Government Loan and Subsidies Schemes for Business in India

For doing any activity business activity the fund is very important. The fund is considered one of the main pillars of the business. The fund works as fuel for the business. India is a developing country and the government of India is always providing support in the growth, development of startups, professional businesses, and other businesses. For the growth and the development of businesses, the government of India introduced many government subsidy loans schemes for the business. On the basis of these schemes, the government of India provides financial assistance and financial help to the business in the form of loans so that they can start, manage,grow and develop their businesses. The small scale business is commonly known as Small and Medium Enterprises (SME) and it has a big contribution to the GDP (Gross Domestic Product) of India. So for the development of MSME business, for performing all the day to day activities, and for purchasing the assets of the business the government provides financial assistance and subsidy loans to the Small and Medium Enterprises.

There are some government loan schemes for small scale businesses are as follows-

  1. Pradhan Mantri Mudra Yojana (PMMY)
  2. SIDBI Make in India Loan for the Enterprises
  3. Credit Guarantee Scheme
  4. MSME Loans in 59 minutes
  5. Bank Credit Facilitation Scheme
  6. Stand-Up India Scheme
  7. National Small Industries Corporation Subsidy
  8. Udyogini
  9. Credit Link Capital Subsidy Scheme for Technology Up- gradation
  10. National Small Industries Corporation Subsidy

Pradhan Mantri Mudra Yojana (PMMY)

The scheme Pradhan Mantri MUDRA Yojana (PMMY) is introduced by the Prime Minister on April 8, 2015, for providing financial assistance and loan to micro enterprises, and non-corporate for the development and growth of the business. Under this scheme, the person can apply for the loan for the purpose of business and the amount of loan under this scheme will be 50000 to 10 lakh on the basis of categories.

Under this scheme, the loans are provided by Small Finance Banks, Non-Banking Financial Companies, Commercial Banks, Regional Rural Banks, and Micro Financial Institutions. If there any person who wants to take the benefit of such scheme, can apply for such loan from any of the above authorities or can apply online through portal of the government www.udyamimitra.in .

Under this scheme, there are 3 categories

‘Shishu’- Loan up to 50000

‘Kishore’- 50001 to 5 lakhs

Tarun’ -500001 to 10 lakhs

These categories will signify the stage of growth, stage of development, and requirement of funds to the entrepreneurof the enterprise. This scheme is a very big initiative of the government to provide financial assistance and loans to small businesses. Under this scheme, the following person will be eligible to get the amount of government assistance-

  1. The person, who wants to take transport vehicle loans.
  2. To small businesses just like traders, shopkeepers, vendors, and service providers.
  3. Can apply for a working capital loan.
  4. Small business enterprises are eligible to take equipment finance under this scheme.
  5. The person, who is using two wheelers tractors, and tillers for business and commercial activities, can apply.
  6. The person, who is involved in the Agri-allied non-farm income generating activities.

For taking any amount of loan under this scheme there is no need to provide any security as collateral i.e. without any security the person can apply for the loan.

SIDBI Make in India Loan for the Enterprises

This scheme is introduced by the government for the enhancement of skill development, build the best infrastructure, facilitate investment, and protect intellectual properties. Under this scheme, the person can take the amount of loan in the form of a soft loan and term loan at a very lower interest rate. This scheme is very helpful for the startup, growth, and development of the entity. Under this scheme, the amount of loan is required to repay within a longer period. The new enterprises which are involved in the services and manufacturing sector can take the benefit of such a loan. The MSMEs which are engaged in 25 selected sectors are eligible to receive financial support at very reasonable interest rates as part of the ‘Make in India’ campaign launched by the government of India.

As per the scheme, the business persons who are engaged in trading activities, manufacturing activities, or services sectors are eligible to avail loan. If the business person is not an individual, then a minimum of 51% of the shares should be held by such an individual who is a woman or who belongs to Scheduled Tribe (ST)/Scheduled Caste (SC).

Credit Guarantee Scheme

Under this scheme, the MSMEs are eligible to get financial assistance from the government in the form of a financial loan. Under this scheme, the person who is engaged in service sectors and manufacturing sectors can apply for financial assistance and educational institution, self-help groups, retails trades, agricultural, etc. are also eligible for the loan under this scheme. Under this scheme, the enterprises can borrow a maximum of 200 lakh.

This scheme is available for new as well as existing enterprises. For the purposes of implementing the CGFMSE scheme, the Credit Guarantee Fund Trust is established by the Ministry of MSMEs and the Small Industries.

  • This scheme provides term loans and/or working capital loans up to Rs. 2 crores.
  • If the credit facility is up to Rs. 1.5 crore, the guarantee cover will be required up to 75% of credit facility.
  • If the amount of loans is up to Rs. 5 Lakh and it is provided to micro-enterprises, then the guarantee cover will be 85% of the credit facility.
  •  If the credit facility for MSMEs is owned and operated by the women and the loans are given to North Eastern Region, including Sikkim, then the guarantee cover will be 80% of the credit facility.
  • If the amount in default is subject to a maximum of Rs. 50 Lakh for the MSME Retail trade, then the guarantee cover will be 50% of the amount.

