Starting and running a business can be challenging, requiring more financial support than anticipated. This is particularly true for MSMEs and small businesses in India.
Here’s an overview of some of the government business loans that can assist in business growth:
The MSME Loan Scheme
- This is a popular government option offering working capital up to Rs. 1 crore for MSME sector businesses.
- With processing taking 7 to 12 days and approval within an hour, it provides a significant advantage with an 8% interest rate, making repayments more manageable.
- Additionally, there is a 3% reservation for female entrepreneurs, who may find the approval process more accessible.
Credit Guarantee Fund Scheme
- The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a well-known government loan scheme offering collateral-free loans.
- Scheduled commercial banks and regional rural banks can participate by becoming empaneled.
- The scheme provides working capital loans up to Rs. 10 lakhs without collateral. For loans up to Rs. 1 crore, a primary security or property/land mortgage is required.
MUDRA Loan
MUDRA (Micro Units Development and Refinance Agency) provides low-cost credit for small businesses in the services, manufacturing, and trading sectors.
MUDRA loans are accessible through public and private sector banks, cooperative societies, and small banks.
Businesses applying for MUDRA loans can choose from:
- Shishu Loan: Up to Rs. 50,000
- Kishor Loan: Up to Rs. 5,00,000
- Tarun Loan: Up to Rs. 10,00,000
Credit-Linked Capital Subsidy Scheme
If your small business is looking at any technological upgrade in the future, this loan is tailor made for you. With this business loan by the government, the funds are primarily allocated for tech upgrades in the supply chain, manufacturing, and marketing sectors.
CLCSS offers an up-front capital subsidy of around 15 per cent for businesses eligible for this scheme. These loans are most helpful for:
- Sole proprietorship’s
- Partnership firms
- Co-operatives
- Private limited companies
- Public limited companies
SIDBI Loans
Established in 1990, the Small Industries Development Bank of India (SIDBI) provides financial support to MSMEs.
Businesses can obtain loans directly from SIDBI or through top NBFCs and small finance banks, with amounts ranging from Rs. 10 lakhs to Rs. 25 crores and tenures up to 10 years. Loans up to Rs. 1 crore do not require collateral.
Popular SIDBI loan schemes include:
- SPEED: Loan for Equipment Purchase
- SMILE: Make in India Soft Loan Fund for MSMEs