Govt Schemes under which Small Businesses can apply Loan of up to Rs. 2 Cr

India has become home to a large number of micro industries and start-ups. The main challenge the start-ups and small businesses nowadays face is getting necessary financial assistance during the initial phase of business. The MSME sectors have limited access to getting formal lending for the smooth running of their business. In India, there are almost 10 business start-up loan schemes offering financial support to business entrepreneurs. Here we are discussing the top 3 government schemes for small business loans under which one can apply for up to 2 crores.

Important facts to keep in mind before applying for a loan:

• The common eligibility criteria to apply for a government business loan scheme up to 2 Crores
• Must be a resident of India
• The minimum age to apply for a loan is 25 years, and the maximum is 65 years
• Must have a stable business of 3 years.

The documents required to apply for a business loan

• PAN card
• Latest 3 years ITR filings
• Any kind of business proof like a business existence certificate, last 3 years profit and loss statements, etc.

1. PSB / MSME Loans

This MSME government business loan scheme was launched on 5th November by Prime Minister Narendra Modi. It is one of the best digital lending platforms offering loan disbursal up to 5 crores in just 59 minutes. The scheme is designed to offer financial assistance to start-up businesses and MSME. The government start-up loans launched throughout India.

Here are the features of MSME Loans

• Interest rate: The interest rate applicable to MSME loans is 8.50% onwards.
• Loan amount: The amount of loan one can apply ranges between 1 lakh to 5 Crores.
• Quick Loan disbursal: It offers quick loan disbursal. The time taken to get the loan credited into the applicant’s account is 7-10 working days.
• Collateral free loan: It is a collateral-free loan with minimal documentation. So, the businessman is not required to worry about any assets or collateral for getting a business loan approved.

The popular form of MSME Loan schemes are:

1. Credit Guarantee Funds Trust for Micro and Small Enterprise or CGTMSE: Subsidy loan for business

The government of India launched this government scheme for business for facilitating and strengthening the credit delivery system. All public, private, and foreign banks along with SBI are offering a Credit Guarantee scheme. Both new and existing enterprises are eligible to apply for this scheme. By availing of this scheme, the benefits enjoyed by entrepreneurs mainly are terms loans and working capital facility of a maximum of 100 lakhs. It is a kind of government subsidy loan for businesses.

2. The Prime Minister Employment Generation Programme:

It is an integrated MSME government loan business scheme associated with Prime Minister Rozgar Yojana and the Rural employment Generation program. The scheme was launched to offer employment opportunities to the young generation of the country. The scheme provides financial assistance to business endeavours. This scheme does the funding in collaboration with various schemes like Microcredit scheme, Mudra Card, Mahila Uddyami, and equipment finance scheme.

3. Pradhan Mantri Mudra Yojana

The Mudra loan is Micro Units Development and Refinance Agency. It is launched by the government of India and offers financial assistance to non-corporate MSMEs. The maximum funds one can avail of with Mudra loan is up 10 Lakh. The funds under the Mudra loan are divided into three government loan schemes for new business:

• Shishu- loans up to ₹ 50,000
• Kishore-loans up to ₹ 5,00,000
• Tarun-loans up to ₹ 10 Lakh

Main features of Mudra Loan schemes:

• Collateral-Free Loan
• There is no processing fee
• The Mudra loan is given in collaboration with a credit guarantee scheme where the risk is shared as a correlative loan instead of a single loan.

The documents required to apply for MSME loans

• Latest Passport size photographs
• Self-created business plan
• Identity proof, address proof, and age proof
• GST number
• Latest 6 months bank statements
• Latest ITR of 3-5 years
• Address proof of business
• Detail of the nature of the loan
• Details of the directors of the company, partners, and partnership firm
• E-KYC mandate

Who can all apply for Mudra Schemes?

• Artisans,
• shopkeepers
• Vegetable vendors
• Machine operators
• Repair shops, etc.

2. Credit Linked Capital Subsidy Scheme

This is a subsidy loan for small scale industries. It has been launched by the Ministry of Small Scale Industries for offering financial assistance to small businesses and start-ups for technology upgradation. This program offers the loan applicant upfront cash for modernizing equipment and techniques.

