.png){kind=logo}
Education Subsidy
Business Subsidy
The Government of India (GOI) initiates various schemes and policies to bring a change in the economic condition of the country. The factors relating to the futuristic approach of various businesses need to be assured and backed up with some financial help from the government itself.
Finance is the key reason for any kind of business, whether it is a big or small enterprise, it results in generating capital. The financial liquidity with additional financing will help businesses by involving them in a variety of schemes as a helping hand.
There are several Micro Small and Medium Enterprises (MSME) which are a combination of registered and unregistered ones. The government has even considered various schemes to boost MSME's business and enhance the growth of the Indian economy.
Top 5 government business loan schemes in 2022
MSME Loan Scheme
⦁ The loan was introduced by the Government of India focusing on the working capital loan
⦁ This scheme can be preferred by both the new and existing businesses with the financial assistance of Rs 1 crore
⦁ The approval is done within a time period of 59 minutes of the application.
(Rate of Interest) ROI: 8 percent
Women Entrepreneur Reservation: 3 percent
Loan Processing Time: 8 to 12 days
Credit Guarantee Fund Scheme
This scheme provides collateral-free loans for MSMEs. Scheduled commercial banks and the regional rural banks can become a part of the scheme by selecting themselves as a lending authority.
Working capital loans: Rs 10 lakhs without collateral as security
Credit Facilities: Rs 10 lakh and up to Rs 1 crore
Security: Primary security and mortgage of assets like land and buildings.
MUDRA Loan
Micro Units Development and Refinance Agency (MUDRA) takes the initiative of funding small businesses and startups to get financial support for low-cost credit.
Mudra loan provides micro or small businesses that are operated in the manufacturing, trading, and services sector.
The loan is registered via public and private sector banks, cooperative societies, small banks, scheduled commercial banks, and rural area banks.
The MUDRA loan scheme is guaranteed under three categories:
⦁ Sishu Loans: Rs.50,000
⦁ Kishor Loans: Rs.5,00,000
⦁ Tarun Loans: Rs.10,00,000
Credit Link Capital Subsidy Scheme
This loan includes funds for technological upgrades to your business. Basically, used to revamp various processes like manufacturing, marketing, and supply chain.
The production cost is also reduced for the creation and providing goods and services for SMEs.
The scheme offers a capital subsidy of about 15 percent for eligible businesses.
Loan Limit: Rs 15 lakh
Eligibility: Proprietorship business, partnership firm, co-operative or private and public limited company
National Small Industries Corporation Subsidy:
This subsidy is to opt for the raw material assistance scheme where a business can fund the cost of indigenous and imported raw material required for the business. With the marketing strategy, the funds can be utilized to create competitive market value for the business offerings.
This helps in the functioning of MSME to enhance production and quality.
NSIC offers MSMEs two different kinds of funding:
⦁ Raw material assistance
⦁ Marketing assistance
Top Government Loan Schemes for Startups & New MSMEs
There are more than 10 popular business startup loan schemes that the Indian Government provides to budding entrepreneurs. The features and benefits of the top 6 government business loans to start a new business are given below:
MUDRA Loan under PMMY
The Government has set up this scheme to provide finance to non-corporate, non-farm small/micro-enterprises. Mudra loans can be availed from private and public sector banks, commercial banks, regional rural banks (RRBs), small finance banks, and corporate banks. Interested applicants can approach any of the above lending institutions or apply online through the official website of MUDRA. MUDRA loans are majorly used by small-scale businesses and startups.
Features:
⦁ Collateral-free loans
⦁ Competitive Interest Rates from banks/NBFCs
⦁ Loan Amount up to Rs. 10 lakh
⦁ Nil Processing Fee
⦁ Zero prepayment charges
⦁ Repayment Tenure from 12 months to 5 years
⦁ Concessional Interest Rates for Women Entrepreneurs
Eligibility:
⦁ The minimum age of the applicant should be 18 years and maximum 65 years
⦁ Applicants with no past loan defaults
Non-Corporate Small Business (NCSB) segment comprising of individuals, MSMEs, sole proprietorships/enterprise firms in rural and urban areas can apply for the loan. Here are some examples of NCSBs:
⦁ Small manufacturing units
⦁ Service sector units
⦁ Shopkeepers
⦁ Fruits / vegetable vendors
⦁ Truck operators
⦁ Food-service units
⦁ Repair shops
⦁ Machine operators
⦁ Small industries
⦁ Artisans
⦁ Food processors and many other entities
Individuals, business owners, and enterprises engaged in the manufacturing, trading, and services sectors are eligible to avail MUDRA loans. Loans under Govt. schemes for women entrepreneurs can also be availed under Mudra Yojana. Below stated are the types and loan amounts offered under 3 loan schemes under Mudra loan:
Types of 3 Mudra loan schemes along with offered loan amount
⦁ Shishu: Loan Scheme: Up to Rs. 50,000
⦁ Kishor: Loan Scheme: From Rs. 50,001 and up to Rs. 5,00,000
⦁ Tarun: Loan Scheme: From Rs. 5,00,001 and up to Rs. 10,00,000
Stand-Up India
Governed by the Small Industries Development Bank of India (SIDBI), Stand up India was initiated to provide funding to people who come under SC/ST category and women entrepreneurs. This scheme provides bank loans between Rs. 10 lakh and Rs. 1 crore to at least one SC/ST borrower and one woman borrower per bank branch.
