Top Government Business Loan Schemes in India 2023

Are you looking for business loans? Then, you must know about the government business loan scheme in India. Read to learn more!

The government provides established businesses and aspiring entrepreneurs with a number of well-known loan programmes for business startups. Below is a list of the top 6 government business loan programs’ characteristics and advantages for starting a new company or growing an existing one:

Mudra loans, Udyogini, India Stand-up, CGFMSE, and 59-Minute MSME loans, are some of the government-led small business loan schemes in India. In this article, we will talk about each one of these in detail. 

There are approximately 40 million registered and unregistered Micro, Small and Medium Enterprises (MSMEs) in India. They account for over 40% of India’s total GDP, and continue to be a major source of employment. They address pressing concerns like poverty, unemployment, income inequality, regional imbalances, etc. MSME’s owners might borrow cash from a loan through the schemes that suit their needs.

Whether starting a business from the ground up or expanding an existing one, you will need consistent cash flow. That is where business loans or corporate loans come in, and a business loan can assist you in obtaining the necessary capital for your company.

While many private lenders are eager to grant business loans in light of India’s recent fintech growth, the government of India also offers a variety of lending options to entrepreneurs through its various agencies. Government organisations provide business owners loans with low-interest rates and, often, no collateral.

The most important types of government financing programmes are:

PSB Loans in 59 Minutes 

PSB Loans in 59 Minutes is a special digital platform introduced by the Prime Minister on 5 November 2018. It facilitates loans up to ₹5 crores for startups, companies, and MSMEs in just 59 minutes of approval. The Indian government launched this credit programme to aid new businesses and Micro, Small, and Medium-Sized Enterprises (MSMEs) throughout the nation. Here are some key features of this loan program:

• Interest rate: The rate starts at 8.50% per year
• Loan amount: You can borrow from ₹1 lakh up to ₹5 crore
• Loans without collateral: The portal is linked with Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) so it doesn’t require any collateral 
• Quick access to financial assistance: The loans  But with this scheme, the loan approval process takes only 59 minutes.

Mudra Loan Under PMMY

The government created the Mudra lending programme, which is overseen by the Pradhan Mantri Mudra Yojana (PMMY). It aims to provide financial support to small businesses and micro-enterprises that are not part of big corporations or farms. You can get Mudra loans from various banks, finance companies, rural banks, small finance banks, foreign banks, and microfinance institutions. You can visit the official website or go to one of these lending institutions to submit an application. Owners of small firms, newly established companies, freelancers, and MSMEs all favour Mudra loans.

Features of PMMY:

• You can get a loan without providing collateral
• The interest rates are competitive
• You can  borrow up to ₹10 lakh
• There are no processing fees
• There are no charges for prepayment
• The loan tenure varies from 12 months to 5 years
• Women entrepreneurs can avail the loan at concessional interest rates.

Eligibility of PMMY:

• The applicant has to be 18 to 65 years of age
• They should have a good repayment history and no record of previous loan defaults

The Mudra loan is available to both individuals and small businesses in addition to corporations. It supports various business models like::

• Truck drivers 
• Small industries
• Artisans
• Food businesses 
•  Manufacturing units
• Food-service sections 
• Service sections
• Shopkeepers
• Fruits/vegetable sellers
• Automotive repair shops
• Machine operators

People engaged in manufacturing, trading, and services, including individuals, business owners, self-employed professionals, and MSMEs, can apply for MUDRA loans. Women entrepreneurs can also avail loans under government schemes through Mudra Yojana. Here are the types of Mudra loan schemes and the loan amounts offered:

• Shishu Loan Scheme: Up to ₹50,000.
• Kishor Loan Scheme: From ₹50,001 to ₹5,00,000.
• Tarun Loan Scheme: From ₹5,00,001 to ₹10,00,000.

Comparison of Business Loan Interest Rates Offered by Top Banks/NBFCs – 2023

Bank/NBFCs	Interest Rate
Axis Bank	14.95% – 19.20% p.a.
Bajaj Finserv	9.75% – 30% p.a.
Flexiloans	1% per month onwards
HDB Financial Services Ltd.	Up to 36% p.a.
HDFC Bank	10% – 22.50% p.a.
IDFC First Bank	10.50% p.a. onwards
Indifi	1.50% per month onwards
Kotak Mahindra Bank	16% – 26% p.a.
Lendingkart	12% – 27% p.a.
Mcapital	2% per month onwards
NeoGrowth Finance	19% – 24% p.a.
Tata Capital	12% p.a. onwards
UGRO Capital	14.90% p.a.

Stand Up India

The stand up India was initiated by the Small Industries Development Bank of India (SIDBI). Its purpose is to give loans to people who belong to the SC/ST category and women entrepreneurs. This scheme offers bank loans ranging from ₹10 lakh to ₹1 crore. Each bank branch is expected to lend money to at least one woman and one member of the SC/ST category.