MSME Loans in 59 minutes

MSME Loans in 59 minutes is a scheme that is introduced by the government of India in September 2018. This scheme is introduced to boost financial assistance for the growth of the business and the growth of the Indian economy. Under this scheme, the new as well as existing businesses, can apply for the loan. The amount of the loans that are provided under this scheme will be to the extent of Rs. 5crores and it will take approx. 8 to 12 days to complete the process for the approval, and the loan will be received within 59 minutes so this scheme is known as MSME business loan in 59 minutes. The rate of interest under this scheme depends on the type and the requirement of the business. Normally the interest of such loans starts at 8.5%.

Under this scheme, the amount of loan is dispensed through banks and financial institutions and can apply online. To apply online we will visit the websites of the banks and financial institutions and fill up the application form, upload all the relevant documents, provide all the relevant details and submit it. When we will provide all the relevant and required details and complete the process then the verification is done from the banks and financial institutions and after verification, the loan amount will be credited directly into the bank account of the applicant.

Under this scheme, thereare requirements for certain documents obtaining a loan and we will scan all these documents as per the requirement. The required documents are:

  1. KYC details- Business Incorporation Proofs, Partnership deed, MOA and AOA of the company, etc.
  2. Filed and signed Application Form.
  3. PAN Cards of the entity and required person.
  4. Address Proofs of business entity and required person.
  5. Projected Financial Statements.
  6. Tax Audit Reports, Balance sheet, P & L account, etc.
  7. Passport size photographs of the applicant
  8. The documents are related to ownership.
  9. Income tax verification
  10. GST verification
  11. Bank statements for the period of last 6 months

Bank Credit Facilitation Scheme-

This scheme is developed by the NSIC (National Small Industries Corporation) for provides credit facilities to the MSMEs and SMEs as per their requirements. Under this scheme, the loan is provided by the private and public sector banks and financial institutions in the form of term loans and working capital at an affordable rate. Under this scheme, the amount of loan is required to repay between 5 to 7 years but in special cases, the time limit can be extended to 11 years.

Stand-Up India Scheme

This scheme is launched by SIDBI in 2016 by the government of India. This scheme provides financial assistance from 10 lakh to 1crore in the form of inclusive working capital and term loan. This scheme is very helpful for the startup, growth, and development of the trading, services, and manufacturing sectors which are run by Scheduled Castes/ Scheduled Tribes and women. Under this scheme, the amount of loan is required to repay within the period of 7 years but such period can be extended for the maximum extra period of 18 months.

National Small Industries Corporation Subsidy Scheme

The National Small Industries Corporation Subsidy scheme is introduced by the government of India for the development and growth of MSMEs.  This scheme is ISO certified. One of the main functions of this scheme is to provide help for the growth of MSMEs by providing services, services include financial services, technology services, and market related services, and other services.

The National Small Industries Corporation has initiated two schemes to promote the growth and the development of the MSMEs,

1- Credit Support Scheme

2- Marketing Support Scheme

1- Credit Support Scheme– Under this scheme, the National Small Industries Corporation will provide financial support to the MSMEs to procure the raw materials, for activities that are related to marketing and for financing. Under this scheme, the amount of financial aid is provided by the banks and financial institutions. Under this scheme, there is no need to provide any collateral security for the loan.

2- Marketing Support Scheme- On the basis of this scheme, the government provides support in developing any business of the MSMEs. This scheme is helpful for the MSMEs to grow in the current competitive and growing market.

Udyogini

This is a scheme which is introduced by the Women Development Corporation under the government of India for empowering Indian women. The main objective to introduce this scheme is to provide support and financial aid / assistance to women who can meet their capital requirements for the starting and development of a business. Under this scheme, the maximum loan that can be approved by the provider is Rs. 15 lakhs for the woman entrepreneur. The woman entrepreneurs who want to apply for the loan under this scheme must be between the age of 18 years and the maximum is 55 years and the annual income of the family of such woman should not be more than Rs. 15 lakhs. But in the case if the women who are physically challenged or widowed then there is no limit of income for these types of women.

There is the requirement of the following documents for the application of loan by the women under this scheme-

  1. Aadhaar Card
  2. Below Poverty Line Card
  3. Birth certificate
  4. Caste Certificate
  5. Passport-sized photographs
  6. Bank account or passbook
  7. Certification of income
  8. Ration card

Credit Link Capital Subsidy Scheme for Technology Up gradation

This scheme is developed by the government of India for the technology up gradation for the small businesses. Under this scheme, small businesses can upgrade their technical processes by financing technological up gradation. The technological up gradation may be related to various activities and the processes of the just like marketing, production, and manufacturing,supply chain, etc. The main objective of this scheme is to reduce the cost of production and manufacturing of goods and services for small and medium enterprises (SMEs) so that they can compete in the local and international markets.

Credit Link Capital Subsidy Scheme for Technology Up gradation scheme is run by the Ministry of Small-Scale Industries. And this scheme offers an up-front capital subsidy of 15% for eligible businesses.

