As the current health and economic crisis has shown us, preparing for every possible financial eventuality is extremely difficult. Despite the many savings and investments an individual or business might make, even the most well laid out financial plans can sometimes take an unexpected hit. In the event of a financial crisis such as this, employment can become unstable and the future of budding entrepreneurs and small businesses can seem bleak.
However, a number of entrepreneurial ambitions around the country can heave a sigh of relief thanks to the Government-backed PMEGP loan. While the PMEGP loan has been around for more than a decade now, the opportunities created by the scheme have found new relevance in the circumstances of today.
If you are an entrepreneur or a small business owner looking for a much-needed financial impetus, here is everything you need to know about the PMEGP loan:
The PMEGP stands for the Prime Minister's Employment Generation Programme, which is a credit linked subsidy programme that was first launched in the year 2008. The PMEGP came about as a result of merging two previous similar government schemes that shared similar goals and benefits - the Prime Minister’s Rozgar Yojana and the Rural Employment Generation Programme.
The prime objective of these two programmes and the PMEGP loan scheme at present is to provide much-needed financial encouragement to Indian entrepreneurs in both rural and urban sectors to set up their own businesses and enterprises. As a result of these initiatives, the programme strives to foster employment among the country’s youth and aid the community with new ventures.
The administration of the PMEGP loan scheme is handled by the Ministry of Micro Small and Medium Enterprises while the implementation is governed by the Khadi and Village Industries Commission on the national level. On the district level, the scheme is handled by District Industries Centres as well as banks.
Under the PMEGP scheme, the PMEGP loan is a type of term loan offered by the government to entrepreneurs at a specific rate as well as subsidies on their overall project cost. The exact specifics of a PMEGP loan varies based on a number of factors. Here are some of the more important details about how much financial assistance a PMEGP loan offers:
The Government of India offers PMEGP loan amounts based on the sector and the cost of the overall project. For projects in the manufacturing sector, this loan amount is capped at Rs. 25 Lakhs. For projects in the business or service sectors, PMEGP loan amounts are offered up to Rs. 10 Lakhs.
The PMEGP loan scheme also requires a share of self investment in the project from the entrepreneur. For the General category, this share is marked at 10% while for the Special category, this share is 5%. Hence, the government can sanction as much as 90 to 95% of your project if it falls within the upper limit.
Along with the PMEGP loan, the scheme also offers a certain percentage of subsidy or margin money for your project. For rural enterprises, this subsidy percentage is 25% for the General category and 35% for the Special category.
For urban enterprises, the subsidy percentage is 15% for the General category and 25% for the Special category.
Apart from these varying factors, all PMEGP loans incur regular interest rates around 11-12% per annum. Also, the tenure for repayment of a PMEGP loan can be around 3 to 7 years, with a moratorium period of 6 months. As for collateral, all PMEGP loans up to Rs. 10 Lakhs do not require any form of security, as per guidelines from the Reserve Bank of India.
As discussed above, the PMEGP loan scheme was launched with the goal of boosting employment among the youth and encouraging rural and urban entrepreneurs to set up new micro enterprises.
However, apart from this overarching goal, the Government has further delineated the goal of the PMEGP scheme with this four-fold objective:
The PMEGP loan scheme strives to make a substantial improvement in the employment and entrepreneurship landscape of the country. It follows that the PMEGP loans have specific criteria for budding entrepreneurs or businesses that may be eligible for this beneficial opportunity.
Here is a comprehensive list of individual and organisation criteria that determine the eligibility of the PMEGP loan:
After ascertaining whether an individual or organisation meets the eligibility criteria listed above, they can move on to the next step - collecting the necessary documents for the PMEGP loan application process.
Here is a comprehensive list of the documents you will require before applying for a PMEGP loan:
Finally, on checking your eligibility criteria and collecting all the necessary documents, all that remains in the process of availing the PMEGP loan is the application process. Offering immense convenience to entrepreneurs everywhere, the loan application can be completed and submitted entirely online.
Here are the simple steps you need to follow to avail a PMEGP loan:
The PMEGP loan might provide a much-needed source of credit for many individuals and businesses around the country. However, businesses often have growing needs and might still be in need of additional financial aid. You can consider availing one of the many customisable business loans available at Finserv MARKETS today. The Bajaj Finserv Business Loan of up to Rs. 30 Lakhs, available on Finserv MARKETS, can be availed through a completely online process. For your convenience, the process has been made even easier through features such as minimal documentation, instant approval and swift disbursal.