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About Government Loans for Small Scale Businesses

The past few years have seen a surge in the number of start-ups cropping up all over the country. Numerous ideas have taken shape into successful businesses. The economy has seen a healthy rise in investments in these small-scale businesses that have provided livelihood to millions of Indians.

Any new venture needs a capital. Not everyone has the backing of venture capitalists ready to pour in millions of rupees. Non-availability of timely and adequate funds can dampen the spirit of entrepreneurship. In addition, arranging for collateral or security can be tough for a few. There are also other factors like stringent government policies, legal framework, regulatory gaps, unreliable information, etc; that could delay the process of procuring the initial capital.

Hence, the Indian Government has introduced a number of financial aids to help small scale entrepreneurs to achieve their business goals. These schemes and loan products are designed to make sure that they reach the remotest of areas all over the country. There are schemes that can be availed with very minimal or nil collateral. Loans procured under these government schemes are a good choice due to its lower interest rates.

In India, both the State and Central Governments have a number of loan schemes specified for small business owners to meet their requirements. Many public sector banks too have various offers to assist small scale businesses. These schemes help entrepreneurs to obtain financial assistance to fulfil their business needs.

Government Loans For Small Scale Businesses
Government Loans for Small Scale Businesses

Government Schemes for funding MSMEs

The Indian government has set up few institutions for the development of the Micro, Small and Medium Enterprise Sector (MSME). SIDBI – Small Industries Development Bank of India is one such principal financial institution. It was set up in April 1990 for the promotion, financing and development of MSME sector. The main focus of SIDBI has been to create a conducive and nurturing environment for a holistic growth of the MSME sector. It works towards building a strong network of associates and subsidiaries to address both the financial and non-financial needs of the MSME sector.

Some of the schemes under SIDBI are:

MUDRA – Micro Units Development & Refinance Agency Ltd

  • Refinance support to banks and NBFCs to facilitate higher funds available for lending
  • Onward lending to business entities involved in manufacturing, trading, services, tractor financing, agriculture and allied activities, and two-wheeler loans
  • MUDRA also empowers MSME entities through financial literacy and other social support services in addition to financial assistance
  • MUDRA has three loan schemes under it – Sishu loan up to Rs. 50000, Kishore loan up to Rs. 5,00,000 and Tarun loan up to Rs. 10 lakhs

Technology Upgradation Fund Scheme for the Textile Industry (TUFS)

  • Aimed at upgradation and modernization of the textile industry.
  • Available for both new and existing MSME textile units.
  • Along with SIDBI, 36 Nodal banks have been assigned to disburse funds under this scheme.

Credit Linked Capital Subsidy Scheme (CLCSS)

  • Facilitate technology upgradation of MSME units in specific products
  • 15% capital induction for well-established and improved technologies
  • SIDBI and NABARD are the principal institutions for fund disbursement
  • Nine nodal banks have been inducted to work along in the scheme

Technology and Quality Upgradation Support to Micro, Small & Medium Enterprise (TEQUP)

  • Aimed at encouraging energy efficient projects
  • EET Machinery having 15% or more energy saving capability are eligible to apply for this fund
  • SIDBI and Nodal banks act as primary lending institutions for quicker loan disbursal
  • A maximum of 25% of the project cost or Rs. 10 lakh can be availed as loan amount

SMILE – to develop Make In India initiative

  • Loans issued in the form of Quasi-Equity
  • New and existing MSME units in manufacturing sector or service sector undertaking expansion can avail this loan
  • Minimum loan size is Rs. 25 lakhs
  • Attractive rate of interest starting from 8.36%
  • Repayment tenure of up to 120 months

MSME Receivable Refinance Scheme (MSME RFS)

  • Assist MSMEs with delayed payments with respect to their credit sales to large purchaser companies
  • Offers them finance against bills of exchange/invoices arising out of such sales

The Credit Guarantee Fund Scheme for Micro and Small Enterprises

  • Under this scheme, loan can be applied without any collateral
  • New and existing MSME units involved in manufacturing or service sector can apply
  • Retail trade, Educational institutions, Agriculture and Self-Help Groups (SHGs) are excluded

Apart from SIDBI, the Government of India has set up numerous other financial institutions for the progress and development of the MSME sector across the country.

National Small Industries Corporation Limited (NSIC)

Established in 1999, the NSIC works with the objective of providing machineries to small scale industries. NSIC works towards importing, supply and distribution of raw materials and machines to small scale industries. It also facilitates the export of indigenous products and thus helping small production units. NSIC also promotes latest technological advancementspertaining to the MSME sector.

National Bank for Agriculture and Rural Development (NABARD)

NABARD was established in 1982 with the sole objective of development of Agriculture based rural businesses in India. It offers financial assistance to various small scale industries of rural India viz; cottage industry, dairy farming, and other village industries

NABARD lays emphasis on continuous social innovations in the rural areas. Apart from providing funds, NABARD helps rural businesses to establish a framework that works well for them. It works in tandem with the State and Central Governments and the RBI in establishing a well-oiled mechanism for the general upliftment of the rural MSME sector.

Market Development Assistance Scheme for MSMEs

Another premise for our Indian MSMEs, that could take them to International community, but left unexplored due to lack of funds, is the International Trade Fairs and Exhibitions. For this purpose, the government set up the Market Development Assistance Scheme for MSMEs. This scheme aims at funding MSMEs in showcasing their products and services at the MSME India Stall in major International Trade Fairs and Exhibitions. This scheme offers partial reimbursement of the One-time registration fees or annual fees or similar fees paid by the MSMEs to participate in the trade fairs.

There are a number of resources available for budding entrepreneurs to realize their dream of owning a business. These government schemes are aimed at empowering every individual to build their business with minimal hassle. Because, it is an established fact that MSMEs are the backbone of any economy and their growth and development should be the core agenda of the government.

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