Government Loans for SMEs

India’s SME sector is growing by 40% annually – moreover, the government has in its 2020 Annual Budget made special provisions to encourage development in this burgeoning sector. This includes continued taxation and auditing discounts, a seed capital provision initiative as well as a soon-to-be-introduced app-based invoice financing loans product.

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

Here’s a lot of the various government loans you can avail of to take your business to new heights:

1) For everyone: MSME Loans in 59 minutes

SMEs can obtain a loan amount ranging from 10 lakhs to 1 crore under this scheme. The star attraction of this loan is that the loan amount is deposited to your account in less than 60 minutes after your application is approved.

SME owners must keep in mind that they should check and compare the rates of different lenders offering the MSME loan because interest rates may differ. Industry intelligence pegs the lowest interest rate on this type of loan at 8%.

2) For 25 selected sectors: SIDBI Make in India Loan for Enterprises (SMILE)

This government small business loan can only be obtained if you belong to one of the 25 selected sub-sectors as specified by the government.

When launched, the government said that SMILE aims to foster innovation, facilitate investment, protect intellectual property, enhance skill development, and build the best infrastructure for MSMEs.

According to the SMILE website, preference for these loans will be given to financing smaller enterprises within the MSME sector and more specifically to new enterprises in the manufacturing and services industries.

There is a minimum loan amount under SMILE - INR 10 lakhs, if the amount will be utilised for Equipment Finance and INR 25 lakh, if the loan capital will be used for other business purposes.

3) For demographics that need a special push: Stand up India scheme

The Stand up India scheme aims to provide much-needed funds to entrepreneurs emerging from Scheduled Caste (SC)/Scheduled Tribe (ST)/women entrepreneurs. SMEs having multiple owners belonging to different demographics may also avail of the Stand up India scheme provided the larger stake of the business (minimum 51%) is owned by a member of SC or ST or else is a woman entrepreneur.

Under this scheme, SME owners will obtain composite loans – these loans include both term loan as well as working capital.

4) For Farmers and retailers: Pradhan Mantri Mudra Yojana (PMMY)

Under the PMMY scheme, MSME owners can obtain three types of government small business loans depending on which stage of the development curve their business is currently at. Shishu, which means new-born, is for nascent, newly-established enterprises. 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 and therefore require an SME loan. Tarun, which means young man, is for SMEs that have found their feet but possibly need funds for expansion.

This government business loan is easy for SME owners to benefit from because no collateral or security is required – however, they will need to prove conclusively that their enterprise will generate employment and income specifically in agriculture, manufacturing, retail and services.

5) Calling the North-East: CGSMSE

SMEs can opt for very small loans under the Credit Guarantee Scheme for Micro and Small Enterprises (CGSMSE). MSMEs opting for loans up to INR 5 lakh, enterprises that are fully located in the North East and for enterprises owned by women, the government offers a credit guarantee of 80%. Other parties in the SME sector also benefit from a guarantee of 75%.

A credit guarantee backs up the loan taken by the applicant as a form of collateral. This gives the lender sufficient assurance that they will lend to the SMEs more willingly especially since the loans are to be collateral-free and cover both working capital as well as term loans.

6) Special assistance offered: Bank Credit Facilitation Scheme

This scheme is run by the National Small Industries Corporation (NSIC). This government enterprise was launched 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.

NSIC has signed a Memorandum of Understanding (MoU) with banks and under this scheme, it first and foremost helps SMEs with the documentation process in order to prove their eligibility for availing of a loan. Thereafter, it also helps SMEs to procure loans at affordable rates and also assists them with the necessary paperwork. In other words it facilitates the whole process, sort of like an agent.


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 on Finserv MARKETS helps prospective borrowers obtain a loan of up to 30 lakhs within 24 hours, with minimal documentation. The business loan on Finserv MARKETS also requires no collateral to be signed against the loan. You can also benefit from flexible repayment tenures ranging from 12 to 60 months.

2020 is the unnamed year of Small Businesses. With so many options available to business owners, the growth potential is unlimited. Do not let lacking capital put a glass ceiling on your plans – opt for one of these loans and take your business to the next level while the iron is hot.

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