Eligibility:
Enterprises engaged in trading, manufacturing, or services sectors are considered eligible to avail loans under this scheme. In the case of non-individual enterprises, at least 51% of the shareholding stake should be with an SC/ST or woman entrepreneurs.
Interest Rate and Features:
⦁ Rate of Interest: Bank’s (Base Rate (MCLR)) + 3% + Tenor Premium
⦁ Composite loans can be availed between Rs. 10 lakh to Rs. 1 crore to cover 75% of the project, inclusive of the term loans and working capital loans
⦁ The specification of the loan being expected to cover 75% of the project cost. However, it will not be applicable if the borrower’s contribution along with convergence support comes from any other schemes that exceed 25% of the project cost
PSB/MSME Loans in 59 Minutes
On Nov 5, 2018, the Prime Minister, unveiled a dedicated digital platform or web portal named psbloansin59minutes.com to enable loans of up to Rs. 5 crores within just 59 minutes of approval for startup businesses and MSMEs. This loan scheme was initiated by the Indian Government to provide financial assistance to the Startups, Micro, Small, and Medium Enterprises (MSMEs) throughout India. Some of the salient features of this loan type are as follows:
⦁ Rate of interest: 8.50% onwards per annum
⦁ Loan amount: From Rs. 1 Lakh and up to Rs. 5 crore
⦁ Collateral-free Loans: Collateral or Security is not mandatory, as the online portal is directly linked to the ⦁ Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme
National Small Industries Corporation (NSIC) Subsidy
The government aids the small business under National Small Industries Corporation Subsidy (NSICS) with a focus on two financial benefits: marketing assistance and raw material assistance. Its benefits are as follows:
⦁ Cost-free tenders: Under the marketing assistance program, the Small-Scale Industries (SSIs) shall have access to the tenders without any costs
⦁ No Security deposit requires: The SSIs (Small Scale Industries) are exempted from paying a security deposit for availing of finances
⦁ Land and building financing: For the SSI units with the project cost not exceeding Rs. 25 Lakh, the scheme provides a financial facility for the land and building department
Not every scheme initiated by the Government offers subsidies on loans for businesses.
SIDBI Make in India Soft Loan Fund for MSMEs (SMILE)
Launched in 2015, SMILE is governed by the Small Industries Development Bank of India (SIDBI). The aim of this scheme is to provide soft loans, to meet the required debt-equity ratio for the establishment of new MSMEs, and also to enable the growth of existing ones. The interest rate offered under SMILE Timely Working Capital Assistance during the COVID times scheme is 8.25% onwards.
Eligibility: All existing borrower accounts including under Credit Delivery Arrangement with combined outstanding credit facilities up to ₹25 crores as of 29th Feb 2020.
Loan Amount: Up to 20% of total outstanding loans with SIDBI up to Rs. 25 crores with cap exposure of Rs. 5 crores.
Credit Guarantee Scheme (CGS)
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme was launched by the Government to strengthen and facilitate the credit delivery system to the MSME sector. Public, private, and foreign banks along with Regional Rural Banks (RRBs) and the SBI with its associate banks are included in the lending institutions under this scheme.
Eligibility:
New and existing MSMEs engaged in manufacturing or service activities, excluding retail trade, educational institutions, agriculture, Self-Help Groups (SHGs), training institutions are eligible for this scheme.
Features:
⦁ This MSME scheme for entrepreneurs includes term loans and/or working capital loan facility up to Rs. 2 crore, per borrowing unit
⦁ The guarantee cover provided is up to 75% of the credit facility up to Rs. 1.5 crore
⦁ 85% of credit facility for loans up to Rs. 5 Lakh is provided to micro-enterprises
⦁ 80% of credit facility for MSMEs owned/operated by women and all loans to North Eastern Region, including Sikkim
⦁ For MSME Retail trade, the guarantee cover is 50% of the amount in default subject to a maximum of Rs. 50 Lakh