India is home to a large number of startups and micro industries. In the past few years, the growth of unicorns has been exponential. However, it is a challenge to get necessary financing when the business is just in the early stages. Also, the MSME sector in India has limited access to formal lending for business. With the rise in the number of small businesses across India, the Government of India decided to roll out a government loan for startups. These loan schemes provide financing and further promote MSMEs and startups. Here are some of the most notable government schemes that offer financing for startups and MSMEs in India.
NABARD is a development bank whose primary focus is the rural sector of India. It is one of the most critical financial institutions in the country. NABARD is responsible for the development of small scale industries, cottage industries, and any other such rural projects. The National Bank for Agriculture and Rural Development was established on 12th July 1982, with an initial capital of 100 crores. Other than meeting financial requirements of the rural sector, NABARD also provides for social innovations and projects, by partnering with various organizations for many innovative projects and innovative schemes for water and soil conservation.
New and existing MSMEs that are in manufacturing or service activities, excluding retail trade, agriculture, self-help groups (SHGs), training institutions, etc. can apply for CGS. The Credit Guarantee Scheme (CGS) was launched by the government to strengthen the credit delivery system and to facilitate financing to the MSME sector. The lending institutions that offer this scheme mainly include public, private sector banks, foreign banks, along with regional rural banks, the SBI and its associate banks. This MSME scheme for entrepreneurs comes with several benefits, including term loans and working capital loan facility up to Rs. 100 Lakhs per borrowing unit.
The Micro Units Development and Refinance Agency (MUDRA) was launched in 2015; this scheme is headed by the, and it aims at offering loans to all kinds of manufacturing, trading, and service sector activities. PMMY provides loans under three categories – Shishu, Kishor, and Tarun loan. Anyone, from artisans to shopkeepers to machine operators can avail a Mudra Loan.
MUDRA loan scheme offers incentives through these interventions:
The Mudra scheme can be availed by artisans, shopkeepers, vegetable vendors, machine operators, repair shops, etc.
Businesses that fall under the trading, manufacturing, or service industry can apply for the standup scheme. For non-individual enterprises, at least 51% of the shareholding needs to be held by an SC/ST or a woman entrepreneur. The applicant should have a good credit history and not have default payments with any bank or financial institution. This Stand Up India scheme facilitates bank loans between Rs 10 Lakh and Rs 1 Cr to at least one SC or ST individual and at least one woman borrower per branch to build their business.
The Coir Udyami Yojana is aimed at supporting the establishment of coir units. Banks will offer finance capital expenditure in the form of a term loan to meet the working capital requirements. The bank can also fund projects in the way of composite loans consisting of Capex and working capital. All coir processing MSME startups registered under the Coir Industry (Registration) Rules, 2008, are eligible for this scheme. Banks will Finance projects that cost up to Rs 10 Lakh one cycle of working capital, which should not exceed 25% of the total project cost. This amount should be exclusive of the Rs 10 Lakh limit, and the credit amount will be 55% of the total project cost after deducting 40% margin money and the owner’s contribution of 5% from beneficiaries.
The National Small Industries Corporation (NSIC) is targeted at fulfilling the credit requirements of the MSME units. The NSIC scheme has partnered with various banks to provide loans to the MSME units. The loan repayment tenure of the scheme ranges between 5 years and 7 years; it can be extended up to 11 years. The loan repayment tenure varies depending on the income generated from the startup and generally extends from 5 to 7 years. However, in exceptional cases, it can extend up to 11 years.
A Market Development Assistance Scheme is currently operated by the Ministry of Commerce to encourage exporters (including MSME exporters) to access and develop overseas markets. The scheme offers to fund for participation in international fairs, study tours abroad, trade delegations, publicity, etc. The Market Development Assistance Scheme offers funds for participation by manufacturing SMEs in International Trade Fairs/ Exhibitions under the MSME India stall. Funding for sector-specific market studies by Industry Associations/ Export Promotion Councils/ Federation of Indian Export Organisation.
Also, another option to get instant business financing is by applying for a business loan at Finserv MARKETS and quickly get loans of up to Rs. 30 Lakhs without any collateral. Whether you’re planning on getting a business started or are looking to upgrade your SME business with the latest technology. You can get a business loan tailored to your requirements on Finserv MARKETS. The online business loan application process is quite convenient with flexible loan repayment tenures. The business loan disbursal process takes less than 3 minutes along with access to exclusive offers on loans.