Skip to content

10 Government Loan Schemes for Small Businesses In India

Are you searching for Government loan schemes for your small-scale business in India? If yes, you have landed at the right place.

What is a Government Loan Scheme?

A government loan scheme refers to a structured financial program initiated by a government to provide financial assistance to individuals, businesses, or specific sectors within the economy. These schemes are designed to support economic development, entrepreneurship, and social welfare by offering accessible and affordable credit facilities.

Here are key aspects that define government loan schemes:

  • Affordable Interest Rates: Government loan schemes often feature subsidized or low-interest rates compared to conventional loans available in the market.
  • Collateral and Guarantor Requirements: Government loan schemes often provide flexible collateral and guarantor requirements, making it easier for individuals and businesses with limited assets or credit history to access financial support.
  • Subsidies and Grants: In addition to loans, government schemes may include subsidies and grants to further incentivize specific activities or investments. These financial incentives play a role in reducing the overall financial burden on borrowers.

10 Government Loan Schemes for Small Businesses

#1. MUDRA Loan

The Micro-Units Development and Refinance Agency (MUDRA) Loan Scheme is a pivotal initiative by the Government of India aimed at supporting micro-enterprises, fostering entrepreneurship, and promoting financial inclusion.

The primary objective of the MUDRA Loan Scheme is to provide financial assistance to micro-enterprises in the non-corporate small business sector, thereby encouraging economic growth, generating employment, and empowering individuals at the grassroots level.

Features:

  • There are three categories: Shishu (up to ₹50,000), Kishor (up to ₹5 lakhs), and Tarun (up to ₹10 lakhs).
  • Collateral-free loans for various business purposes.

2. Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE)

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE) is a pioneering initiative by the Government of India to address the credit-related challenges faced by micro and small enterprises. This scheme aims to facilitate easier access to credit for such enterprises by providing a credit guarantee cover.

The primary objective of CGTMSE is to encourage financial institutions, including banks and financial organizations, to extend collateral-free credit to micro and small enterprises (MSEs) and thereby foster entrepreneurship and economic growth.

Features:

  • Guarantees up to 85% of the sanctioned amount for loans up to ₹2 crores.
  • Covers both term loans and working capital facilities.

3. Stand-Up India

Stand-Up India is a transformative initiative launched by the Government of India, aiming to foster entrepreneurship and economic inclusion by providing financial support to women and individuals from Scheduled Castes (SC) and Scheduled Tribes (ST) communities.

This popular funding program seeks to promote and support entrepreneurship among women, SCs, and STs, thereby creating opportunities for economic empowerment and bridging existing social and economic gaps.

Features:

  • Offers term loans for greenfield projects in the manufacturing, trading, or services sector.
  • Funding support for at least one SC/ST and one woman entrepreneur per bank branch.

4. Prime Minister’s Employment Generation Programme (PMEGP)

The Prime Minister’s Employment Generation Programme (PMEGP) is a flagship initiative by the Government of India designed to promote entrepreneurship and generate sustainable employment opportunities. By facilitating the establishment of micro-enterprises, PMEGP contributes significantly to economic development.

PMEGP aims to provide financial support to individuals interested in establishing micro-enterprises in the non-farm sector, thereby fostering job creation and contributing to the country’s economic growth.

Features:

  • Subsidy assistance for micro-enterprises in the manufacturing and service sectors.
  • The maximum project cost is ₹25 lakhs for manufacturing and ₹10 lakhs for the service sector.

5. SIDBI Make in India Soft Loan Fund for Micro, Small, and Medium Enterprises (SMILE)

The SIDBI Make in India Soft Loan Fund for Micro, Small, and Medium Enterprises (SMILE) is a pioneering initiative that aligns with the ‘Make in India’ campaign, aiming to empower entrepreneurs and bolster the manufacturing sector. SMILE, managed by the Small Industries Development Bank of India (SIDBI), plays a pivotal role in providing soft loans to eligible enterprises.

SMILE seeks to facilitate the growth and development of Micro, Small, and Medium Enterprises (MSMEs) in the manufacturing and services sector by offering soft loans at favourable terms. The primary objective is to promote ‘Make in India’ by encouraging indigenous production and innovation.

Features:

  • Low-interest loans for technology upgradation, energy efficiency, and modernization projects.
  • Focus on MSMEs in the manufacturing and services sector.

Read: Best Business Loans in India

6. National Small Industries Corporation (NSIC) Subsidy Scheme

The National Small Industries Corporation (NSIC) Subsidy Scheme is a commendable initiative aimed at providing financial support and encouragement to small-scale industries across various sectors. As a government-backed scheme, NSIC plays a pivotal role in fostering the growth and sustainability of small businesses. Here’s an in-depth exploration of the NSIC Subsidy Scheme:

The primary objective of the NSIC Subsidy Scheme is to promote the competitiveness and viability of small-scale industries by offering financial assistance and subsidies. The scheme aims to enhance the overall contribution of small enterprises to economic development.

Features:

  • Subsidy on the procurement of raw materials, marketing assistance, and performance and credit rating.
  • Benefits MSMEs in manufacturing and service sectors.

