Government supported business loans are an important option for small businesses. They can be very advantageous in terms of providing capital, helping to stimulate the economy, and creating jobs. When it comes to financing small businesses, the Government of India has a wide array of options available.
Most of these loans can be availed through banks and NBFCs. They come at attractive interest rates, high loan amounts, and collateral free options. We have listed 5 of the top loan schemes offered by the Govt. of India to small businesses and MSMEs –
- PM Mudra Yojana – Micro Units Development & Refinance Agency Ltd
- Bank and NBFC refinancing assistance to increase funds available for lending
- Further lending to businesses engaged in manufacturing, trading, services, tractor financing, agriculture and related activities, and two-wheeler loans
- In addition to financial assistance, MUDRA empowers MSME entities through financial literacy and other social support services.
- MUDRA offers three loan programs: Sishu loan up to Rs. 50000, Kishore loan up to Rs. 5,00,000, and Tarun loan up to Rs. 10 lakh.
- Credit Linked Capital Subsidy Scheme (CLCSS)
- Encourage MSME units to upgrade their technology for certain products
- For well-established and improved technologies, there is a 15% capital induction.
- The two main institutions for fund disbursement are SIDBI and NABARD.
- Nine nodal banks have been established to participate in the program.
- SMILE – to develop Make In India initiative
- Loans that are issued as quasi-equity
- This loan is available to both new and existing MSME units in the manufacturing or service sectors that are expanding.
- The smallest loan is for Rs. 25 lakhs.
- Attractive interest rates beginning at 8.36%
- Duration of repayment of up to 120 months
- The Credit Guarantee Fund Scheme for Micro and Small Enterprises
- This program allows for the application of loans without any security
- Both new and existing MSME businesses in the manufacturing and service sectors are eligible to apply.
- Self-Help Groups (SHGs), agriculture, educational institutions, and retail are not included.
- MSME Loans in 59 Minutes
- Promises a 59-minute or less loan application and approval turnaround time.
- A fully transparent process that is fully online
- Starting at Rs. 10 lakhs and going up to Rs. 5 crore
- Interest rates begin at 8.50%.
- Since this program is covered by the Micro And Small Enterprises Loan Guarantee Fund Trust (CGTMSE) program, collateral-free loans are available.
- Loan disbursement takes place one week after loan approval.
For this program, the government has set up a special website at psbloansin 59 minutes. This portal enables the loan application process to be fully automated and digitized, cutting the processing time from the customary 20–25 days to under an hour. The program offers working capital and term loans for businesses with loan amounts ranging from Rs. 10 lakh to Rs. 5 crore. Even the lender for this loan can be chosen by the borrower.
How Do MSME Loans Benefit Small Business Owners?
MSME loans can assist small business owners in starting a new business, running an existing business, or expanding an existing business. An MSME loan can be used for the following things:
- You are purchasing land in order to start a business.
- You’re purchasing a manufacturing unit.
- You are purchasing factory supplies such as computers and appliances.
- You are purchasing raw materials to meet your company’s capital needs.
- You must pay employee wages, bills, and debts.
- You want to grow your company.
- You require funding for marketing and advertising.
- You require funds for office renovations.
What Are Some Of The Benefits of MSME Loan?
- MSME loans are typically collateral-free.
- Quick online approval and disbursement of loan funds
- An extended tenure ranging from 12 to 60 months
- Interest rates have been reduced.
- Documents required for an MSME loan application
- Manage your loan easily through your financial provider’s net banking website.
- Pre-approved plans
What Is The Eligibility Criteria To Apply For A Small Business Loan?
According to government guidelines, the following entities are eligible to apply for a Small Business Loan:
- Retailers
- Manufacturers
- Traders
- Sole Proprietorship Firms
- SMEs, MSMEs and Large Enterprises
- Partnership Firms involved only in Manufacturing, Trading or Service sectors
- Private limited companies and closely held limited companies
Banks and NBFCs also have different eligibility criteria for disbursing MSME loans. The following are the most common MSME loan eligibility criteria:
| Business Age | Minimum 2 years of existence, with 1 year of profit making |
| Eligible Entities | Individuals, SMEs, MSMEs, business owners, women entrepreneurs, self-employed professionals |
| Business Type | MSMEs registered as Proprietorship, Partnership or Pvt. Ltd. / LLP / One Person Company |
| Annual Turnover | Micro Enterprises – Rs.5 crores
Small Enterprises – Rs.5 – 75 crores Medium Enterprises – Rs.75 crores – 250 crores |
| Collateral or Security | Based on the bank’s discretion |
What are the documents needed to apply for a Small Business Loan?
- Signed Application Form
- Identity Proof (Individuals) – PAN card, Passport, Driving License, Aadhar Card, Voter ID, any Govt. issued ID card
- Identity Proof (Business Entities) – PAN card
- Residential Address Proof (Individuals) – Passport, Driving License, Election ID card, Electricity/ Telephone/ Mobile bill/ bank statement (not more than 3 months old)
- Business Address Proof – Bank statement, utility bill, Registry copy, lease or rent agreement, TAN allotment letter
- Proof of Business Existence – PAN card, GST Registration, copy of Partnership Deed, Trade License, Certificate of Practice, Registration Certificate issued by RBI, SEBI
- Last 3 years’ ITR (self and business), Profit and Loss Account, Balance Sheets Certified/Audited by a CA.
- Last 12 months’ bank account statement (self and business)
Tips To Small Business Owners To Avail The Right MSME Loans
There are various types of MSME loans. You can obtain term loans for any purpose or machinery loans to purchase specific equipment. Working capital loans or lines of credit are available to meet your company’s day-to-day needs. So, before seeking the right type of MSME Loan for his business, the business owner should make a list of his requirements.
It is critical to financially support MSMEs and other Small Industries in order to get the most out of them. The right kind of financial assistance at the right time is critical for the small business machinery to continue operating smoothly. To reduce the interest burden on these borrowers, the government provides numerous subsidies to small business loans.
Both the state and central governments in India have a number of loans designated for small business owners to meet their needs. Many public sector banks also have a variety of offers to help small businesses. These programs assist entrepreneurs in obtaining financial assistance to meet their business needs.