Eligibility Criteria:

Enterprises involved in trading, manufacturing, or providing services can get loans under this scheme. If it’s not a sole proprietorship, a SC/ST or female entrepreneur must own at least 51% of the shares.

Interest Rate & Features:

• Interest Rate: The interest rate is based on the bank’s base rate or MCLR plus 3% and a tenor premium
• Loan Amount: You can borrow composite loans between ₹10 lakh and ₹ 1 crore. The funding,  including term loans and working capital loans, cover upto 85% of the  cost
• Loan Requirements: Typically, 85% of the project’s cost will be covered by the loan. However, if the borrower’s contribution and support from other schemes exceed 15% of the project cost, this specification may not apply.

Micro and Small Business Credit Guarantee Fund Scheme (CGFMSE)

The Indian Government has launched a scheme that allows enterprises in mentioned sector to receive finance via loans without requiring collateral. The scheme’s loans can give to both modern and old businesses. Working capital loans of up to 200 lac under this scheme are available with a preference for qualifying businesswomen.

Eligibility

Trades, institutions, helping groups, and other institutes are examples of manufacturing enterprises. Additionally, the service sector enterprises are eligible for funding through this loan programme.

National Small Industries Corporation (NSIC) Subsidy

The Government helps small businesses through a program called National Small Industries Corporation Subsidy (NSICS).  Here are the benefits of this program:

• Free access to tenders: SSIs can apply for tenders without paying any fees under the marketing assistance program
• No requirement for a security deposit: When borrowing money, SSIs are not required to put down a security deposit
• Financing for land and building: SSIs with a project cost of up to ₹25 lakh can get financial help for purchasing land and building.

Some Government schemes don’t give subsidies on business loans. Here are the banks that provide credit facilities under the Bank Credit Facilitation Scheme from NSIC:

• AU Small Finance Bank
• Axis Bank
• Bank of Baroda
• Bank of Maharashtra
• Canara Bank
• Central Bank of India
• Federal Bank
• HDFC Bank
• ICICI Bank
• IndusInd Bank Ltd.
• Karnataka Bank
• Kotak Mahindra Bank
• State Bank of India
• Tata Capital
• Union Bank of India
• Yes Bank

MSME Loan Schemes from SIDBI

The Small Industries Development Bank of India (SIDBI) launched the SMILE programme in 2015. It aims to provide simple loans to launch new MSMEs and support the expansion of already existing ones. Here are a few credit programmes that SIDBI provides for MSMEs:

• General Purpose Term Loan
• Secured Business Loans for MSMEs
• SIDBI and Google Partnership for Assistance to Micro Enterprises (SANGAM)
• SIDBI’S Term Loan to enhance the production of MSMEs (STEP) Scheme
• SIDBI Assistance to Export Oriented MSMEs under UBHARTE SITAARE PROGRAMME
• SIDBI Thematic Assistance for Purchase of Capital Assets in New Enterprises (STHAPAN)
• Assistance to Re-Energize Capital Investments by SMEs (ARISE)
• SIDBI Term-Loan assistance for Rooftop Solar Photovoltaic (PV) Plants (STAR)
• SIDBI – Loan for Purchase of Equipment for Enterprise’s Development Plus (SPEED PLUS)
• SIDBI – Loan for Purchase of Equipment for Enterprise’s Development (SPEED)
• Working Capital (Cash Credit)
• TOP Up Loan for Immediate Purposes (TULIP)

CGTMSE

The Government started a scheme called CGTMSE to help the MSME sector get loans easily. Banks like public, private, foreign, and Regional Rural Banks (RRBs), as well as the State Bank of India (SBI) and its associate banks, can give loans under this scheme. The maximum guarantee coverage under the CGTMSE scheme has been increased from ₹200 lakh to ₹500 lakh.

Eligible Entities:

This scheme is for new and existing MSMEs involved in making things or providing services. It does not include retail stores, schools, farms, self-help groups, or training centers.

Features:

• MSME scheme helps entrepreneurs with term loans and/or working capital loans
• The loan facility can be up to ₹5 crores for each borrowing unit
• Up to 75% of the credit facility’s value is covered by the guarantee, with a maximum of ₹1.5 crore
• Micro enterprises can get 85% of the credit facility for loans up to ₹5 lakh
• MSMEs in the North Eastern Region, including Sikkim, and those owned or operated by women are eligible to receive 80% of the credit facility
• The guarantee cover for MSMEs in the retail trade is 50% of the defaulted amount, up to a maximum of ₹50 lakh.

