Business Loan Schemes

Introduction

Business loan schemes introduced by the Government of India offer funding to Micro, Small and Medium Enterprises (MSMEs) and other business enterprises. There are many loan schemes that entrepreneurs can avail of depending on their needs. Business entities can choose the right loan scheme which suits them the best.

Thanks to the advances in digital technology by the government of India, most of these schemes are available on online portals. The main objective of business loan schemes from the government schemes is to aid entrepreneurs with finances for the day-to-day operations of their business. They are specifically aimed at catering to the needs of enterprises.

Read on to find out more about some of the prominent and key schemes launched by the government under the business loans category.

Prime Minister's Employment Generation Programme (PMEGP)

Prime Minister’s Employment Generation Programme (PMEGP) was first introduced by the Government of India back in 2008. It is a credit-linked subsidy scheme that was originally an integration of two schemes, which are, Prime Minister’s Rojgar Yojna and Rural Employment Generation Programme. This scheme aims to create self-employment opportunities by setting up micro-enterprise establishments especially in the non-agriculture sectors. It focuses on extending help to unemployed youth and also traditional artisans.

The Prime Minister’s Employment Generation Programme (PMEGP) is looked after by the Ministry of MSME. From an implementation point of view, this scheme is taken care by Khadi and Village Industries Commission (KVIC) nationally. The scheme is implemented at the state level via the State Khadi and Village Industries Commission Directorates, State Khadi and Village Industries Boards and District Industries Centres and banks.

Pradhan Mantri Rojgar Yojana (PMRY)

Prime Minister’s Rozgar Yojana (PMRY) was started by the Central Government of India mainly to offer self-employment opportunities to nearly 10 lakh unemployed youth and women across India. Under the scheme, the government looks to support and empower educated youth and women and aims to offer sustainable employment. This scheme was launched back in 1993 and it also offers financial assistance to individuals who want to start their enterprise across categories such as trade, manufacturing, as well as services sectors.

PMRY aims to set up nearly 7 lakh micro-enterprises with the help of inducting service and business ventures. The timeline for the setup is 2 years 6 months. The scheme also focuses on utilizing local resources and technologies to exploit the local market opportunities at the micro-level.

Small Industries Development Bank of India (SIDBI)

The SIDBI (Small Industries Development Bank of India) is a wholly-owned subsidiary of IDBI (Industrial Development Bank of India). It was established under the special Act of the Parliament 1988 that became functional on April 2, 1990. SIDBI is responsible for the administration of Small Industries Development Fund and National Equity Fund which were earlier looked after by IDBI.

SIDBI helps to promote, develop and finance the MSME (Micro, Small and Medium Enterprise) sector. Apart from focussing on the development of the Micro, Small and Medium Enterprise sector, it also ensures assistance in cleaner production and generating energy efficiency. SIDBI assists MSMEs in the acquisition of funds they need for growth, marketing, development and commercialization of technologies as well as innovation. There are several schemes and financial services designed to meet the individual requirements of different businesses.

Pradhan Mantri Kaushal Vikas Yojana (PMKVY)

Intending to build a brighter future for the country’s youth, the Government of India launched Pradhan Mantri Kaushal Vikas Yojana (PMKVY) as part of the administration of the Ministry of Skill Development & Entrepreneurship (MSDE). This scheme is designed to enable the country’s youth to develop industry-specific skills and training. It aims at helping them to get a better lifestyle. The scheme helps to improve the working efficiency of daily labourers or wage earners by giving away financial rewards and providing free skill-based training to them. The Government allocated Rs. 12,000 crores (2016-2020) to the PMKVY scheme which will benefit 10 million youth of the nation.

The National Skill Development Council (NSDC) monitors and controls this scheme and takes important decisions around specific skills based on the feedback provided by industries which employ trainees. Since the launch of PMKVY, a total of 252 job roles have been taken up to offer training within a timeframe of 2 years. Approximately 15.4 lakh beneficiaries have been offered certificates for skill training. About 5.8 lakh placements as part of short-term training have also been registered within this time.

Stand-up India

The Stand-Up India Scheme offers financial assistance to women entrepreneurs and people from SC/ST category primarily for establishing greenfield projects. It helps in offering bank loans ranging from Rs. 10 Lakh to Rs. 1 Crore. The loan can be availed by at least one SC/ST or woman entrepreneur per bank branch at the time of initiation of projects. A greenfield project can be described as a project involving new infrastructure built on unused lands which require no remodelling or demotion of a previously existing structure.

The Stand-up India Scheme is provided to first-time ventures in manufacturing, services or trading segments. It facilitates non-individual enterprises in which a minimum of 51% of the shareholding is with an SC/ST or woman entrepreneur. Under the scheme, the loan amount covers 75% of the net project cost. The entrepreneur must commit a minimum of 10% of the project cost under the scheme.