7. Credit Linked Capital Subsidy Scheme (CLCSS)

The Credit Linked Capital Subsidy Scheme (CLCSS) is a transformative initiative by the Government of India designed to boost the competitiveness of small and medium enterprises (SMEs) in the industrial sector. CLCSS plays a pivotal role in providing financial support to businesses for technology upgradation, fostering innovation, and enhancing their overall efficiency.

The primary objective of CLCSS is to encourage SMEs to invest in technology upgradation, modernization, and the adoption of energy-efficient equipment. By providing a credit-linked subsidy, the scheme aims to enhance the manufacturing capabilities and global competitiveness of small-scale industries.

Features:

  • Subsidy for eligible MSMEs to upgrade and modernize their plant and machinery.
  • Enhances the competitiveness of small businesses.

8. Women Entrepreneurship Platform (WEP) – An Initiative by NITI Aayog

The Women Entrepreneurship Platform (WEP), an initiative spearheaded by NITI Aayog, stands as a groundbreaking endeavour focused on fostering the growth and success of women entrepreneurs in India. Designed to provide a supportive ecosystem, WEP empowers women to overcome challenges, drive innovation, and establish thriving businesses.

WEP is dedicated to advancing women’s entrepreneurship by creating a conducive environment that encourages innovation, collaboration, and the holistic development of women-led businesses. The platform aims to bridge gaps, offer mentorship, and facilitate access to resources for aspiring and established women entrepreneurs.

Features:

  • Access to credit facilities and financial assistance for women-led startups.
  • Mentorship programs and networking opportunities.

Read: Personal Loan Apps in India for Instant Cash

9. Tribal Entrepreneurship Development Program (TEDP)

The Tribal Entrepreneurship Development Program (TEDP) is a vital initiative aimed at fostering entrepreneurship and economic empowerment among tribal communities in India. Facilitated by various government bodies and organizations, TEDP seeks to provide the necessary support, skills, and resources to empower tribal entrepreneurs and uplift their communities.

The primary objective of TEDP is to stimulate entrepreneurship within tribal communities, fostering economic self-reliance, preserving indigenous skills, and promoting sustainable development. By providing training, mentorship, and financial assistance, TEDP aims to unlock the entrepreneurial potential within tribal regions.

Features:

  • Financial support for skill development, capacity building, and market linkages.
  • Aimed at enhancing tribal livelihoods.

10. Coir Udyami Yojana

Coir Udyami Yojana, a government-backed initiative, plays a crucial role in promoting entrepreneurship within the coir industry in India. This scheme is designed to empower individuals interested in venturing into coir-related enterprises by providing financial support, training, and market linkages.

The primary objective of the Coir Udyami Yojana is to encourage entrepreneurship and economic development in the coir sector. By offering financial assistance and support, the scheme aims to facilitate the establishment and growth of coir-based businesses.

Features:

  • Financial support for setting up coir-based businesses.
  • Encourages innovation and sustainable practices in the coir industry.

Frequently Asked Questions

Who is eligible to apply for government loan schemes for small businesses?

Eligibility criteria vary depending on the specific scheme. Generally, small businesses, startups, and entrepreneurs meeting certain criteria such as turnover, employment, and project viability are eligible to apply.

What types of businesses can benefit from these schemes?

Various sectors are covered. It includes manufacturing, services, agriculture, and technology. Eligibility criteria and focus sectors may differ between schemes, so it’s essential to check the specific details of each scheme.

Are interest rates subsidized in government loan schemes?

Yes, many government loan schemes offer subsidized interest rates to make credit more affordable for small businesses. The extent of the subsidy can vary, and some schemes may even offer zero-interest loans for specific purposes.

What collateral requirements are there for these loans?

Collateral requirements vary among schemes. Some schemes provide loans with minimal or no collateral, while others may require tangible assets or third-party guarantees. It’s important to understand the collateral requirements of each scheme.

How can I apply for a government loan for my small business?

The application process depends on the implementing agency or financial institution overseeing the scheme. Typically, applicants can apply online or through designated physical offices. Detailed guidelines are provided for each scheme.

What is the repayment period for these loans?

Repayment periods vary based on the type of loan and the nature of the business. They can range from short-term loans with a few years’ tenure to longer-term loans with extended repayment periods.

8. Do these schemes provide any grants or subsidies, apart from loans?

Yes, some government schemes offer grants or subsidies in addition to loans. These financial incentives aim to further support small businesses by reducing the overall financial burden.

Can existing businesses also apply for these schemes, or are they only for startups?

Many government loan schemes cater to both startups and existing businesses. Some schemes specifically target new ventures, while others support the expansion and modernization of existing businesses.

Can businesses from rural areas also avail themselves of these schemes?

Yes, many government loan schemes extend their benefits to businesses in rural areas. These schemes often address the unique challenges faced by rural enterprises, including those in agriculture and agribusiness.

What documents are generally required for applying to these schemes?

Document requirements vary, but common documents include business plans, financial statements, identity proof, address proof, and project-related documents. It’s essential to check the specific documentation needed for each scheme.

Where can I find more information about government loan schemes for small businesses?

Detailed information about government loan schemes is available on official government websites, financial institutions, and relevant implementing agencies. Additionally, entrepreneurs can seek guidance from business associations and industry chambers.

About Next What Business Research Team

The Editorial Staffs at NextWhatBusiness is a team of Business Consultants with years of experience in small and medium-scale manufacturing and service-based businesses.