The Government of India has initiated various government-backed business loans for funding support to individuals, business owners, SMEs and MSMEs engaged in Trading, Manufacturing and Services activity.
These loans are offered through various financial institutions in India like private and public sector banks, NBFCs, etc. There are various government business loans available that help the enterprises to decide on loans to suit their business requirements and financial capability.
Let’s discuss key government business loan schemes offered with their eligibility criteria, documents required and application process.
The Top 5 Govt-Approved Business Loans in India
Pradhan Mantri MUDRA Yojana (PMMY)
This scheme is for providing finance to non-corporate, non-farm small/micro-enterprises. Start-up business loans known as Mudra loans are available through private/ public sector/ commercial banks, regional rural banks (RRBs), small finance banks and corporate banks. Interested applicants can apply by visiting any of these banks or through online mode from the official MUDRA website. MUDRA loans are majorly used by small scale businesses and as start up business loans offered by the Indian government.
- Non-Corporate Small Business Segment (NSCB) made up of proprietorship/enterprise from rural/urban sectors
- Individuals/business owners/enterprises engaged in the activity of manufacturing, trading and service activities
- Women entrepreneurs
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
Small Industries Development Bank of India (SIDBI) has initiated the Stand- up India scheme for providing funding to applicants who fall under SC/ST category and for women entrepreneurs.
- Enterprises in trading, manufacturing, or services sectors
- Non-individual enterprises should have at least 51% of shareholding stake with an SC/ST or woman entrepreneur
- Rate of interest is lowest applicable rate – (Base Rate (MCLR)) + 3% + Tenor Premium
- Composite loans can be availed between Rs. 10 lakhs - Rs. 1 crore covering 75% of the project, which includes term loan and working capital
- Loans are provided to at least one SC/ST borrower and one woman borrower per bank branch
PSB/MSME Loans in 59 Minutes
PSB/MSME loans in 59 minutes is a digital platform, launched by the Government of India as a faster business loan portal for individuals who require funds to expand their current business.
Additional Reading: All that you need to know about MSME Loans in 59 Minutes
- Starts-ups and MSME’s
- Rate of interest 8.5% onwards pa
- Loans available between Rs. 1 lakh up to Rs. 5 crores, with approval in just 59 minutes
- Quick disbursal of loans within 7-8 working days
- Collateral free loan as the online platform is linked to the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme
National Small Industries Corporation (NSIC) Subsidy
The government has initiated National Small Industries Corporation Subsidy (NSICS) for small businesses for providing marketing and raw material assistance.
- Small Scale Industries (SSIs)
- One can avail of cost-free tenders under the marketing assistance program
- SSIs can avail of funding without having to pay a security deposit
- The scheme provides a financial facility for the land and building department for SSIs whose project cost does not exceed Rs. 25 lakhs
- All government schemes do not offer subsidy on loan for businesses
Credit Guarantee Scheme (CGS)
CGTMSE scheme was launched by the Government for strengthening and facilitating a seamless credit delivery system across the MSME sector. Public/private/foreign/ Regional Rural Banks (RRBs) and the SBI with its associate banks are lending institutions associated with this scheme.
- New and current MSME’s which are engaged in manufacturing/service activities excluding retail trade, educational institutions, agriculture, Self-Help Groups (SHGs), training institutions
- Includes term loans and working capital loans up to Rs. 2 crores per borrowing facility
- Cover available up to 75% of credit facility with an upper limit of Rs. 1.5 crores
- Micro enterprises get 85% of credit facility for loans up to Rs. 5 Lakhs
- MSMEs run by women entrepreneurs and all loans to North Eastern Region, including Sikkim can avail 80% of credit facility
- Guarantee cover is 50% of the amount in default with an upper limit of Rs. 50 lakhs for MSME Retail trade
Additional Reading: Best government loans for entrepreneurs
You can now run your businesses smoothly, thanks to the various government business loan options made available by the Government of India through both offline and online modes.
1. What is the minimum loan amount under government business loan schemes?
The minimum loan amount under government business loan schemes starts from as little as Rs. 30,000 per borrower.
2. How can one avail a government small business loan to establish a new business?
In India, one can avail of a government small business loan to establish a new business by visiting the official website of the government initiated schemes and applying for it through online mode or by visiting the respective bank which offers such schemes.
3. What is an MSME?
Ministry of Micro, Small & Medium Enterprises (MSME) related to small scale businesses with minimum investment in plant and machinery of Rs. 1 crore and with an upper limit up to Rs. 50 crores.
4. Which is the easiest way to get a government business loan in India?
One can avail government business loan in India through the various government schemes for small scale businesses, like Stand-up India, Mudra Yojana, psb loans in 59 minutes, etc.
5. How much loan can one avail under the Mudra Yojana scheme?
The maximum loan amount that can be availed for small business under the Mudra Yojana scheme is up to Rs. 10 lakhs.