Government Loan Schemes for Small Scale Businesses In India

Are you searching for Government loan schemes for your small scale business in India? In starting a new venture or for an expansion, both the cases need finance. Though the small and medium enterprises are the backbone of Indian economy, most of the SME owners face a lot of problem due to the non-availability of timely and adequate credit at the reasonable rate of interest.

In addition, arranging collateral security or third party guarantee is the tough proposition for them. The financing constraints are due to a number of reasons, including stringent policies, legal/regulatory framework, institutional weaknesses, and lack of reliable credit information.

A business loan provided under a government scheme or program is always favorable due to its lower interest rates. Besides, government loan schemes help you suffice your day-to-day business funding requirements.

In India, both state and central government have framed various policies and schemes to cater to the financial requirement of small businesses across the country.

Many public sector banks like State Bank of India (SBI), Andhra Bank, Canara Bank, Allahabad Bank and Bank of Baroda offer various financial schemes to small business owners. These schemes help the entrepreneurs obtain financial products and services according to their business requirements.

In India, you will find various Government loan schemes specified for small business both from state and central government to cater to the financial requirement of small businesses across the country. These schemes help the entrepreneurs obtain financial products and services according to their business requirements. Here you can find a list of Government loan schemes for small business owners.

List Of Government Loan Schemes For Small Business In India

#1. The Credit Guarantee Fund Scheme for Micro and Small Enterprises

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) was launched by the Government of India to provide collateral-free credit to Indian MSMEs. Both the existing and the new enterprises are eligible for the scheme. The Ministry of Micro, Small and Medium Enterprises and Small Industries Development Bank of India (SIDBI) established a trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the scheme.

The scheme provides credit facilities in the form of term loans and working capital facility of up to Rs. 100 lakh per borrowing unit. The amount is contributed by the Government and SIDBI in the ratio of 4:1, respectively. The scheme also offers rehabilitation assistance to sick units covered under the guarantee scheme. To know more about the scheme, click here.

#2. Credit Link Capital Subsidy Scheme for Technology Upgradation

Upgradation of the process as well as the corresponding plant and machinery is important to help SMEs reduce the cost of production and remain price competitive in the global market. To help SMEs flourish in international trade markets, the Ministry of Small Scale Industries (SSI) runs a scheme for technology upgradations of Small Scale Industries.

Known as the Credit Linked Capital Subsidy Scheme (CLCSS), it aims at facilitating technology upgradations by providing an upfront capital subsidy of 15% (limited to maximum Rs.15 lakhs) to SSI units for credit availed by them for the modernization of their plant and machinery.

All sole proprietorship, partnership firms, cooperative, private and public limited companies are eligible for this scheme. Since the inception of this scheme, more than 28,287 units have availed subsidy of Rs.1619.32 crore. To know more about the scheme, click here.

#3. Small Industries Development Bank of India (SIDBI)

Small Industries Development Bank of India (SIDBI) started its small business funding programs way back in 1990. Established by an act of Parliament, SIDBI is now one of the most illustrious names of the government financial institutions. This loan has played an active role in the promotion and development of the small business industry. Various schemes provided by SIDBI are enlisted below:

  • Direct Assistance Scheme
  • Indirect Assistance Scheme
  • Promotional and Development Activities
  • National Equity Fund, Scheme
  • Technology Development and Modernization Fund Scheme
  • Single Window Scheme
  • Mahila Udyam Nidhi (MUN)
  • Scheme and Equipment Finance Scheme
  • Integrated Development of Leather Sector Scheme (IDLSS)
  • FPTUFS – Scheme for Food Processing Industries

#4. National Small Industries Corporation Limited (NSIC)

National Small Industries Corporation Limited (NSIC) came into effect in the year 1999 with an objective of encouraging the small-scale industries in the country. The prime feature of NSIC is to import machines on hire-purchase terms. It lay emphasis on supplying and distributing both indigenous and imported raw material as well as on exporting the products of small business units. Besides, it also creates awareness of advancements occurring in the field of small-scale industries. To know more about the scheme, click here.

Related: 8 Best Business Credit Cards In India 

#5. National Bank for Agriculture and Rural Development (NABARD)

National Bank for Agriculture and Rural Development or NABARD came into existence mainly for promoting agriculture-based rural business enterprises. NABARD mostly offers financial assistance to small scale industries viz; cottage and village industry.

Related: NABARD Dairy Farming Subsidy | How To Get | Basic Guide

#6. Market Development Assistance Scheme for MSMEs

To help Indian manufacturing SMEs gain traction in the international markets, the Market Development Assistance Scheme for MSMEs offers funding for participation in international trade fairs and exhibitions under MSME India stall. It also offers to fund for sector-specific market studies by industry associations, export promotion councils, and FIEO. This scheme offers reimbursement of 75% of a one-time registration fee and 75% of annual fees (recurring) paid to GSI by SMEs for the first three years for the barcode.

#7. Technology and Quality Upgradation Support to MSMEs

This scheme aims at sensitizing the manufacturing MSME sector to use energy efficient technologies and manufacturing processes in order to reduce production cost and emissions of harmful gasses. The scheme also aims to improve the product quality of MSMEs to encourage them towards becoming globally competitive. For this, the Government of India provides financial support to the extent of 75% of the actual expenditure to help to manufacture MSMEs buy energy efficient technologies for production. Read More…

#8. Mini Tools Room and Training Centre Scheme

To assist state the Governments set up Mini Tool Room and Training Centres, the Government of India provides financial assistance in the form of one-time grant-in-aid. The financial aid equals to 90% of the cost of machinery/equipment (maximum to Rs. 9 crores) in case new Mini Tool Room has to be created and 75% of the cost (maximum to Rs. 7.50 crore) in case an existing room has to be upgraded. The main objective of this scheme is to develop more tool room facilities in order to provide technical support to the MSMEs and training facility in tool manufacturing and tool design to create a workforce of skilled workers, supervisors, engineers/designers, etc.

#9. MUDRA Loan

Mudra stands for Micro-Units Development and Refinance Agency Ltd. This organization has been established by Government of India for development and refinancing activities relating to micro units. Simply with the vision of – ‘Funding the Unfunded’.

Small organizations, companies, startup entrepreneurs of micro-units in India face the lack of formal financial support in starting or growing stage of their small businesses. Read More…

Related: Best Small Business Loans In India – Big List

Both government and public sector banks play significant roles in funding the small-scale and rural business industries in India. According to the industry and your specific funding requirement, choose the right Government loan schemes for your small business.