If you are planning to start a company or are looking for funding, here are a few loan schemes launched by the Government of India with the goal of helping and encouraging small businesses in India. Micro, Small and Medium Enterprises (MSMEs) are critical to an economy's development. MSMEs are often a good solution to major economic issues like poverty, unemployment, income inequality, social inequality. To apply for a government business loan, you must be at least 18 years old. A minimum credit score of 650 is required for loans to be issued by the respective banks. Government business loans are financing assistance given in the form of loan schemes launched by the Indian government and made available through financial institutions. Individuals, company owners, SMEs, and MSMEs in the Trading, Manufacturing, and Services sectors are its primary beneficiaries of government business loans.
Basic documents required to avail of the loan
Although the documents needed for these government schemes will differ from one loan scheme to another, we have compiled a list of the most common documents required for all government loan schemes:
- BluePrint of Business plan
- GST Identification number
- Details of income tax paid for the last 3 to 5 years
- Age, Address, Identity and Income Proof
- Bank statements of last 6 months minimum
- Registered business address proof
- Income Tax Return for the last 2 years
- All the documents required to apply for E-KYC
- Details of the type of loan
- List of company Directors or partners of the company
- Passport-size photographs
There are several different forms of these schemes, and modern entrepreneurs may use various online platforms and choose based on the requirement. Here are the best 6 Government loan schemes for small businesses in India:
MSME Loan in 59 Minutes
The 59-minute MSME loan, which is available via government programs, is a business capital loan for amounts ranging from Rs 10 ten lakhs to Rs 5 crore. Although interest rates are low, they will vary depending on the individual's credit profile. The advantage of this Government loan scheme for small businesses in India is that it approves or disapproves the loan in 59 minutes rather than 30 days, which makes it much quicker, and the loan is received in 7 to 8 days if approved. TO avail of the loan, the lender must be GST-registered and IT-compliant.
Your loan amount will be determined by:
- Repayment Capacity
- Existing Credit Facilities
- Until the final stage of loan sanction, the loan process happens without human involvement. That is why the program is called Advanced Technology Backed Loans.
The Pradhan Mantri Mudra Yojana (PPMY) was established with the intention of "financing the unfunded." People may get loans from Public Sector Banks (PSB), Regional Rural Banks (RRB), Co-operative Banks, Private Banks, Foreign Banks, Micro Finance Institutions (MFI), and Non-Banking Finance Companies for non-farm activities under the scheme (NBFC). Mudra is an acronym for Micro Units Development & Refinance Agency Ltd. Mudra loans are divided into three categories based on the stage of growth of the operation that requires financing and the amount required. These loans are not subsidized in any way. If the loan application is related to another government scheme that requires a capital subsidy, it will be eligible for the Pradhan Mantri Mudra Yojana as well. The Mahila Uddyami Scheme, managed by MUDRA, is a special refinance program for women entrepreneurs. Women who avail the loans from MFIs/NBFCs will get a 25 basis point interest reduction.
- Types of Mudra loan
- Shishu: Loans up to Rs 50,000
- Kishor: Loans above Rs 50,000 and up to Rs 5 lakh
- Tarun: Loans between Rs 5 to Rs 10 lakhs
SMILE (SIDBI Make In India Soft Loan Fund For MSMEs)
The loan is open to new MSMEs in the service or manufacturing industries, as well as established small businesses seeking to grow. This government loan scheme was initiated by the Small Industries Development Bank of India (SIDBI) in 2015. It aims to assist new small businesses in meeting their debt-to-equity ratio. The SMILE program's minimum loan amount is Rs. 25 lakh. It also has a loan repayment period of up to ten years. As part of the government of India's "Make in India" initiative, MSMEs in 25 selected sectors will receive financial assistance at reasonable interest rates. Loans will be available in the form of soft loans and term loans under the scheme.
Crafted specifically to meet the funding needs of Scheduled Caste (SC)/Scheduled Tribe (ST)/women entrepreneurs looking to start a new company. The company should be in the manufacturing, trading, or service industries. If the company would be non-individual, the controlling stake (51%) should be owned by either an SC, ST or women entrepreneur. This scheme provides at least one woman and one SC/ST borrower with a minimum of Rs. 10 lakh and a maximum of Rs. 1 crore per branch. Stand-Up India accounts for 75% of the overall project costs, including machinery and facilities as well as working capital.
Credit Guarantee Scheme (CGS)
To provide affordable loans to the MSME industry, the government created the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). MSMEs can get up to Rs. 2 crores in terms of working capital loans under this scheme. The CGS loan is another unsecured government business loan that does not require you to give any assets or guarantee any property in order to obtain a loan. Under the Credit Guarantee Scheme of the Credit Guarantee Fund Trust for Micro and Small Enterprises, a limit of Rs. 2 crores can be covered (CGTMSE). Established and new companies are also eligible for coverage under the program. This government-subsidized business loan also has options for micro, small, and medium-sized businesses. This loan gives a substantial portion of the loan sum as a guarantee. The Guarantee Cover is available to the extent of a maximum of 85% of the sanctioned amount of the credit facility. To apply for this loan, you must have an IT PAN number.