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 the necessary financing when the business is just in the early stages. Also, the MSME sector in India has limited access to formal lending for businesses. With the rise in the number of small businesses across India, the Government of India decided to roll out government schemes for startups. These loan schemes provide financing and further promote MSMEs and startups. Here are some of India's most notable government schemes that offer finance for startups and new businesses.
The features and benefits of government scheme business loan are as follows:
Zero collateral required: You will not have to collateralise your jewellery or property to avail this credit.
Flexible repayment tenures: You can select the tenure as per your convenience to repay the loan in easy instalments.
Interest rate depends on credit score: If you have a good credit history, you can easily get a loan at lower interest rates.
Instant disbursal of loan: If all your documents are accurate, the credit amount will be instantly disbursed to your bank account.
Minimal documentation: You will have to upload only a few essential documents while applying for a loan.
The revenue generated from MSME sectors contributes to about 30% of the overall GDP of India. In addition to this, it serves as the largest job creator for the citizens of India. Hence, to financially strengthen this sector, the government has introduced several credit schemes.
These credit schemes enable a constant inflow of cash that can escalate the growth of these businesses. Entrepreneurs can use this money for funding existing activities, expanding their ventures and monetising new ideas to generate more profit.
Below we have provided the best start up business loan by Indian government:
National Bank for Agriculture and Rural Development (NABARD)
Credit Guarantee Scheme (CGS)
Pradhan Mantri Mudra Yojana (PMMY)
Stand Up India Scheme
Coir Udyami Yojana
Bank Credit Facilitation
Market Development Assistance (MDA)
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 developing 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. Besides meeting the rural sector's financial requirements, NABARD also provides for social innovations and projects by partnering with various organisations for many innovative projects and schemes for water and soil conservation.
The government launched the Credit Guarantee Scheme (CGS) to strengthen the credit delivery system and facilitate financing to the MSME sector. New and existing MSMEs in manufacturing or service activities, excluding retail trade, agriculture, self-help groups (SHGs), training institutions, etc., can apply for CGS. The lending institutions that offer this scheme mainly include public, private sector banks, foreign banks, regional rural banks, the SBI, and associate banks. This MSME scheme for entrepreneurs comes with several benefits, including term loans and working capital loan facilities up to Rs. 100 Lakhs per borrowing unit.
The Micro Units Development and Refinance Agency (MUDRA) was launched in 2015, 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 loans. Anyone, from artisans to shopkeepers to machine operators, can avail of a Mudra Loan. MUDRA loan scheme offers incentives through these interventions:
Shishu: Loans up to Rs. 50,000
Kishor: Loans above Rs. 50,000 and up to Rs. 5 Lakhs
Tarun: Loans above Rs. 5 Lakhs and up to Rs. 10 Lakhs
The 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. 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.
The Coir Udyami Yojana is aimed at supporting the establishment of coir units. Banks will finance capital expenditure in 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.
The Ministry of Commerce currently operates a Market Development Assistance Scheme to encourage exporters (including MSME exporters) to access and develop overseas markets. This scheme provides 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.
To avail of a startup loan for new business, you must meet the following eligibility criteria:
Must be an Indian citizen.
Must be self-employed.
Age must be between 25-65 years.
Must have a minimum business vintage of 3 years.
You will have to furnish the following documents when applying for a government loan for new business.
Aadhaar card/passport/driving license
Bank statement of the last three months
Any business proof like a certificate of business existence, tax filings from the previous financial year, profit and loss statements from the last 3 years, etc.
Wondering how to get a loan to start a business from the government? Here, we have provided simple steps to apply for a loan for startup through Bajaj Markets.
Step 1: Fill in your personal details, including your name, mobile number, occupation, residential address, etc.
Step 2: Choose a suitable loan amount and repayment tenure.
Step 3: Get instant approval in 3 minutes and the loan amount in just 24 hours.
Prepare a detailed business plan that you want to fund using the loan amount.
Summarise the potential growth and financial returns expected with the venture.
Submit a clear plan on how you will raise funds to repay the loan.
We have another option to get instant business financing by applying for a business loan at Bajaj Markets and quickly getting loans of up to Rs. 50 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 Bajaj Markets. The online business loan application process is quite convenient with flexible loan repayment tenures. The business loan disbursal process takes less than 2 minutes, along with access to exclusive offers on loans.
Stand Up India Scheme facilitates bank loans between Rs. 10 Lakhs and Rs. 1 Crore to at least one scheduled caste (SC) or Scheduled Tribe, borrower and at least one woman per bank branch for setting up a greenfield enterprise. This enterprise may be in manufacturing, services or the trading sector.
As a business owner, here are the top government business loan options you can choose from:
● MSME government business loan scheme.
● MUDRA business loan.
● Credit guarantee fund government business loan scheme.
● National Small Industries Corporation Subsidy.
● Credit Link Capital Subsidy Scheme.
Entrepreneurs can now avail this distinct type of funding for their start up from the banks. Many banks and financial institutions offer loan schemes that are specifically designed to fund startups and their special needs.
Startup India is a flagship initiative of the Government of India, intended to build a strong ecosystem that is conducive for the growth of startup businesses, to drive sustainable economic growth and generate large scale employment opportunities.
It is essential to know about government schemes for startup business loans to meet emergency fund requirements of your venture. With adequate knowledge, you can accurately apply for credit, thereby minimising the chances of loan rejection.
You can get a maximum of Rs. 100 Lakhs under the under the Credit Guarantee Scheme (CGS) for business loans.
Yes, a credit score matters for a government scheme business loan as it reflects your credit history. So, if you have a good score, there are high chances of availing business loan at lower interest rates.