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Eligibility for Government Business Loans

Sukanya Mukherjee -

Irrespective of whether you are a newcomer in the business world or a veteran in the industry long, you will always need funds to succeed. You may need instant funds to upgrade technology, meet working capital needs, hire new staff, buy new equipment, tackle the loss that occurred due to sudden calamity like COVID-19, etc. You may need funds for various reasons, and the best way to meet your funding needs is to avail the government business loans.

What is a government business loan?

Government business loans typically aim to provide financial aid to startups, SMEs, MSMEs, and other business entities. The government offers many types of business loans and it is up to the entrepreneurs to choose the one that best suits their business requirements.  The government provides these loans through different organisations for the primary purpose of offering financial support to small businesses.

Top six government loan options:

Thinking to opt for government business loans? Wait! Before you apply, know what kinds of business loan schemes are available and their eligibility criteria.

1. MUDRA Loan:

The government has acknowledged the scarcity of sufficient funds for start-ups and SMEs to grow their businesses. Therefore, MUDRA loan schemes have been introduced to help out micro-units and non-corporate small businesses by providing adequate financial aids. These loans are provided depending on the funding needs of the beneficiary and the stage of business. Also, the loans under the MUDRA scheme are collateral-free loans.

Government categorises MUDRA scheme under the following three stages:

  • Shishu: Up to INR 50,000
  • Kishor: From INR 50,000 to INR 5 lakhs
  • Tarun: From INR 5 lakh to INR 10 lakhs

Eligibility: All kinds of non-corporate small business (NCSB) like shopkeepers, small manufacturing units, service sector units, truck operators, machine operators, food-service units, repair shops, artisans, food processors, and others can apply for the MUDRA loan scheme.

2. Credit Guarantee Scheme (CGS):

The government of India launched the Credit Guarantee Scheme (CGS) for Micro and Small Enterprises to support and strengthen the credit delivery system. Under this scheme, both private and public banks, as well as overseas banks and the SBI are involved in the lending institutions. This scheme aims at making collateral-free credit to the start-ups and SMEs and helps them avail the best business loans at reasonable interest rates. The maximum limit of the Credit Guarantee Scheme is INR 100 lacs. The specific loan amount that an individual can avail varies depending on the applicant’s eligibility and business feasibility.

Eligibility: Both new and existing enterprises engaged in manufacturing or service activities can avail this loan. However, micros and small enterprises involved in retail trade, agriculture, Self-Help Groups (SHGs), educational or training institutions can’t apply for this scheme.

3. Stand-Up India:

The Government of India has introduced the Stand-Up India loan scheme to help out SC/ST and women entrepreneurs. Under this scheme, the bank provides loans from 10 lakhs to 1 crore to at least one SC/ST and a woman borrower per bank branch for setting up a greenfield enterprise. The loan tenure is 7 years. This scheme aims at financially empowering women entrepreneurship among SC/ST segments.

Eligibility: All kinds of women entrepreneurs belonging to the scheduled caste or scheduled tribe can opt for Stand-Up India loan to start a trading, manufacturing or service unit.

4. PSB Loans in 59 Minutes:

On 5th Nov 2018, the PrimeMinister of India launched a digital platform psbloansin 59 minutes to provide financial aids from 1 lakh to 5 crore INR in less than an hour to startups and Micro, Small and Medium Enterprises (MSMEs). Typically, such loan schemes take about 7-10 working days to process but under this scheme, the applicant can complete the approval process in just 59 minutes. Once the loan gets approved, the loan amount can reach in your account within 7-8 working days. The loan is free from collateral and its interest rate is 8.50% onwards.

Eligibility: Both new and existing entrepreneurs aim to set up a new business or upgrade their trade can avail this loan scheme.

5. NSIC Subsidy:

Another momentous business loan introduced by the government is the National Small Industries Corporation Subsidy (NSICS). This scheme focuses on two primary assists: raw material support and marketing support. Under the marketing support program, the small industries can access cost-free tenders. Also, the Small-Scale Industries (SSIs) need not pay any kind of security deposit for availing the financial aids. NSIC provides financial assistance for the land and building department, for which the project cost must not exceed the limit of INR 25 lakhs. This scheme aims to aid, rise, strengthen and promote the growth of MSMEs all across the country.

Eligibility: Any micro, small and medium enterprises who have incurred commercial production for less than a year can apply for National Small Industries Corporation (NSIC) Subsidy.

6. SMILE:

Introduced in 2015, SMILE financially supports MSMEs to meet their needed debt-equity ratio to enable the growth for their existing enterprise and also to establish new ones. The minimum loan amount that an applicant can expect to avail under the scheme of SMILE is 20 lakhs and its interest rate is 8.36% onwards. The loan tenure is 10 years with 3 years of the moratorium period.

Eligibility: New enterprises in the service and manufacturing sectors can apply for this scheme. Existing enterprises starting new projects or undertaking up-grades to exalt their business can also avail the benefits of SMILE.

How to apply for government business loans?

1. Visit the desired bank’s website associated with the particular scheme you like to avail.

2. Make your account or register on the portal by filling the essential details and OTP authentication.

3. Fill the form by entering your personal information, monetary credentials and other required details.

4. Upload the required documents.

Eligibility to avail government business loans:

Any individual, startups, SMEs, MSMEs, or big businesses can avail government business loans on condition that they fulfil the needed eligibility criteria. Eligibility to avail government business loans depends upon a variety of important factors. These factors are listed below:

  • Age of the applicant: The minimum age of the applicant should be 18 years.
  • Type of Business: The loan is typically offered to individuals, partnership, sole proprietorship, startups, private limited companies, SMEs, MSMEs, large enterprises, etc.
  • Credit score: The applicant’s credit score should be greater than 650.
  • Annual Turnover: Annual Turnover of the business should be profitable as it determines the activity levels of the fund.
  • Capital Invested: Capital investment is also important eligibility criteria to avail the government business loans.

Required documents to avail government business loans:

One can never avail any kind of business loan as long as he/she provides the needed documents to support his/her loan application. The documents required to avail the government loans vary from one scheme to another. However, the basic documents which an applicant is generally asked to submit are listed below:

  • Identity proof: Passport, PAN Card, Driving License, Voter ID, Aadhar Card, or any Govt issued i-card, Passport size photographs
  • Age proof: Passport, PAN card, Driving License, Birth certificate, Voter ID card, Employee ID card
  • Address Proof: Election ID card, Driving License, Electricity bill, Passport, or bank statement
  • Business Address proofs: Utility bill, Bank statement, Registry copy, Rent agreement.
  • Business plan
  • A detail of the credit option you are applying for
  • GST number
  • Last six months bank statements
  • Last 3 years Income Tax filing
  • List of company Partners or Directors
  • Duly filled application form
  • Balance sheet for the last two years

Setting up your new enterprise or expanding the established ones has got easier than ever before! Just choose your preferred government business loan option, check your eligibility, apply online, submit the required documents, get approvals and be ready to receive the loan amount in your bank account in the next couple of days.

Also Read:

1) List Of Schemes Farmers Can Avail in India
2) How to Apply for a Mudra Loan?
3) What is a Mudra Loan? Features, Eligibility & More
4) 7 Different Types of Loans for Your Small Business
5) Which Are the Different Types of Loans in India?