Government business loan schemes every business owner must know in India

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Government business loan schemes every business owner must know in India

Cash is the only thing a business owner wishes and dreams of all the time. There’s a constant fear and worry among business owners about running out of working capital or not getting funds when required. This fear is not just restricted to start-ups but also extends to established players. The only source of income for them is through family, friends and relatives. To solve this issue, our government has introduced several business loans schemes in India. 
 
Let’s learn about each loan scheme.
 
  • End-to-End Energy Efficiency by SIDBI
  • Bank Credit Facilitation Scheme
  • Credit Guarantee Scheme
  • Credit Linked Capital Subsidy for Technology Upgrades
  • Coir Udyami Yojana
  • MSME Business Loans for Start-ups in 59 minutes
  • Pradhan Mantri Mudra Yojana
  • SIDBI Make in India Soft Loan Funds for MSME
  • Standup India
  • Sustainable Finance Scheme
 
End-to-End Energy Efficiency by SIDBI
 
Overview
 
The main objective is the implementation of energy efficiency measures on a full scale. The start-up can use the funds to purchase equipment, machinery, civil works, installations and commissioning. 
There’s a 50% cap of the total project cost on the loan, and the funds cannot be used to purchase land or execute civil works (minor tweaks are fine). 
 
Eligibility
 

MSME start-ups operating in the manufacturing or service sectors are eligible for the loan provided they have established themselves for 3 years and have earned profits for the last 2 years. Apart from this, the start-up must oblige to the following prerequisites:

 

  • The start-up mustn’t be involved in any fraud with the bank or NBFCs
  • The start-up must’ve undergone detailed energy audits by the Bureau of Energy Efficiency. 
  • The detailed project report prepared by BEE must be vetted by Energy Efficiency Cell, SIDBI. 
  • The start-up must be following the environmental and social management frameworks. Also, it should not have availed performance-linked grant under the World Bank Global Environment Facility Project. 
 
Benefits
 
  • The MSME must only pay INR 30000 + taxes. To facilitate the entrepreneurs, the remaining balance will be taken care of by SIDBI.
  • The start-up can avail up 90% of the project cost. Apart from this, the minimum amount that can be availed is INR 10 lakhs and the maximum is INR 150 lakhs. 
  • Also, you need to ensure that the total funds availed must not exceed 1/5th of your total turnover. 
 
Repayment Tenure
 
The loan up to INR 100 lakhs must be closed within 36 months, and the loans above INR 100 lakhs must be repaid in 60 months.
 
Bank Credit Facilitation Scheme
 
Overview
 
The scheme aims to help MSMEs in India by making funds available to them. The main objective is to increase the count of MSMEs. The NSIC has signed the memorandum of understanding with several national and private banks to make funds available to MSMEs without any surcharge.
 
Eligibility
 
All MSMEs registered in India are eligible for the loan.
 
Benefits
  • Helps you in getting fair interest rates from banks after the rating is awarded to you under the Performance and Credit rating scheme of the Ministry.
  • Provides handholding supports to MSMEs
  • Helps MSMEs in finishing the documents and submitting them to the banks
  • The main objective is to help as many MSMEs as possible. 
 
Repayment Tenure
 
This must be the most flexible repayment option. You can repay it according to the profits earned. Generally, the loan is repaid in five to seven years, but in worst cases, it gets extended to eleven years. Now tell me, isn’t this the most flexible repayment option?
 
Credit guarantee scheme for micro and small Enterprises
 
Overview
 
This loan scheme was introduced to help MSEs. The major drawback with the current lending schemes is that it doesn’t cater to businesses of smaller sizes. The banks consider micro-enterprises to be too risky to invest. Due to this a majority of MSE run by organizing funds from third party sources for which they pay lofty interest rates. 
To support micro, small and first-generation entrepreneurs, the government has launched this scheme to freely allocate funds to MSEs. 
 
Eligibility
 
All new and existing MSEs can avail funds up to INR 100 lakhs without gagging any collateral. Under this scheme, you can avail either term loans or working capital loans. 
 
Benefits
 
  • Earlier when micro and small enterprises couldn’t get funds are now able to procure it.
  • Loans up to 100 lakhs can be availed.
  • The term loan and working capital loan can be availed. 
  • Repayment tenure
  • If you’ve availed a term loan, then it must be repaid in the decided tenure, and if you’ve availed a working capital loan, then it can be extended to up to 5 years or to be repaid in blocks of 5 years. 

Credit linked capital subsidy for technology upgrades

 

Overview
 
The scheme was introduced to help small scale industries by providing them funds for their technological upgrades. If you’re looking to upgrade the machinery to stay competitive in the market, then this is the loan for you. 
 
Eligibility
 
  • Sole proprietors, partnership firms, co-operative societies, private and public limited companies in the SSI sector are eligible for the loan. 
  • Industry scaling from small scale to medium scale after the procuring the loan is eligible for the loan. 
  • The Capital subsidy will be given to only those businesses who have availed a term loan from eligible PLI on or after 29 September 2005.
  • Labour intensive and export-oriented sectors are eligible for this scheme.
 
