Are you looking for government Funding to gain capital support for your startup? Then you are at the right place. Follow along to discover ways to receive government funds through different schemes for businesses.
Government funding is the generation of financial contracts, grants and mechanisms from the federal, local or state government for startup business. This arrangement can be funded by the national government or state government or through different agencies. A government can also draft a contract with a company to fund the work and subcontract the parts to other companies. These companies will fall under the relevant rules and regulations for the particular sub-contracted job.
Another kind of government funding is via loans. Governments lend money to micro, medium and small business enterprises to remedy alarming economic problems, including poverty, income inequality, unemployment, regional imbalances and like. Harnessing local talent plays a pivotal role in contributing to the country’s GDP. Presently MSME sector creates 11.10 crore jobs all over India, and this sector contributes 8% of GDP, becoming the engine of growth in India.
The government of India has created an equity fund for start-ups to help them with additional capital support. The equity fund is supposed to have a 20 per cent limited stake by it. There will be a government fund that will be sponsored and created by the Government but will be managed by private funds.
This will create a necessary private equity fund as a crucial addition to current equities. These funds are mainly aimed at start-ups in deep-tech, climate action, pharma, digital economy and agri-tech. However, the government has already set up funds like SISFS or Startup India Seed Fund Scheme with an INR 945 crore investment to help start-up businesses launch their services. Apart from the Central Government, the State Governments like Karnataka, Uttar Pradesh, Gujarat, Bihar and Rajasthan have come up with separate funds to help and support the new entrepreneurs in the start-up ecosystem.
Business Loans by Government
The MSME sector is the largest job creator in India and contributes 30% to India’s GDP. Considering its importance, the government of India has initiated various credit schemes to support and strengthen the MSME sector. Business loans provide financial backing to all existing and new business activities and drive extension. The start-up loans by the Indian government ensure necessary access to capital to permute bankable start-up ideas into cost-effective ventures.
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MSME Loan:
This Loan also referred to as the PSB loan in 59 minutes, is a scheme launched by the Fundraising government of India to initiate a quick business loan for entrepreneurs who want to expand their start-ups. Under the scheme, MSMEs are sanctioned loan amounts ranging from INR 1 Lakh to INR 5 Crores within 59 minutes from private and public sector banks and Non-banking Financial Companies or NBFCs, where the interest rate is 8.50%. MSME or Micro Small and Medium Enterprises Loan Scheme in 59 minutes provide you with the essential financial resources even if you have time constraints.
The criteria that determine the kind of businesses eligible for MSME or PSB loans scheme are- the income or revenue of the business, existing credit facilities and the capacity of repayment by the borrower, along with other factors pre-set by the financial lender.
The benefits of this scheme for business are:
- The loan process requires minimal documentation and is granted within 59 minutes
- This loan is an Advanced Technology Backed Loans scheme meaning the entire process is conducted without human intervention only except for the last stage of the loan being sanctioned
- The procedure maintains the safety and security of the data provided by the applicant. Therefore, all details and documents are highly confidential, and there can not be any security breach during the entire process.
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NBFC:
Non-Banking Financial Company is engaged in the business of loans by the government or local authority. An NBFC deposits any arrangement or scheme in installments or one lump sum amount. However, they can not demand or accept deposits or draw cheques by themselves. The depositors of NBFCs also do not get the Deposit Insurance facility of Credit Guarantee Corporation and Deposit Insurance.
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Mudra Scheme:
MUDRA or Micro Units Development and Refinance Agency Limited provides sufficient refinancing support to NBFCs and Banks to lend money to Micro Units which require loans up to INR 10 Lakh under Pradhan Mantri MUDRA Yojana Scheme. Under MUDRA, the loan can be divided into three categories: ‘ Shishu’, ‘Tarun’ and ‘Kishore’, which symbolise the different developmental stages. The Shishu loan covers loans up to INR 50,000 at a 1% -12% annual interest rate. The Kishore loan covers loans above INR 50,000 and up to INR 5 Lakh at an 8.60% – 11.15% annual interest rate. Tarun loan covers above INR 5 Lakh and up to INR 10 Lakh at an 11.15% – 20% annual interest rate.
This loan is a business loan for vendors, shopkeepers, traders and other service necessities. This loan is also offered for working capital through the Mudra Card. The tractors and two-wheeler vehicles which will be used for commercial purposes can also be bought through this loan. This loan finances equipment for micro-units. You will receive a MUDRA debit card against the loan amount, which can be used for multiple withdrawals and credit necessities to manage to limit the working capital. This also helps in keeping the interest rate minimum. The cards play an essential role in digitalising the transactions and keeping track of the borrower’s credit history.
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Mahila Bank:
Bharatiya Mahila Bank offers a loan amount up to the value of INR 20 crores to enterprises. The women entrepreneurs get a concession of 0.25% in the annual interest rate. They also grant collateral-free loans ranging up to INR 1 crore. The interest rate per annum is 10.15% – 13.5%. The loan tenure is up to 7 years. You will need income and self-employment documents along with proof of business to avail of the loan.
You can also get other loans from the government of India and connect with the experts of VakilSearch to get perfect pitch decks for raising funds for your start-up business.
