The Government of India (GOI) has launched many programmes and initiatives to improve the nation’s economic situation. The aspects of various enterprises’ futuristic approaches need to be guaranteed and supported by some financial assistance from the government.
Any business type, whether a large or small enterprise, depends on finance to generate cash.
A significant portion of the Indian economy comes from the MSME sector. It is responsible for 29% of the nation’s overall GDP. To address this, the government has developed several company credit programmes in recent years. These programmes offer MSMEs significant financial support, enabling them to concentrate on improving business operations and developing expansion plans.
The top 5 government business credit programmes for 2022 are listed below:
1. MSME Loan Scheme
The Government of India started the MSME Business Loan Scheme to concentrate on the working capital needs of businesses in the MSME sector. Under the MSME scheme, any new or old business can apply for loans for financial support of up to Rs. 1 crore. While the acceptance or rejection of a loan application is given within the first 59 minutes of the application, the loan procedure takes 8–12 days to complete.
The MSME Loan Scheme’s biggest feature is that you may acquire a loan at an ROI of 8%, which makes loan repayment simpler. Women business owners are given a 3% preference when applying for loans through the MSME Loan Scheme. In addition, women business owners experience relative ease in the loan acceptance.
The borrower must have a business at least one year old, and the annual turnover for existing businesses must be at least Rs 12 lakh.
- Individuals over the age of 18 may apply for the loan.
- Suppose you are a business entity (non-individual). In that case, you should have a GST registration certificate, your most recent Income Tax Return (ITR), and a bank account statement for the previous six months.
- The lender assesses your ability to repay the loan and access other credit options, income, and business revenue.
- Quick funding
- No collateral.
- Flexible terms of payment
- Affordable interest rates.
- Simple eligibility
- Amount of loan: up to 50 lakhs.
- The maximum loan term is 36 months.
- No additional fees.
- Electronic documentation.
- Quick Fund Disbursement and Approval.
- Flexibility in Repayment.
2. Credit Guarantee Funds Scheme
For Long-time provider of collateral-free loans to MSMEs, CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises). Any scheduled commercial or regional rural bank that qualifies as a leading authority can join the CGTMSE programme. Through the lending companies that have registered with the agency, the agency provides loans to MSMEs based on their credit standing. Working capital loans of up to 10 lakhs are offered via the CGTMSE scheme without the need for any security. However, only primary security or mortgage of land and buildings would be covered under the CGTMSE plan for all loan facilities of sums larger than 10 Lakhs (and up to 1 Crore).
This programme is open to both new and current MSMEs involved in manufacturing or service-related activities, except retail businesses, institutes of higher learning, farms, Self-Help Groups (SHGs), and training facilities.
- The working capital loan facility under this MSME programme for business owners is up to Rs. 2 crore per borrowing unit.
- Up to 75% of the credit limit up to Rs. 1.5 the guarantee covers crore.
- Microbusinesses receive 85% of the credit facility for loans up to Rs. 5 lakh.
- 80% of MSMEs with credit facilities are run or owned by women, and all loans go to Sikkim and the Northeastern region.
- The guarantee cover for MSME Retail Trade is 50% of the amount, up to a maximum of Rs. 50 Lakh.
The Credit Guarantee Fund Scheme for MSMEs (CGS) was established so that the MSME sector may use the credit without having to put up any collateral.
For credit up to Rs 5 lakh, microenterprises have a guaranteed coverage of 85%. For credit from Rs 10 lakh to Rs 1 crore per MSE borrower for retail trade activity, the guarantee covers amounts to 50% of the credit facility’s sanctioned amount.
3. MUDRA Scheme
Small enterprises and start-ups can receive financial support in the form of low-cost credit through the Micro Units Development and Refinance Agency (MUDRA) funding programme. MUDRA loans are primarily given to micro or small firms engaged in manufacturing, trade, or providing services.
The government established this scheme as part of the Pradhan Mantri Mudra Yojana (PMMY) to finance non-corporate, non-farm small/micro-enterprises. Mudra loans are available from private and public sector banks, non-bank financial companies, and other financial institutions. Interested applicants should contact one of the lending institutions listed above or apply online at MUDRA’s official website. MUDRA loans are mostly used by business owners, small businesses, start-ups, and MSMEs.
|Up to Rs 50,000
|1% to 12% p.a.
|Rs 50,001 to Rs 5,00,000
|8.60% to 11.15% p.a.
|Rs 5,00,001 to Rs 10,00,000
|11.15% to 20% p.a.
- Loans with no collateral.
- Banks and NBFCs offer competitive interest rates.
- A loan of up to Rs. 10 lakh is available.
- There is no processing fee.
- There are no prepayment penalties.
- The repayment period ranges from 12 months to 5 years.
- Women and entrepreneurs can benefit from the concession at an interest rate.
- The applicant should be minimum 18 years old and no older than 65 years old.
- Applicants with a good repayment history and no previous loan defaults.
Individuals, MSMEs, sole proprietorships, and enterprise firms in urban and rural areas that fall under the Non-Corporate Small Business (NCSB) group are eligible to apply for the loan. Following are a few instances of NCSBs:
- Small manufacturing units
- Service sector Units
- Suppliers of fruits and vegetables.