National Small Industries Corporation

National Small Industries Corporation or NSIC is a Government of India Enterprise and comes under the blanket Micro, Small and Medium Enterprises category.  National Small Industries Corporation works to assist, foster and encourage the growth of MSMEs (micro, small and medium enterprises) across the nation. It operates via a network of Technical Centres and multiple offices across the country. It also operates in African countries with a central office in Johannesburg, South Africa. National Small Industries Corporation has successfully set up training and Incubation Centres that are managed by highly skilled professionals. Its main objective is to help the MSME sector by offering support services including finance, technology, marketing and other relevant services.

Unemployed Youth Employment Generation Programme

The UYEGP scheme is a combination of subsidy and generous bank loan that is offered to the youth applicants of Tamil Nadu state. An entrepreneur has to make arrangements for immediate finance while starting a new business. This, besides facing many other challenges while setting it up. There are many instances when banks or lending institutions are unable to finance first-time businesses. This could be due to lack of experience, poor repayment history or issues with income stability. To help entrepreneurs who face such a situation, the Tamil Nadu Government introduced this loan scheme for small businesses. This scheme was introduced under the title UYEGP (Unemployed Youth Employment Generation Programme) to assist unemployed youth in starting-up their businesses.

Coir Udyami Yojana (CUY)

Coir Udyami Yojana (CUY) is a credit-linked subsidy scheme which has been set up to assist entrepreneurs in establishing coir manufacturing units. The maximum project cost can be Rs. 10 lakhs to be eligible for this scheme. It comes as a mix of subsidy and loan, depending on any upfront contribution made by the owner towards the establishment. Businessmen who are interested in establishing a coir manufacturing unit can make the most of this scheme. Applications can be made to any coir board in the state or institutes which are designated by the coir board.

Bank Credit Facilitation Scheme

MSMEs operate across varied sectors such as telecom, healthcare, electronics, etc and are known to be a driving force which contributes greatly to India’s economy. To help MSMEs grow faster, the government in association with various financial institutions has set up several business loan schemes. The main objective of these schemes is to make sure that small-scale businesses do not face a financial crunch. Bank Credit Facilitation Scheme was established by the National Small Industries Corporation in association with many national and private banks across India. It helps in encouraging the MSME sector.

To cater to the credit requirements of small and medium-size industries, the National Small Industries Corporation (NSIC) has collaborated with various national and private banks in India. This agreement is known as the Bank Credit Facilitation Scheme and it provides credit support needed by MSMEs by sourcing funds from national or private banks. The NSIC assists the MSMEs in the documentation and related filing process at the time of submitting proposals to banks and other such activities. As part of the Bank Credit Facilitation Scheme, all such facilities are offered free of cost.

Khadi and Village Industries Commission (KVIC)

Khadi and Village Industries Commission (KVIC) helps in planning, organizing, promoting and implementing various programs to develop Khadi and allied village industries in rural areas across the country. KVIC also assists in building up inventory reserves of raw materials for easily supplying to producers. The commission’s main focus is in the establishment of common service facilities that are needed for the processing of raw materials, for example, semi-finished goods. It also helps in generating more employment in the Khadi industry.

Atal Innovation Mission (AIM)

Atal Innovation Mission (AIM) was launched by the Government of India to encourage the culture of entrepreneurship combined with innovation across the country. The National Institution of Transforming India (NITI) Aayog was set up as part of this mission to assist the entrepreneurial requirements in the near future. It works for the set-up and further development of an entire ecosystem specifically designed for entrepreneurship at various levels. This includes MSMEs, NGOs, higher secondary schools, corporates, and also science as well as engineering institutions. AIM plans to set-up and encourage Small Business Innovation Research and Development (SBIR) at a pan-India level to cater to Start-ups, SMEs and Micro Small and Medium Enterprises (MSMEs). This mission was launched in 2018.

National Skill Development Corporation (NSDC)

National Skills Development Corporation (NSDC) was established in 2008 as a not-for-profit public limited company. It was incorporated under Section 25 of the Companies Act 1956 by the Ministry of Finance. It comes under an entity called ‘Public-Private Partnership’. NSDC’s main focus is to encourage skill development across the country. Funding offered by NSDC may be used for various working capital requirements meant for skill development activities. It is not meant for buying or constructing any kind of immovable property including land or building, etc.

Udyogini Scheme

Udyogini is a term used for Woman Entrepreneur. The Government of India initiated this scheme with the objective of welfare and assistance to Indian Women Entrepreneurs. Udyogini Scheme is implemented by Women Development Corporation which comes under the government’s purview. This scheme motivates and empowers entrepreneurship among poor women by offering them financial assistance required for doing business. It mainly supports and assists illiterate women from rural areas. Udyogini Scheme helps in the betterment of income of women and their families and further contributes to the overall growth of the nation.

Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-KGY)

Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY) is a skills training initiative to help place the beneficiaries in good and sustainable jobs. It comes under the Ministry of Rural Development (MoRD) that is set-up by the Government of India. DDU-GKY was set-up under MoRD which works towards transforming rural youth into economically independent individuals of society. It is considered to be a part of the National Rural Livelihood Mission (NRLM) which focuses on imbibing diversity in the incomes of poor families from rural areas. DDU-GKY also helps with the career and employment needs of rural youth of India.

