The Indian Startup ecosystem is growing continuously at a higher pace. But starting a new business is still a challenge. You need at least some funds or Government Business Loans to start or run it initially. There are more than 39,000 startups in India as of now. But more people are now thinking to start their venture instead of joining a job. The biggest challenge someone faces while starting a startup is funding.
Top 5 Government Business Loans for MSMEs
Every business needs some investment in it initially. But there are many citizens of India who have greater, innovative ideas but they lack the initial investment to take their ideas into reality. Though many startups are receiving funds from outside the country. But for a new startup or an idea, no one wants to invest. So, in this article, we will talk about the top 5 Government Business loans for MSMEs and discuss a bit about how to apply for loans there, eligibility criteria and interest rates. Let’s get started!
1. Pradhan Mantri Mudra Yojana (PMMY)
Pradhan Mantri Mudra Yojana was launched back in 2015 to provide refinance support to banks or MFIs so that they can lend money to micro and small-sized businesses which need a loan of up to Rs 10 lakh. The scheme is headed by the Micro Units Development and Refinance Agency Ltd also known as MUDRA.
Micro and small-sized businesses comprising proprietorship or partnership firms from urban and rural areas are eligible to apply for business loans under this scheme. At the same time, the business should be non-corporate. Below, you can see some of the examples of non-corporate small businesses:
- Small Manufacturing Units.
- Service Sector Units.
- Fruits or Vegetable Vendors.
- Truck Operators.
- Food-Service Units.
- Repair Shops.
- Machine Operators.
- Small Industries.
- Food Processors and Others.
There are three different interventions through which the offers are given:
- Shishu: Provides up to Rs 50,000
- Kishor: Provides between Rs 50,000 and Rs 5 Lakh.
- Tarun: Provides between Rs 5 Lakh and Rs 10 Lakh.
How to Apply:
You can head over to the official portal for the application procedure and others FAQs.
2. MSME Business Loans In 59 Minutes
Headed by the CGTMSE, this program was launched recently in September last year to help Startups grow. If you are running a Startup and you need a loan, this is possibly the best option for you. Here you can get in-principle approval for your loan in just 59 minutes as its name suggests.
The company must be GST and IT compliant and providing the bank statement for the last six month is mandatory. Apart from that, some other factors of the company will also be considered as eligibility criteria such as the company’s income or revenue, repayment capacity, existing credit facilities, etc.
Once you get the in-principle approval, the disbursal should occur within seven working days. The value of the loan can be from Rs 1 Lakh upto Rs 1 Cr depending on different factors of the company and repayment capacity. The minimum interest rate is 8%.
How to Apply
To apply for a loan online in 59 minutes go to the official website from here.
3. Credit Guarantee Scheme (CGS)
This is another initiative to provide loans to micro and small businesses engaged in manufacturing or service activities and is not a retail trade, educational institutions, agriculture, self-help groups, training institutions, etc. The scheme is headed by CGTMSE.
This scheme can provide term loans and/or working capital loan of up to Rs 200 Lakh per loan taker. It offers 80% of credit facility to Women-operated small and micro businesses and 85% credit facility to loans up to Rs 5 Lakh for micro businesses. It also facilitates 50% guarantee cover in default subject to a max of Rs 50 lakh to MSME Retail trade. For credit facility up to Rs 150 lakh, maximum 75% guarantee cover is provided.
The credit guarantee will commence from the day when the payment of guarantee fee is given and will run through for a period of 5 years where working capital facilities alone are extended to loan takers. For term loans or composite loans, the credit guarantee will run through the agreed tenure of the term credit.
How to Apply:
To apply MSME loan head over to CGTMSE website and follow guidelines.
4. Standup India
This initiative was launched back in April 2016 by the Government and is headed by the Small Industries Development Bank of India (SIDBI).
Businesses which deal with trading, manufacturing or services. If the applicant is a non-individual enterprise, a minimum 51% of the shareholding and controlling stake should be held by an SC/ST or business woman. This scheme is made to help the SC/ST and woman entrepreneurs by providing business loans.
The Standup India initiative provides composite loans from Rs 10 Lakh to Rs 1 Cr. The lowest applicable rate of the bank for that category would be the rate of interest. But it would not exceed [base rate (MCLR) + 3%+ tenor premium].
It is repayable in 7 years with a max moratorium period of 18 months.
How to Apply:
In order to avail the benefits of the scheme go to the official website and follow given steps.
5. SIDBI Make in India Soft Loan Fund for MSMEs (SMILE)
This loan scheme was launched in August 2015 and is currently headed by the Small Industries Development Bank of India (SIDBI). It was made to provide soft loans to small and micro businesses to either establish the business or for the growth of the existing MSMEs.
New businesses in the manufacturing and services sector are eligible to apply for this loan scheme. Existing MSMEs who are going to expand, modernise, upgrade the technology are also eligible to take loans to grow their business.
Loan amount of up to Rs 20 Lakh, 10% of the project cost will be provided for the general category. SC/ST/PWD/Women operated businesses can get 15% up to Rs 30 Lakh as loan amount. Owning a controlling stake (51% or higher) is mandatory to apply for the loan by the mentioned candidates.
The repayment period is up to 7 years, inclusive of the moratorium up to 18 months for the term loan and up to 24 months for a soft loan.
How to Apply:
To apply for a loan, head over to the official site from here.
I hope this article helped you to know about the top 5 government business loans for MSMEs and will help you take a loan from any of these schemes. If you have any further query on the same topic, feel free to ask in the comments section below.