Benefits
 
  • The cap on the loan limit has been extended to INR 100 lakhs from INR 40 lakhs.
  • The subsidy has also been enhanced to 15% from 12%.
Repayment tenure
 
The loan must be repaid according to the decided tenure. 
 
Coir Udyami Yojana
 
Overview
 
The main objective of this scheme is to promote Indian Coir industry. Hence, loans up to INR 10 lakhs can be availed to set up a coir unit and subsidy of one working cycle.
Working capital will not be considered for subsidy. It’s under the ambit of the Ministry of MSME. 
 
Eligibility
 
Individuals, Companies, Self Help Groups, Non-Governmental Organizations, Institutions registered under Societies Registration Act 1860, Production Co-operative Societies, Joint Liability Groups and Charitable Trust are eligible for the loan. 
 
Benefits
 
  • It only needs you to invest 5%, and the remainder can be availed via loan.
  • A subsidy of 40% on the loan.
  • Bank’s credit rate is 55%.
Repayment tenure
 
Must be repaid within 7 years after an initial moratorium. 
 
MSME business loans for start-ups in 59 minutes
 
Overview
 
The main objective behind the scheme is to automate the process, including loan appraisal. The idea is to make loans available to entrepreneurs in less than 60 mins. In-principal approval will be done within 60 mins from the bank of the borrower’s choice. However, the funds may take 7-8 business days to reflect in your account. 
 
Eligibility
 
The basic requirement is fulfilling the GST number, IT returns and should have 6 months dynamic bank statements. However, the following are must for any business loan approval.
  • Income source proof
  • Repayment capacity
  • Existing credit facility
  • Any other factor imposed by the lender
Benefits 
 
The Loan can be availed online. 
Funds ranging from INR 1 lakh to INR 1 crores
Interest rates start from 8% per annum
 
Repayment Tenure
 
As per the agreed tenure while availing the loan. 
 
Pradhan Mantri Mudra Yojana
 
Overview
 
The objective is to provide support to businesses to up to INR 10 lakhs. The government has sanctioned funds to various banks and Microfinance? Institutions to make loans available to borrowers. There’s a 41% increase in the borrowing of the loans from 2017 to 2019. The funds are only to increase. Meaning you can avail the funds any time you’re ready for the business. 
 
Eligibility
 
These funds are specifically for non-corporate small business segments comprising proprietorship and partnership firms. 
Benefits
The loan is approved in three categories
  • Shishu: Up to INR 50,000
  • Kishor: From INR 5 lakhs to up to INR 5 lakhs
  • Tarun: From INR 5 lakhs to INR 10 Lakhs
Repayment Tenure
 
As per the agreed tenure.
 
SIDBI Make in India Soft Loan Fund for MSMEs
 
Overview
 
The objective is to sanction soft funds to MSMEs in the quasi-equity format, and term loans on relatively soft terms. It is to meet the required debt-equity ratio to set-up new MSMEs and enhance the pre-existing ones.
 
Eligibility
 
New enterprises from manufacturing and service sectors can avail the loan for expansion, modernization, technology upgrades or other projects aimed for the growth of the business. 
 
Benefits
 
  • People from the general category are subject to INR 20 lakhs.
  • People from reserved class, disability and women are subject to INR 30 lakhs
Repayment tenure
 
The loan should be repaid in seven years. However, under circumstances, the loan can be repaid in more than seven years. But after completion of 3 years, the loan will be converted into a secured term loan, which will bear the interest rate depending on the credit score of the borrower. 
 
Standup India 
 
Overview
 
The objective of this scheme is to sanction loans ranging from INR 10 lakhs to INR 1 crore to at least one borrower of the reserved class per bank branch. So far, 3457 loans have been disbursed online.
 
Eligibility
 
Reserved class entrepreneurs from manufacturing, trading and services sectors with major stake holding (51% +) are eligible for the loan. Also, the borrower mustn’t have been indulged in any bank repayment fraud. 
 
Benefits
 
  • Loans up to INR 1 crore to cover up to 75% of the total project cost.
  • The interest rate depends on the bank’s interest rate for that industry. 
  • A moratorium of 18 months.
Repayment tenure
 
Must be repaid within 7 years with a moratorium of 18 months. 
 
Sustainable Finance Scheme
 
Overview
 
The main objective is to promote energy efficiency/cleaner production and sustainable development projects. 
 
Eligibility
 
  • Renewable energy projects such as solar power plants, wind energy generators, mini hydel power plants, biogas power plants, etc are eligible for the loan. 
  • Industries working on cleaner production such as waste management are eligible.
  • Entrepreneurs working in the original equipment manufacturing (OEMs) of energy-efficient machinery and related disciplines. 
  • The OEM should be an MSME or must supply products to MSMEs. 
Benefits
 
  • Suitable assistance with a term loan or working capital is granted to the ESCOs that implement energy efficiency, cleaner production or renewable energy projects. 
  • Grants are provided to the eligible ones.
Repayment tenure
 
As per the agreed tenure while availing the loan.
 
Lastly
 
These are the ten loan schemes launched by the government of India to facilitate entrepreneurs of our country. Whatever industry your targeting with your business, ensure that you leverage the suitable loan for your business.