Small Business Loans For Women

. 7 min read
Small Business Loans For Women

Table of Contents:

1. Women Business Loans In India

2. Types Of Business Loans For Women

3. Available Small Business Loans For Women

Key Takeaways

FAQs On Women Business Loans

1. Women Business Loans In India

The growth of entrepreneurship is not a novel concept in India. Every day, you can see startups flourishing or new ventures being launched in the country. However, women-led startups or businesses owned by women are still a minority.

Often, women entrepreneurs encounter several hurdles in launching their venture. Women-owned businesses are less likely to receive funding than male-owned enterprises. To boost the entrepreneurial spirit's growth among women, major financial institutions in India and government-led and private banks have introduced various loan schemes that solely cater to women. To encourage women, these loans are usually offered at interest rates that are lower than the current market rate, little to no processing fees, require no collateral or third-party guarantee, and a loan repayment tenure of ten years or more.

Government loans for women to start business are a better alternative since these are usually provided at subsidised rates and have a longer payback period. However, non-government and personal loans are also good borrowing options since they typically do not require the borrower to show collaterals such as cars, homes, or any other fixed asset. If you have a fixed income source or a strong credit history, then a personal loan is better than any other form of financing.

2. Types Of Business Loans For Women

Although the best type of women entrepreneurs loan would be a business loan for women, there are other alternatives that one can consider borrowing.

1- Small Business Finance

Several financial institutions offer different kinds of startup business loans for women and SME loans. Although these loans are mostly provided to small-scale enterprises, some also offer to lend to startups. However, lenders are usually quite stringent while lending applicants, as credit score parameters are evaluated to check the candidates’ eligibility before approving a given loan amount. Nevertheless, small business loans are suitable for female entrepreneurs’ short-term funding requirements as they have affordable rates of interest, and secured and unsecured funding options.

2- Commercial Business Loan

Commercial business loans provide immediate funding and are ideal for medium-scale enterprises who want to expand their operations further. Such loans usually do not require any collateral or guarantor and are instantly approved by the lenders. With a commercial business loan, you can borrow as much as Rs. 50 lakhs, can apply online with minimal documentation and have a tenure ranging between three and five years. However, a commercial business loan is usually eligible for those who have been running their business for at least one year and have valid business proofs. In some instances, borrowers may have to submit their current account statements to show that they are operating a profit-generating venture.

businessman signing small business loan

3- Loans Against Securities

A loan borrowed against securities is one of the best small business loans for women. With loan issued securities, women can pledge their investments in stocks, mutual funds, or insurance policies and borrow funds against these securities. Financial institutions usually offer up to 60-75% of the investments’ market value and are secured loans with a predetermined tenure of 4-5 years. Although the eligibility criteria for a loan against securities is minimal, one has to show proof of ownership of these securities to the bank or financial institution where they are borrowing the amount from. These loans offer subsidised rates of interest and have flexible repayment options.

4- Government Schemes

Govt loans for women are characterised mainly by lower interest rates and flexible eligibility requirements. Government loans generally have a tenure of five years or more. Several banks and financial institutions are a part of the government schemes that offer loans solely to female entrepreneurs. Some of the most well-known schemes providing government loans for women to start a business include the Pradhan Mantri Mudra Yojana, the Women Enterprise Program, the Mahila Udyami Yojana, and so on.

3. Available Small Business Loans For Women

Let us now look at some of the small business loans for women offered by the Indian Government.

1. Stree Shakti Package for Women Entrepreneurs- The Stree Shakti Package for Women Entrepreneurs is offered by several State Bank of India’s (SBI) branches. Under this scheme, women who own a 50% stake in a business or have taken part in Entrepreneurship Development Programmes (EDP) conducted by state-run agencies are eligible to apply for a loan. The loans offered are further subsidised if the amount borrowed is greater than Rs. 2 lakhs.

2. Mahila Udyam Nidhi Scheme- Under the Mahila Udyam Nidhi Scheme, women’s small business government loans are offered by the Punjab National Bank for ten years. Different interest rates are provided depending upon the venture that a woman wants to start, such as a beauty parlour or purchasing a vehicle.

3. Cent Kalyani Scheme- Loans under the Cent Kalyani Scheme are made available by the Central Bank of India and offer interest rates from 7.35% onwards. Such loan facilities are provided to women looking to start their venture or wish to expand their current businesses. One can borrow up to Rs. 10 lakhs under this scheme. This loan’s primary aim is to assist women working in the field of agriculture, MSMEs, rural and cottage industries, retailing, and government-backed enterprises. No processing charges need to be paid while availing of a loan under the Cent Kalyani Scheme.

small business loan application papers with a stopwatch, glasses and pen

4. Shakti Scheme from Dena Bank- Under the Shakti Scheme, government loans for women to start a business are supported, especially those working or who want to work in agriculture, retail trade, microcredit, education, housing, manufacturing, and the service industry. Women entrepreneurs can borrow up to Rs. 20 lakhs with a concession up to 25 basis points of the loan interest amount, although loans as small as Rs. 50,000 or less are also available. Loans are offered with zero processing fee. Interest rebate of 0.5% is available in respect of loans up to Rs. 5.0 lakh subject to certain conditions.

5. Bhartiya Mahila Bank Business Loan- The Bhartiya Mahila Bank’s loans aim to support those female entrepreneurs who wish to launch their ventures in retail, manufacturing, and micro and small-scale enterprises. Women can borrow up to Rs. 1 crore in manufacturing industries and Rs. 5 crores if they want to start a business in the retail or service industry. The maximum amount that one can borrow under this scheme is Rs. 20 crores. Although this loan scheme does not require any collateral or third-party backing and is not just limited to women working in SMEs, one needs at least two years of work experience to avail of a loan.

Key Takeaways

There is no denying the fact that women generally find it harder to access credit. The Indian government loans for women to start business will certainly go a long way in helping them start their own ventures. Such a step will encourage more and more women to undertake risks and become financially independent and push the economy towards higher growth.

Also Read:

1) 35 Small Town Business Ideas That Every Community Needs
2) How to start a restro-bar in a tier-2/tier-3 city?
3) What is a Manufacturing Business? An A to Z Guide of a Manufacturing Business
4) OkCredit: Simple, Paperless & Secure solution for businesses

FAQs On Women Business Loans

Q. What documents do I need to submit while applying for a loan?

Ans. The documents required to apply for any of the loans described here vary between schemes. However, most banks and financial institutions may demand the following identification proof:

  • Aadhaar Card
  • bank account statements
  • voter ID
  • address proof

Some may also ask for documents such as a caste certificate, ration card, and if you are a beneficiary of any government scheme, in case a loan caters explicitly to women belonging to disadvantaged sections of the society.

Q. Do I require any collateral while applying for a loan?

Ans. Typically women-only loans do not require you to show any collateral or third-party backing. Nevertheless, you should check the terms and conditions before applying for a loan.

Q. What is the payback period for these loans?

Ans. The repayment tenure varies between loans, although most of them are flexible and range between 3-5 years or more.

Q. Can any concessions be availed on the loan schemes?

Ans. Some banks offer concessions on borrowing a certain loan amount. For instance, you can borrow up to Rs. 20 lakhs with a concession of 25 basis points to the interest rate. Interest rebate of 0.5% is available in respect of loans up to Rs. 5.0 lakh subject to certain conditions