Whether you are planning to bootstrap a startup or wish to take your existing enterprise to new heights, a constant cash flow is something you will always need. That’s where business loans or corporate loans come into the picture, and a business loan can help you secure the required funding for your business.
While many private lenders are willing to offer business loans, given the recent fintech boom in the country, the government of India also provides multiple lending schemes to business owners through its various agencies. Government agencies offer loans to business owners at attractive interest rates and many times even without any collateral.
Business Loan by Government
Here are the top six government business loan schemes in India for new businesses-
MSME Loan Scheme
Credit Guarantee Fund Scheme
Credit Link Capital Subsidy Scheme
National Small Industries Corporation Subsidy
The MSME business loan scheme was launched by the Government of India to focus on the working capital requirement of industries in the MSME sector. Any business can avail loans under the MSME scheme, be it new or existing, for financial assistance of up to ₹1 Crore. The loan processing takes 8-12 days to complete, while the approval or disapproval is granted within the first 59 minutes of the application.
The best part of the MSME Loan Scheme is that you get the loan at 8% ROI, making the loan repayment easier. There is a reservation of 3% for women entrepreneurs for loans availed under the MSME Loan Scheme. Moreover, the loan approval process is also comparatively easier for women entrepreneurs.
CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) has been facilitating collateral-free loans for MSMEs for quite a long time now. Any scheduled commercial or regional rural bank can become a part of the CGTMSE scheme by empanelling itself as a leading authority. The agency grants loans to MSMEs based on their credit standing via the lending agencies registered with it. The CGTMSE scheme provides working capital loans of up to 10 Lakhs without any collateral. However, for all credit facilities of amounts greater than ₹10 Lakhs (and up to ₹1 Crore), only primary security or mortgage of land and building will be covered under the CGTMSE scheme.
The Micro Units Development and Refinance Agency (MUDRA) has a funding scheme where small businesses and start-ups can get financial support in low-cost credit. MUDRA loan is typically for micro or small businesses that operate in the manufacturing, trading, and services sectors. MUDRA Loans can be applied for through public and private sector banks, cooperative societies, small banks, scheduled commercial banks, and rural areas. A business firm can apply for the MUDRA loan scheme in three categories.
Shishu Loan: up to ₹50,000
Kishor Loan: up to ₹5,00,000
Tarun Loan: up to ₹10,00,000
The purpose of this loan scheme is to fund technological upgrades in businesses. The funds can be used to undertake revamps related to the various processes involved in the business, such as manufacturing, marketing, and supply chain, so that the production cost for creating and providing goods and services is reduced. The CLCSS offers an up-front capital subsidy of 15% for eligible businesses under the scheme. Sole proprietorship businesses, partnership firms, and co-operative or private and public limited companies are all eligible for loans under CLCSS.
The NSIC offers MSMEs two types of funding benefits:
Raw material assistance
Any business that qualifies as a micro and small enterprise with an EM Part-II (Optional)/ Udyog Aadhaar Memorandum (UAM) is eligible to apply for the NSIC subsidy under the Single Point Registration Scheme (SPRS). Suppose you qualify for this business loan scheme. In that case, you can opt for raw material assistance that allows you to fund the cost of indigenous and imported raw material required for your business.
As far as marketing assistance is concerned, you can use the funds to enhance your competitiveness and the market value of your offerings. The NSIC subsidy scheme also overlooks the functioning of an MSME and supports it in its endeavour to enrich production and quality.
SIDBI or Small Industries Development Bank of India was set up in 1990 to cater to the financing needs of industries in the MSME sector. SIDBI provides loans directly to MSMEs and offers indirect loan schemes to NBFCs (Non-Banking Financial Companies) and SFBs (Small Finance Banks). The loan amount can be between ₹10 Lakhs and ₹25 Crores, while the loan tenure can go up to 10 years. Loans up to ₹1 Crore can be availed without any collateral.
MSMEs can avail loans from SIDBI under various loan schemes by the bank, including SIDBI-Loan for Purchase of Equipment for Enterprise’s Development (SPEED), SIDBI Make in India Soft Loan Fund for MSME (SMILE), Smile Equipment Finance (SEF), and others. The loan tenure, loan amount and eligibility criteria are different for every loan scheme.
As MSMEs are consistently growing in India, various lending institutions now offer exclusive loan products for MSMEs. At Finserv MARKETS, you can apply for an SME loan for your business at attractive interest rates. The Finserv MARKETS app allows you to apply for SME loans easily, and you might also get pre-approved offers on the app.