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The Indian MSME sector has grown at a compounded rate of 40% annually on an average, as per industry reports shared in the past. Moreover, the government has made several special provisions to encourage development in this burgeoning sector through its 2020 annual budget. This includes continued taxation and auditing discounts, a seed capital provision initiative and a myriad of app-based invoice financing loans products which are yet to be announced.

While some of the government’s moves are still in the pipeline, there already exists a wide selection of government small business financing schemes that Indian SMEs can benefit from. These loans will push your business to grow because not only will they allow you to purchase new equipment, raw materials, or new manufacturing and retail centres, but they will also provide you with the much-needed capital to run a successful business on a day-to-day basis.

Government Loan Schemes for Small and Medium Enterprises (SMEs)

  1. MSME Loan in 59 minutes

  2. SIDBI Make in India Loan for Enterprises (SMILE)

  3. Stand up India scheme

  4. Pradhan Mantri Mudra Yojana (PMMY)

  5. CGTMSE

  6. Bank Credit Facilitation Scheme

1. MSME Loans in 59 minutes

The features of MSME Loans in 59 minutes are as follows:

  • SMEs can obtain a loan amount as high as anywhere between ₹10 Lakhs to ₹1 Crore as a beneficiary of this particular scheme.

  • The applicant can avail a loan as a beneficiary of this scheme in under 60 minutes from the time of submitting the application, as the name suggests.

However, SME owners must be mindful of the fact that they should check and compare the interest rates offered by different potential lenders which are offering MSME loans, as they could vary. Industry intelligence pegs the lowest interest rate on this type of loan at 8% per annum.

2. SIDBI Make in India Loan for Enterprises (SMILE)

The features of the SMILE loan scheme are as follows:

  • It aims to foster innovation, facilitate investment, protect intellectual property, enhance skill development, and build the best infrastructure for MSMEs.

  • One can only be a beneficiary of this government-run small business loan scheme if they belong to one of the 25 selected sub-sectors specified by the government.

  • According to their website, the relevant heads of the organisation will give preference to those who are seeking financing for relatively smaller enterprises within the MSME sector.

  • The minimum amount that one can avail under the SMILE scheme is ₹10 Lakhs if the amount will be utilised for equipment finance. If the loan capital will be used for other business purposes, the minimum amount will be ₹25 Lakhs.

3. Stand Up India Scheme

The features of the Stand Up India Scheme are as follows:

  • The Stand-up India scheme aims to provide the much-needed funds to entrepreneurs that are emerging from Scheduled Caste (SC), Scheduled Tribe (ST), or women-run groups.

  • SMEs with more than one owner (belonging to a different demographic) can also avail the Stand-up India scheme loan if a (SC/ST) member owns a larger stake of the business (minimum 51%) or if she is a woman entrepreneur.

  • Under this scheme, SME owners who are the beneficiaries of the scheme will obtain composite loans which include both term loans and working capital.

4. Pradhan Mantri MUDRA Yojana (PMMY)

The features of the PMMY scheme are as follows:

Under the PMMY scheme, beneficiary MSME owners can obtain government-sanctioned, collateral-free MSME loans. The amount they are eligible for depends on the stage of their business development curve. These are:

  • Shishu, which means newborn, is basically a loan for the nascent, newly-established enterprises who are trying to get their business off the ground. The maximum amount which can be availed as a Shishu loan is ₹50,000.

  • Kishor, which means teenager, is for businesses that have already taken off but continue to need financing as they are still in a very early stage of growth. The maximum amount that the businesses can avail as a Kishor loan is ₹5 Lakhs.

  • Tarun, which means young man, is for SMEs that have found their feet and possibly need funds for expansion purposes. The applying SME can avail up to ₹10 Lakhs as a Tarun loan.

The applicant must also additionally prove that their enterprise will indeed generate employment and income, specifically in the agriculture, manufacturing, retail, and the services sectors of the Indian economy.

5. CGTMSE

The features of the Credit Guarantee Scheme for Micro and Small Enterprises (CGTMSE) scheme are as follows:

  • For MSMEs opting for loans of up to ₹5 Lakhs, including ventures that are located in the North East or are women-owned, the government offers a credit guarantee of up to 80%.

  • Other parties in the SME sector, on the other hand, get a guarantee of up to 75%.

  • A credit guarantee backs up the loan which has been taken by the applicant as a form of collateral. This gives the lender sufficient reason to trust and lend SMEs more often.

  • This kind of assurance is necessary since the loans are collateral-free and cover both working capital and term loans.

6. Bank Credit Facilitation Scheme

Here are some features of the Bank Credit Facilitation Scheme:

  • This government enterprise was launched with the aim to promote, aid, and foster the growth of micro, small, and medium enterprises in the country. It operates through a countrywide network of offices and technical centres.

  • The National Small Industries Corporation (NSIC) has signed a Memorandum of Understanding (MoU) with banks, as per which, the relevant officials are supposed to first and foremost help SMEs with the documentation process in order to prove their eligibility for a loan.

  • After that, the powers that be must also help SMEs with the procurement of loans at affordable rates and assist them with the necessary paperwork as per the MoU.

In other words, the organisation plays a pivotal role in the life of the loan applicant for a certain time.

Government loans can come in handy for SMEs to expand and grow their businesses. However, at times, you may find yourself unable to meet the eligibility criteria for government loans. But you’re in luck. Beyond government business loans, there are other options one can avail of.

For instance, the Business Loan options which are available on Finserv MARKETS helps prospective borrowers obtain a loan of up to ₹75 Lakhs with minimal documentation. Moreover, the business loan options on Finserv MARKETS require no collateral against the loan and rather allows you to benefit from flexible repayment tenure which ranges from 12 to 60 months.

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