5 Government Loan Schemes for SME Businesses

5 Government Loan Schemes for SME Businesses

Indian market is considered one of the most rapidly growing market currently. A huge part of this growth is provided by MSME i.e. micro, small, and medium enterprises. The SME sector contributes over 40% of the total GDP and also helps in providing employment. The government has introduced and updated many business loan schemes to help SME startups or established companies considering the importance of SME growth in the post-demonetization era. The top five business loan schemes from the government of India that you can avail of for small business finance are mentioned below.

  1. MUDRA Loans

Micro-units Development and Refinance Agency (MUDRA) is an agency established by the government of India to provide financial help to micro-business units. This scheme is basically for startups and is given on the pretext of ‘funding the unfunded’. The scheme based on low-cost credit for small companies and startups which have to fund themselves initially. MUDRA Loans are also refinanced business loans, approved and disbursed through public sector banks, private sector banks, co-operative societies, small banks, scheduled commercial banks, and rural banks that fall under the scheme. The loans are for micro or small enterprises operating in the manufacturing, trading, and services sector. The MUDRA Loans are bifurcated as Sishu Loans up to Rs. 50,000/-, Kishor Loans up to Rs.5,00,000/-, and Tarun Loans up to Rs. 10,00,000/-.


  1. Credit Link Capital Subsidy Scheme (CLCSS)

Technology up-gradation is required from time to time and to help finance such up-gradation for the smooth process of the business Credit Link Capital Subsidy Scheme is introduced by the government. These up-gradations can be in any department in the business. With the help of the CLCSS scheme, the government aims to reduce the production cost for small and medium enterprises, thus allowing them to compete in terms of price in national and international markets. The scheme is led by the Ministry of Small-Scale Industries. The CLCSS offers an up-front capital subsidy of 15% for eligible enterprises. The maximum amount of ₹ 15 lakhs can be availed as a subsidy under the scheme. Sole proprietorships, partnership firms, co-operative, private and public limited companies fall under this business loan scheme.


  1. National Small Industries Corporation Subsidy (NSIC)

The National Small Industries Corporation subsidy for small businesses offers two types of financial benefits – Raw Material Assistance and Marketing Assistance. The raw material assistance scheme covers both indigenous and imported raw materials. Marketing assistance funds are given to SMEs for improving their competitiveness and the market value of their products and services. The prime focus of NSIC is funding small and medium manufacturing companies who wish to improve/grow their manufacturing quality and quantity.


  1. MSME Business Loans in 59 Minutes

‘MSME Business Loans in 59 Minutes’, a scheme first announced in September 2018, is one of the most preferred loans by the entrepreneur of SME companies. This scheme is for financial assistance of up to ₹ 1 crore and encouraging the growth of new and existing MSME in the country. Within the first 59 minutes of application, the decision regarding approval is given and the funds are received completion of the actual process after 8-12 days. NSIC is a refinancing scheme, wherein five authorized public sector banks will grant the funds. The interest rate depends on your business and credit rating.

The documents required to apply for this scheme are GST verifications, Income Tax verifications, bank account statements for the last two quarters, ownership related documentation, and KYC details.


  1. Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE)

The CGMSE was introduced in the year 2000 as a financial support scheme for micro and small enterprises. It offers collateral-free credit for both new and existing business units that fall under its eligibility criteria. The scheme grants working capital loans up to ₹ 10 lakhs without any collateral. Moreover, for all credit facilities above ₹ 10 lakhs up to ₹ 1 crore only primary security or mortgage of land and building associated with the building is obtained. These types of eligible accounts are covered under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). Assets created through the credit facility which are associated with the business unit are also considered as collateral when the loan amount is above ₹ 10 lakhs. This business loan scheme is granted by various public and private sector banks covered under the scheme.

These schemes display the commitment of the past and present Indian governments for developing the economy of the nation, more efforts are to be taken to make the schemes effective. This scheme has many criteria that are hard to fulfil. Moreover, the time the loan is approved and granted is also much more than reasonable. However, it is a step to encourage SME companies in India to grow and boost the Indian economy.