Which sectors are eligible to avail of the benefit of the Credit Linked Capital Subsidy Scheme?

• Corrugated boxes
• Biotech Industry
• Pharmaceuticals and drugs Industry
• Food processing industries like ice-cream manufacturing
• Leather products manufacturer
• Steel furniture manufacturer
• Cosmetics
• Ready-made Garments
• Paints, alkyds, varnishes, and alkyd products
• Sewing machine industry

The list of the lending institutions where one can apply for Credit Linked Capital Subsidy loan for small business:

• Scheduled Co-operative Banks.
• North Eastern Development Financial Institution (NEDFi).
• State Finance Corporations (SFCs).
• Scheduled Commercial Banks.
• Regional Rural Banks (RRBs).

Here is the list of eligible beneficiaries of this scheme:

It is the best scheme for women entrepreneurs who are looking for government loan schemes for new businesses. They have been given more preference.

• Sole-proprietors
• Co-operative societies
• Public and Private Limited companies
• Existing Unites registered with the State Directorate of Industries
• Only those terms loans could be upgraded that are sanctioned on or before 29th September 2005
• Machinery purchased by availing of Hire Purchase scheme of NSIC
• New units registered under the State Directorate of Industries that has the appropriate technology.
• Labour intensive and export-oriented activities

Know about the eligible loan amount

The maximum loan amount small scale industries can get is up to Rs up to 100 Lakh. The subsidy is 15%, equal to 15 Lakh under the capital linked subsidy scheme. Units that have already availed of the benefit of this scheme cannot get an additional subsidy. This scheme was operational till 31st March 2007, till subsidy crossed Rs 600 Crore.

3. Stand-up Scheme

Stand-up India is one of the best government loan schemes for small businesses. It works well for women entrepreneurs and SC/ST  planning to start their new business in sectors like manufacturing, agriculture, or trading activities.

The eligibility criteria to apply for Stand-up India Scheme:

• SC/ST and women entrepreneurs who all are above the age of 18 years old.
• The loans are given only for the implementation of greenfield projects. It means the first-time venture in trading or manufacturing services.
• In case one requires financial assistance for non-individual enterprises.  It is a must that 51% of the shareholding belongs to either SC/ST and/or Women Entrepreneur.
• The borrower should not be a loan defaulter to any of the financial institutions and banks.
• Stand-up India is one of the best government schemes for small businesses as it facilitates loans from banks starting from 10 Lakh to 2 Crore,and be it a need of women entrepreneurs or SC or ST. This loan covers almost 75% of the project costs. But you cannot ask for assistance for the rest of the amount from any other government scheme.

Conclusion

The Small- Scale business sectors are also known as Small and Medium enterprises. Its contribution is mainly 40% of India’s GDP. Realising the importance of start-ups and MSMEs, the government has introduced government schemes for small businesses to help them cope with their immediate financial requirements.

Also Read:

1) How Do Business Loans Work?
2) Small Business Loans for Women
3) What is Business Loan? A Complete Guide.
4) Are small business loans secured or unsecured?

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FAQs

Q. Can you tell me the minimum loan amount I can apply for under government schemes for new business?

Ans. The government has not defined any minimum amount to borrow under the government schemes. It also varies from scheme to scheme.

Q. Total how many government schemes are there in India to offer financial assistance to MSME or Start-up businesses?

Ans. There are mainly 10 government loan schemes launched by the government of India. Some of the most popular ones are MSME loans in just 59 minutes, credit linked capital subsidy scheme, Pradhan Mantri Mudra Yojana Scheme, Start-up India Scheme, Credit Guarantee Fund Scheme, etc.

Q. How to apply for a government scheme for starting a small business in India?

Ans. To avail of the government schemes for new businesses, you must log on to the website of the government schemes provider and fill in the application form online with the concerned bank.

Q. How to apply for government loans to start a business?

Ans. You can apply for the Pradhan Mantri Mudra loan scheme and get a loan up to Rs 10 Lakh at the best interest rate with easy repayment options. There are many NBFCs also offering help in availing loans under the government scheme. You can contact the NBFCs and understand all the procedures of applying for government loans to start a business.