Steps to Register with Banks under Govt. Loan Schemes

• Step 1: Visit official website of the eligible bank(s) that offer business loans
• Step 2: Sign up on the website and log in using a One-Time Password (OTP) sent to your mobile
• Step 3: Go through and accept  the ‘Terms & Conditions’ 
• Step 4: Provide your financial details and other required information
• Step 5: Fill out the information and upload the documents

Factors That Affect the Eligibility of An Applicant

• The age of the applicant
• How well the person has repaid loans in the past 
• How financially stable they are
• The business type 
• The total time the business is running
• The person’s or the company’s credit score or rating
• The amount of money wanted for the loan and how long it will take to pay it back
• The annual turnover of the business, along with the income tax return and profit and loss statement
• The money invested in the business and the things like goods, raw materials, equipment, or machinery that will be used
• Any other debts or loans the person has or any problems with paying back loans in the past.

Documents Required for Banks under Govt. Loan Schemes

• Duly filled application form along with passport-sized photographs
• KYC documents: Applicant’s Identity, Age, and Address Proofs
• Passport
• Voter ID card
• Aadhar Card
• Driving License
• PAN card
• Utility Bills (Water & Electricity Bills)
• Bank statements for the last 6 months
• Last 1 year’s Income Tax Return (ITR)
• Business Establishment Certificate
• Business Address and Vintage Proofs
• Business PAN card, if applicable
•  SC/ST/OBC Caste certificate 
• Any other document required by the lender

Technology Upgrade CLCSS

This programme helps small industries to modernise their procedures by giving funds for technical upgrades. Technological advancements benefit manufacturing, marketing strategies, flow chain, and many facilities. The CLCSS scheme intends to decrease the cost of goods and services production. The Head of Small-Scale businesses sees the programme. For eligible companies, the CLCSS provides a 15% annual subsidy. However, the maximum subsidy amount is 15 lakhs. This business lending programme covers sole proprietorships, partnership enterprises, co-operatives, and private, and public limited companies.

Udyogini

Udyogini, which means “women empowerment,” is a scheme to empower  Indian women. The Women Development Corporation of India introduced the project on behalf of the Indian government. The cash provided under this programme intends to assist women in fulfilling their capital needs to start a business.

A maximum loan of 15,00,000 can be issued under this scheme. To be eligible for this scheme, a woman entrepreneur must be between the age of 18 and 55, and her family’s income must not exceed 15,00,000. Disabled women or widows have no income restrictions. This strategy does not demand any processing fees or collateral to obtain a loan.

To be eligible for this loan, women must provide passport-sized pictures, a birth certificate, a Below Poverty Line Card, an Aadhar Card, a Caste Certificate, a passbook or bank account, a ration card, and proof of income. There are around 88 different enterprises for which eligible women can apply for loans.

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Conclusion

This post is for anyone who runs a type of business and wants to expand. It is possible to apply for a government loan. The government offers a variety of government credit initiatives designed for business women and those from SC/ST backgrounds, such as the Udyogini and India Stand-Up schemes. Understanding the aim of these loans and the eligibility criteria might thus make the procedure of obtaining them easier.

FAQs

What is the minimum loan amount that can be availed under government loan schemes?

You can borrow any amount you need from Banks/NBFCs under Government loan schemes. For smaller loans, Banks offer a minimum amount through Mudra Yojana under PMMY. But if you need a larger loan without any collateral, you can borrow up to ₹2 crore.

How many government loan schemes are for MSMEs or for startup businesses?

There are more than ten government credit programmes for enterprises in this movement. MUDRA Yojana, PSB Loans in 59 Minutes, CGTMSE, PMEGP, Credit Linked Capital Subsidy Scheme, National Small Industries Corporation Subsidies, Stand Up India Scheme, Credit Guarantee Fund Scheme, and others are a few of them.

How do I get a government loan under PMMY to start a business?

You can apply for a Mudra loan plan if you wish to start a business and need a loan of up to ₹10 lakh. But if you want more than ₹10 lakh, you can apply for a business loan directly at a bank or NBFC. In most cases NBFCs charge higher interest rates.

How can I get a government loan for a business in India?

If you have a small business and want to get a loan from the government, you can choose from different schemes like Standup India, PMEGP, Mudra Yojana, PMRY, Startup India, PSB loans in 59 minutes, CGTMSE, CLCSS, and more.

How much loan can I get for a small business under Mudra Yojana?

Small businesses can get loans up to ₹10 lakh through a Government scheme called MUDRA Yojana. All the interest rates for the loans are much lower. In case of a higher capital requirement they can apply for public sector banks.

How to get a Startup loan for beginners who are unable to avail loans from private or public sector banks?

Small finance banks (SFBs), micro finance institutions (MFIs), and non-banking financial companies (NBFCs) are options for borrowers whose loans from traditional banks are denied. Additionally, startups can check to see if the Indian government offers any unique initiatives, such as the Mudra Scheme under PMMY, Startup India, Stand up India, and PSB Loans in 59 Minutes.