The Government provides loans to businesses in India for scaling up

“It’s easy to get a loan unless you need it.” ~ Norman Ralph Augustine

To prove the above statement wrong, the Indian government has started various schemes and policies to help citizens for scaling up their businesses. About 40 million Micro Small and Medium Enterprises (MSMEs), including registered and unregistered ones fall under the categories of both the organized and the unorganized sectors. These contribute about 40% of the total GDP of India, and it remains a critical source of employment. They answer critical problems like poverty, unemployment, income inequality, regional imbalances, etc.

These enterprises need capital for startup and to run smoothly. Lack of this money leads people to either mortgage their property or take debt. The key business loan schemes offered by the government for people’s aid are as follows:

PM Narendra Modi on the left (Image source: pmjandhanyojana)

1. PMMY (Pradhan Mantri MUDRA Yojana)

PMMY (Image source: theindianwire.com)

Mudra loans also known as Start-up business loans can be accessed through regional rural banks (RRBs), private/ public sector/ commercial banks, small finance banks, and corporate banks. This scheme provides finance to non-corporate, non-farm small/micro-enterprises. This type of loan is majorly used by small-scale businesses and startups.

3 loan schemes are offered under Mudra Loan:

Shishu - Loans up to Rs. 50,000 @ rate of interest between 1% - 12% pa
Kishor - Loans between Rs. 50,000 - Rs. 5 lakhs @ rate of interest between 8.6% - 11.15% pa
Tarun – Loans between Rs. 5 lakhs - Rs. 10 lakhs @ rate of interest between 11.15% - 20% pa

2. MSME Loans in 59 Minutes

PMMY (Image source: estartindia)

PSB/MSME business loans in 59 minutes is a digital platform, designed to give access to quick business loans for individuals who require funds to expand their current business within 59 minutes. Loan up to Rs 1 crore will be sanctioned online. Startups and MSMEs will be eligible for this scheme.

There are four different types of loans:

Business loan- It is for MSMEs, entrepreneurs, and startup owners and the minimum loan amount is Rs 1 lakh.
Home loans- It is for individuals with a maximum loan amount of Rs 10 crores.
Personal loans- This also is for individuals with the maximum loan amount being 15 lakhs.
Auto loans- Individuals can apply for up to 1 crore.

3. Stand-up India

Standup India(Image source: Vikasepdia)

Small Industries Development Bank of India (SIDBI) has started Stand-up India's scheme which provides funds to the Scheduled caste and Scheduled Tribes category and also for women entrepreneurs. Businesses in sectors of trade, manufacturing, and service, also a non-individual enterprise having at least 51% of shareholding stake with an SC/ST or woman entrepreneur is eligible. The rate of Interest here has the lowest applicable rate which is – (Base Rate (MCLR)) + 3% + Tenor Premium

4. National Small Industries Corporation (NSIC) Subsidy

Developing small business (Image source: Tata Capital)

NSIC aims to promote, aid, and foster the growth of micro, small, and medium enterprises in the country. Through its network of offices and Technical Centres throughout the country, NSIC supports MSME entities. This subsidy is available for Small Scale Industries (SSIs). As part of the scheme, the land and building department will be able to provide SSIs with a financial facility if they have a project cost not exceeding Rs. 25 lakh.

It also has two schemes under it-

Marketing Support Scheme – Using schemes such as Consortia and Tender Marketing, this scheme supports any business development.
Credit Support Scheme – For procuring raw materials, activities concerning marketing, and financing with banks, the NSIC provides financial aid.

5. Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGFMSE)

Getting a Bank loan under CGTMSE (Image source: Indiafilings)

This loan scheme allows funding through loans without collateral to those enterprises that are MSME sectors. Public/private/foreign/ Regional Rural Banks (RRBs) and SBI with its associate banks are contributing institutions related to this scheme. Under this scheme, working capital loans of up to Rs. 200 lakh can be provided to eligible women entrepreneurs.Such schemes empower the minorities like SC, ST, and also women. Hence, they get a chance to improve their lifestyle and succeed.

A word of caution: Before you jump right in, one should always run a background check and read the terms and conditions before signing anything. All the best!