offered to women entrepreneurs and individuals who belong to SC and ST category. Manufacturing enterprises, services or trading sectors can avail this loan facility. If the loan is availed by a non-individual enterprise, the company should have 51% of shareholding and controlling by SC/ST category individuals and women entrepreneurs.  

One can get loan amount between Rs. 10 Lakhs to Rs. 1 Crore under this scheme, and one should be minimum of 18 years of age to qualify for the loan. The loan tenure is up to 7 years with a holiday period of 18 months. This loan is operated through all the branches of scheduled commercial banks in India.  

Coir Udyami Yojana 

This loan scheme was launched by the Ministry of MSME exclusively for people who want to set up a coir unit. Individuals, companies, Self Help Groups, non-governmental organisation, institutions registered under Societies Registration Act 1860, production co-operative societies, Joint Liability Groups and charitable trusts are eligible to get this loan scheme.  

The maximum loan amount is Rs. 10 lakhs with working capital up to 25% of projection cost. The borrowers can get subsidy for up to 40% of the project cost and working capital will not be eligible for subsidy scheme.  

Market Development Assistance Scheme 

Operated by the Ministry of Commerce, Market Development Assistance Scheme is provided to small scale units to gain international exposure through participating in international fairs, study tours abroad, trade delegations, publicity, etc. MSME entrepreneurs can display their products at international exhibitions and fairs through this assistance.  

Last Word 

A nation can experience an exponential economic growth only when it promotes self-sustainability. With a wide range of loan schemes to encourage entrepreneurship and manufacturing units, the path to inclusive economic growth is well laid out by the Government of India. It is more important that public is well informed about the loan schemes and use them to increase income generation and employment creation.