Under this scheme, the Sole proprietorships, partnership firms, co-operative, private limited companies, and public limited companies can apply for the loan and the maximum amount of loan will be 15 lakh as an amount of financial assistance.

National Small Industries Corporation Subsidy

This scheme is introduced by the government of India in 1955 to provide financial aid for the MSMEs in the form of raw material assistance and marketing assistance. Any medium and small enterprises which have Udyog Aadhaar Memorandum (UAM) are eligible to apply for such a loan under this scheme in the form of raw material assistance and marketing assistance.

 

FAQs on Government Subsidy Loan for Businesses

 

1- How many government loan schemes are there for the business of MSMEs, SMEs, or startup businesses?

Answer-There is the list of government loan schemes for the business of MSMEs, SMEs, or startup businesses as follows-

  1. Pradhan Mantri Mudra Yojana (PMMY)
  2. SIDBI Make in India Loan for the Enterprises
  3. Credit Guarantee Scheme
  4. MSME Loans in 59 minutes
  5. Bank Credit Facilitation Scheme
  6. Stand-Up India Scheme
  7. National Small Industries Corporation Subsidy
  8. Udyogini
  9. Credit Link Capital Subsidy Scheme for Technology Up gradation
  10. National Small Industries Corporation Subsidy

2- What is the meaning of MSME?

Answer- In simple words MSMEs means

Enterprise Manufacturing and Production Enterprises (Investment in Plant and Machinery) Services Providing Industry (Investment in Equipment)
Micro Investment in the plant and machinery should not be more than Rs. 25 Lakhs. Investment in the equipment should not more than Rs. 10 Lakhs.
Small Investment in plant and machinery is more than Rs. 25 Lakhs but is less than Rs. 5 Crores. Investment in equipment is more than Rs. 10 Lakhs but is less than Rs. 2 Crores.
Medium Investment in plant and machinery is more than Rs. 5 Crores but is less than Rs. 10 Crores. Investment in equipment is more than Rs. 2 Crores but is less than Rs. 5 Crores.

 

3- What documents are required to apply for the loan under the Udyogini scheme?

Answer- There is the list of the required documents for an application of loan Udyogini scheme –

  1. Aadhaar Card
  2. Below Poverty Line Card
  3. Birth certificate
  4. Caste Certificate
  5. Passport-sized photographs
  6. Bank account or passbook
  7. Certification of income
  8. Ration card

4- How many schemes under The National Small Industries Corporation for the growth and the development of the MSMEs?

Answer- The National Small Industries Corporation has initiated two schemes to promote the growth and the development of the MSMEs,

1- Credit Support Scheme– Under this scheme, the National Small Industries Corporation will provide financial support to the MSMEs to procure the raw materials, for activities that are related to marketing and for financing. Under this scheme, the amount of financial aid is provided by the banks and financial institutions. Under this scheme, there is no need to provide any collateral security for the loan.

2- Marketing Support Scheme- On the basis of this scheme, the government provides support in developing any business of the MSMEs. This scheme is helpful for the MSMEs to grow in the current competitive and growing market.

5- What is the maximum amount of loan that can be availed by the applicant as a business loan?

Answer: The maximum amount of loan that can be availed by the applicant as a small-scale business loan is Rs.5 crore but this will depend on the requirement, use, type of business, and other factors of the business.

6- Is any need to provide any collateral or security to avail a government loan for a small scale business?

Answer: No, there is no need to provide any collateral or security to avail a government loan for a small scale business. However, there are some lenders who may ask to provide collateral if the amount of the loan is higher.

7- To start my own business can any person avail a loan under the Mudra scheme?

Answer: Yes, Under the Mudra scheme, the applicant applies in the range of Rs.50, 000 to Rs.10 lakh. Such an amount of loan can be used to start and for the growth of your business.

8- What are the requirements to avail of a government business loan?

Answer- There are certain eligibility requirements that are required for availing the amount of loan under this scheme. The basic requirements are:

  1. Age of the individual/ applicant
  2. Amount of credit sought
  3. Type and Nature of the business
  4. The credit score of the individual
  5. The capital which is invested in the business invested
  6. The annual amount of turnover of the business

9- Whether there are any government loan schemes that are introduced for women who want to start their businesses?

Answer- Yes, there are some government loan schemes that are mainly introduced for those women who want to start their businesses.

1- The Stand-up India scheme and

2-The Udyogini scheme

10- What are the documents that are required for availing the amount of loan under the government business loans schemes?

Answer- There is a list of the required documents that are required for availing the amount of loans under each and any of the schemes.

  1. Identity proof (PAN card, Aadhaar Card, Driving license, Voter ID, Passport, etc.)
  2. Proof of age (Passport, Driving license, Voter’s ID,Aadhaar card, etc.)
  3. Passport size photographs
  4. Business address proof (Lease or rental agreement, statement of bank account,copy of the registry, etc.)
  5. Address Proof (Driving license, Aadhaar Card, Passport, Bank Statement,Electricity bill, etc.)
  6. Details of business plan
  7. Projected financial statements
  8. List of the directors in case of a company and the list of the partners in case of a partnership firm
  9. The bank account statements for the last six months
  10. Income tax return
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