Mahila Samridhi Yojana

To encourage women entrepreneurs and give impetus to their entrepreneurial journey, the Ministry of Social Justice and Empowerment under the Government of India has started a new policy called the Mahila Samridhi Yojana. Under this visionary scheme, the government aims to offer microfinance to women entrepreneurs who are from weaker sections of the society, primarily backward classes. The scheme has been designed keeping women empowerment at its centre and it is being implemented by a varied number of channel partners across the nation. Under the scheme, women beneficiaries are identified and offered loan directly or via Self-Help Groups (SHGs).

Pradhan Mantri Mudra Yojana (PMMY)

Pradhan Mantri Mudra Yojana (PMMY) was initiated by the Government of India to offer funding assistance of maximum Rs. 10 lakhs to individuals, MSMEs, as well as non-corporate and non-farm small/micro-enterprises. These loans are provided under Mudra scheme in partnership with Private Sector Banks, Non-Banking Financial Companies (NBFCs), Micro Finance Institutions (MFIs), Public Sector Banks (PSBs), Regional Rural Banks (RRBs), etc. MUDRA (Micro Units Development and Refinance Agency) Loan Yojana under Pradhan Mantri Mudra Yojana (PMMY) offers integrated financial assistance to MSME sector that includes small manufacturing units, small-scale food service units and also other small industries. The main objective of launching the MUDRA scheme is to offer institutional finance to small businesses that are involved in trading, manufacturing and service industry.

National Scheduled Castes Finance and Development Corporation (NSFDC)

National Scheduled Castes Finance and Development Corporation (NSFDC) is a not-for-profit association that is fully-owned by the government. This entity is registered under Section 25 of the Company Act 1956. The main objective of this corporation is to offer funds towards the socio-economic development of individuals from Scheduled castes of society. NSFDC offers finances to families which earn up to Rs. 3 lakhs annually and reside in rural or urban areas.

The corporation extends funding assistance in association with State Channelizing Agencies (SCAs) that are nominated by channel partners. These could include Cooperative Banks and Societies, Public Sector Banks, Regional Rural Banks (RRBs), NBFC-MFIs and as appointed by the respective State Governments. These channel partners must have entered into a Memorandum of Agreement (MOA) with NSFDC to offer financial aid to scheduled caste families.

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE) is a trust set-up by the Government of India under the Ministry of Medium, Small and Micro Enterprises (MSME) in association with Small Industries Development Bank of India (SIDBI). This trust was set-up in 2000 to offer credit guarantee to financial establishments which give loans to MSMEs. CGTMSE extends a guarantee to such institutions up to a particular limit for all loans given to the MSME sector.

Credit guarantee comes into picture when the loan given to the applicant is supported by a party without requiring any collateral or any form of third-party guarantee. In such cases, the loan offered by the member lending institution is supported by the scheme which extends the guarantee cover for a majority portion of the loan amount. Under the CGTMSE scheme, new as well as existing micro and small enterprises can get a maximum credit of Rs. 200 lakhs. The guaranteed coverage is also applicable to Non-Banking Financial Companies (NBFCs), who cater to medium, small and micro business segments.

CLCSS (Credit Linked Capital Subsidy Scheme)

The Ministry of Micro, Small and Medium Enterprises (M/o MSME) set-up a subsidy-based scheme called Credit Linked Capital Subsidy Scheme (CLCSS). It is meant to cater to requirements surrounding technology up-gradation of Micro and Small Enterprises (MSE’s). The main objective of this scheme is to offer growth and development of Small Scale Industries (SSI) across rural as well as urban areas.

A major percentage of SSI units still manages with outdated technology and infrastructure. This scheme aims to provide upfront capital subsidy to SSI units, khadi units, rural area or village units and coir industrial units. Under the scheme, a capital subsidy is offered to SSIs for modernizing plants and machinery along with techniques used for manufacturing.

National Bank for Agricultural and Rural Development (NABARD)

The National Bank for Agricultural and Rural Development is also known by the name NABARD. This is one of the leading development-oriented banks in India, with headquarters in Mumbai. The bank has its branches all across the nation and is dedicated to uplifting the rural populace.

It plays a key role in setting up and implementing the government’s financial inclusion policy. To cater to the same, the bank has collaborated with Alliance for Financial Inclusion. The vision of NABARD is ensuring a strong presence when it comes to policy, planning and operations of the area of agriculture-related credit. NABARD also offers financial assistance to many areas other than agriculture. This, to spearhead the development of rural areas in India by financing important economic activities.

The National Bank for Agriculture and Rural Development has played a key role in introducing social enterprises combined with innovations in many rural areas across India. The institution presently works with nearly 4000 partner companies which happen to be innovators and influencers in several rural projects. Some of the main areas of focus are crop productivity initiatives, initiatives for maintaining tribal heritage/traditional life in remote rural areas, soil and water conservation, and also SHG-Bank Linkage initiatives. Despite being involved in these varied roles, NABARD happens to be one of the biggest contributors towards national exchequer and also features among the top 50 tax-paying enterprises consistently.

FAQs on Business Loan Schemes