Small businesses: Top-5 government loan schemes

A business loan is used specifically for expanding business, purchasing long-term assets for the company or launching a new enterprise. The government is also encouraging the launch of small and medium enterprises (SMEs) with a variety of government-backed loan schemes. According to latest report, lenders have disbursed loans worth Rs 9.5 lakh crore to micro, small and medium enterprises in FY21 which is 40% higher than the Rs 6.8 lakh crore in FY20.

Here are 5 key government-backed loan options available for small businesses:

Pradhan Mantri Mudra Yojana

Pradhan Mantri Mudra Yojana was launched to boost grassroots-level entrepreneurship and self-employment in the country.

There are three categories of loans under this scheme. The smallest one titled “Sishu” entitles one to a loan of Rs 50,000. The next level of loan is between Rs 50,000 to Rs 5 lakh and is called “Kishore”, the third category called “Tarun” is from Rs 5 lakh to Rs 10 lakh. According to latest data, the total disbursement so far has reached close to Rs 16 lakh crore.

The loanee does not need to submit collaterals for these loans. The annual rate of interest varies from 8.2% to 9.65%.

Stand-up India

Stand-up India scheme facilitates bank loans between Rs 10 lakh to Rs 1 crore to women entrepreneurs and individuals under the scheduled caste or scheduled tribe category for setting up greenfield units. The interest rate will depend on the bank’s marginal cost of funds-based lending rate (MCLR) + 3% + tenure premium.

SIDBI Make in India Soft Loan

This small business lending scheme is governed by the Small Industries Development Bank of India (SIDBI).

SIDBI Make in India Soft Loan (SMILE) offers loans to small business with interest rates lower than market rates. This scheme is managed by Small Industries Development Bank of India (SIDBI).

The minimum loan amount under this scheme is Rs 25 lakh and maximum repayment tenure is 10 years. The interest rate starts at 8.36% with a moratorium period of 36 months.

Loans for startups in 59 minutes

This is one of the most popular small scale industrial loans backed by central government. This scheme was launched in 2018. Under this scheme, loan eligibility is conveyed to the loan applicant within 59 minutes.

The scheme offers loans ranging from a minimum of Rs 1 lakh to a maximum of Rs 5 crore. An interest rate starting from 8.50% is charged.

Credit Guarantee Fund Trust

CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) scheme offers loans for small scale industries to the MSME sector.

This scheme offers working capital loans of up to Rs 10 lakh without any collateral. New and existing micro and small enterprises engaged in manufacturing or service activity are eligible for this scheme.