Capital is the lifeblood of businesses, big and small. Businesses generally avail of business loans to meet working capital requirements, expand business, and improve cash flow.
Loans are easy to come by as several banking and non-banking organizations offer financial support to firms through business loans. Besides private-sector lenders, the government of India has been proactive in providing government business loans for startups and other businesses. This blog post will discuss the top 5 Indian government loan schemes for micro, small, and medium enterprises (MSME).
Top 5 government business loan schemes in 2024
The government provides financial support for small- to large-scale enterprises through various government business loans and strategic initiatives. You can get a significant financial boost for your start-up or already established business by availing of these schemes. Here are the top 5 government business loan schemes offered by the government of India.
1. Pradhan Mantri Mudra Yojana (PMMY)
The first and most important government loan scheme is the Pradhan Mantri Mudra Yojana or PMMY. It is one of the most lauded government loan schemes for businesses. The scheme was primarily launched to support women start-up entrepreneurs and existing businesses led by women.
MUDRA is short for Micro Units Development and Refinance Agency Ltd. It acts as a refinancing force or support system for both NBFCs and banks that offer credit services for small businesses. The best part of this government scheme is that it is collateral-free. What’s more, MUDRA loans do not come with a specific repayment tenure wherein institutions offering loans are given the flexibility to set their loan tenures as per RBI guidelines.
Under the MUDRA scheme, 3 categories of loans are offered:
| MUDRA Loan Scheme | Loan Amount | Interest Rate |
| Shishu MUDRA Loan | Up to Rs 50,000 | 1%-12% per annum |
| Kishore MUDRA Loan | Above Rs. 50,000 to Rs 5 lakh | Starts from 8.60% per annum |
| Tarun MUDRA Loan | Over Rs 5 lakh to Rs 10 lakh | 11.15%-20% per annum |
2. MSME Loan Scheme in 59 Minutes
MSMEs or Micro, Small, and Medium enterprises, contribute 29% of India’s GDP. The MSME Loan Scheme in 59 Minutes is a dedicated government loan scheme for the MSME group. It is also a vital start-up business loan by India government that helps both start-up and existing enterprises to avail of business loans from Rs. 10 lakh up to Rs. 5 cr in 59 minutes. The scheme typically takes up to 8 to 12 days for the loan processing. However, the loan approval or rejection process takes only 59 minutes which is an incredibly faster processing time compared to other non-government and govt loan schemes.
Another notable fact about this MSME loan scheme is it helps businesses avail loans at the interest of 8%. On the other hand, this scheme also offers women entrepreneurs to take advantage of 3% reservation under the scheme.
3. Credit-Linked Capital Subsidy Scheme
When discussing top government business loan schemes, credit-linked capital subsidy schemes deserve a mention. It is a government-sponsored loan scheme for businesses. It is a perfect credit support for businesses that require a significant amount of money to fund the technological development/advancement. Technological advancements may include manufacturing, marketing, and supply chain logistics.
Whether it is a cooperative company, sole proprietorship, partnership firm, or public or private limited company all are eligible to apply for this loan scheme under the CLCSS. This start-up business loan is a popular choice for business entrepreneurs. Essentially, when they avail this loan, they get an up-front capital subsidy of 15% (on institutional finance of up to Rs. 1 crore availed by them), which is a great subsidy for any business. It is also one of the most popular government business loans that most start-up entrepreneurs prefer to apply to support their financial needs with minimal interest and a significant capital subsidy which makes it easier for the borrower to repay the loan.
4. SIDBI Loans
SIDBI, short for Small Industries Development Bank of India, was constituted in 1990. It is the apex regulatory body for the regulation and licensing of finance companies of micro and small to medium scale. The primary aim of this scheme is to offer financial assistance to MSME companies. SIDBI can directly offer government loans to MSME companies. However, it can also offer financial assistance through SFBs and NBFCs. Loans under the SIDBI scheme can offer a loan amount between Rs. 10 lakhs to Rs. 25 crores and the loan repayment period can range up to 10 years.
Primarily, semi-urban employment-oriented sectors can benefit from this scheme. There are various loan opportunities under SIDBI for different types of businesses. The eligibility criteria for each loan differ based on industry specifics.
5. National Small Industries Corporation
National Small Industries Corporation (NSIC), a public sector undertaking established in 1955, provides government business loans. NSIC offers governmental financial assistance to sectors such as technology, finance, and marketing. The scheme is best suited for business owners of established companies in the sectors mentioned above.
Under the National Small Industries Corporation loan scheme, the government offers two types of business loans:
- Credit Support Scheme: Under the Credit Support Scheme, businesses can avail financial support for marketing, finances, procuring raw materials, etc.
- Marketing Support Scheme: Businesses can make the most out of this marketing support scheme through tender marketing, consortia scheme and more. It can significantly boost market reach, business marketing, and promotions.
The eligibility criteria are quite flexible for any business, especially start-ups to avail financial support for business growth and expansion.
Other government loan options for businesses
Thriving small businesses give a significant boost to the country’s economy. That is why the Indian government also offers other loan options for businesses. Here are some other government loan scheme options you can consider:
– Stand-Up India Scheme
The government of India launched the Stand-Up India Scheme in 2016 to promote entrepreneurship at the grassroots level. The scheme aims to help SC/ST and women entrepreneurs from greenfield enterprises like services, manufacturing, and trading sectors. The loan amount can range from Rs. 10 lakhs to Rs. 1 crore. Businesses can avail of this loan
o At the bank branch office
o At the office of the Lead District Manager
o Through www.standupmitra.in or SIDBI Stand-Up India Portal
– Udyogini
Women Development Corporation of India offers Udyogini, a women-focused government loan scheme for the development and welfare of Indian women entrepreneurs. Indian women engaged in manufacturing, retailing, SSI sectors, and trading can avail of this loan. Mainly, Sind Bank, Punjab Bank, Saraswat Bank, Karnataka State Women’s Development Corporation, NBFCs and other private banks offer this scheme.
– NABARD Loans
The National Bank for Agriculture and Rural Development (NABARD) offers government business loans to businesses in related sectors. Businesses that operate in rural areas can avail financial assistance through NABARD. Also, businesses engaged in agriculture and rural handicrafts can avail of NABARD loans.
– Prime Minister’s Employment Generation Programme
Prime Minister’s Employment Generation Programme (PMEGP) is a governmental development program that offers financial assistance to Indian micro enterprises. The scheme offers up to Rs. 2 lakhs in loans to the unemployed youth of rural areas. The primary aim of this scheme is to boost job opportunities and self-employment projects in the rural areas.
– Credit Guarantee Fund Scheme
Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS) supports financial institutions and banks to guarantee cover for the amount lent to start-up companies. However, a start-up should be recognized by the Department for Promotion of Industry and Internal Trade to avail the benefits of this scheme. The primary aim of this scheme is to mitigate the risks of banks and financial institutions for easy approval for start-up business loans.
Conclusion
Business owners understand the importance of conducting regular business operations to generate growth. A constant cash flow is essential for any business to reach its desired business goals and upscale according to the industry’s needs and requirements. Without external funding, entrepreneurs find it difficult to scale up businesses. Government business loans come in handy for MSMEs to expand their business and improve cash flow. Government business loan schemes come with attractive interest rates and flexible repayment terms. We have discussed top five government business loans that you can consider.