- Drivers of trucks.
Mudra Yojana enables women entrepreneurs to apply for loans via government programmes.
4. National Small Industries Corporation Subsidy Scheme
Under the National Small Industries Corporation Subsidy (NSICS), the government offers financial support to small businesses, focusing on two financial advantages: marketing assistance and raw material assistance. These are its advantages:
- Free-of-charge tender: Small-Scale Industries (SSIs) will have free access to the bids as part of the marketing aid initiative.
- Not requiring a security deposit: Small Scale Industries (SSIs) are excluded from paying a security deposit when requesting financing.
- Building and Land Financing: The scheme offers financial aid for the land and building department for SSI firms with project costs under Rs. 25 lakh.
The NSIC gives MSMEs two different kinds of financial advantages:
- Raw Material Assistance
- Marketing Assistance
You can utilise the cash to increase your competitiveness and the market value of your offerings in terms of marketing support. The NSIC subsidy programme also considers how an MSME operates and aids it in improving both output and quality.
Manufacturing and service providers with MSME or Udyog Aadhaar registration are both eligible for NSIC registration. Enterprises with MSME or Udyog Aadhaar registration can apply for registration online or in person at one of the NSIC locations.
- MSMEs are being helped through loans and programmes.
- Mentoring documentation procedures and assisting in all facets of the business
- Provides financial assistance at the best interest rates and thorough guidance.
- It provides credit and the flexibility to switch banks for credit.
- It provides raw materials, machinery, and other equipment.
- It aids in the advancement of technology and the improvement of abilities.
- It offers people training and ensures their independence.
- Scheme for Single Point Registration
It is a government-owned company with the mission of promoting the expansion of the MSME market.
Read our Module on Saving And Investment Schemes at ELM School
5. SIDBI Loan
To meet the funding requirements of businesses in the MSME sector, SIDBI offers indirect credit programmes to NBFCs (Non-Banking Financial Companies) and SFBs in addition to direct loan programmes for MSMEs (Small Finance Banks). The term might be up to 10 years, and the loan amount may range from 10 Lakhs to 25 Crores. You can obtain loans up to Rs. 1 crore without putting up any security.
The bank’s different lending programmes, such as SIDBI-Loan for Purchase of Equipment for Enterprise Development (SPEED), SIDBI Make in India Soft Loan Fund for MSME (SMILE), Smile Equipment Finance (SEF), and others, allow MSMEs to apply for loans. Each loan plan has a different loan tenure, loan amount, and eligibility requirements.
- SIDBI provides refinancing assistance to Small Scale Industries (SSIs) and MSMEs.
- Funding assistance for the MSME industry.
- Aids in the reduction of Small-Scale Industries’ costs.
- Provides refinancing to financial institutions such as banks, NBFCs, and SFCs.
- Financial services such as hire buy, factoring, and leasing are available.
- Increases employment opportunities for SSIs.
MSME participants can immediately apply for loans from SIDBI. It also provides indirect loans to small finance banks and big NBFCs. With a maximum 10-year term, loan amounts vary from Rs. 10 lakhs to Rs. 25 crores. For loans up to Rs. 1 crore, no collateral is required.
The two most well-known SIDBI loan programmes are:
- The SIDBI Make in India Soft Loan Fund for MSME and
- The SIDBI Loan for Purchase of Equipment for Enterprise Development, or SPEED.
- SEF, short for Smile Equipment Finance.
- Can the government lend me money for my business?
The Government of India started the MSME Business Loan Scheme to concentrate on the working capital needs of businesses in the MSME sector. Under the MSME scheme, any new or old business can apply for loans for financial support of up to Rs. 1 crore.
- Who qualifies for an MSME loan?
A company owner must fulfil the requirements set forth by the lenders to qualify for an MSME loan, namely: Candidates must be between the ages of 25 and 55. The applicant’s business must be older than three years. For at least a year, they ought to have submitted income tax returns for the company.
- Is there a MUDRA loan scheme presently?
Yes. MUDRA loans are available for any activity that generates money. Given that khadi is one of the textile industry’s eligible operations, any MUDRA loans are taken for revenue generation can be repaid.
- How much is the MSME loan subsidy?
The maximum amount of the subsidy would be 15% of the project’s cost (20% for NER and Hill States). Banks issue a term loan for the remainder of the project’s total cost. The manufacturing sector upgrade project has a maximum expenditure of Rs. 1 crore and Rs.
- Describe the government start-up programme.
It is commonly known as Pradhan Mantri Mudra Yojna.
The government set aside INR 10,000 crores in 2015 to encourage the start-up scene in the nation. Small firms and non-corporate, non-farm small/micro-enterprises are eligible for start-up loans of up to INR 10 lakhs from MUDRA banks.
- Is MSME a collateral-free scheme?
Union MSME Minister Narayan Rane stated in a written reply in the Rajya Sabha that the government has operationalised a Rs 3 lakh crore collateral-free lending plan with effect from May 23, 2020, which is estimated to assist 45 lakh MSMEs.
9. What is a credit guarantee scheme?
The Government of India established Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) to provide collateral-free credit to micro- and small-enterprise sectors. Existing and new businesses can apply to have their operations covered by the programme.
10. How do government schemes for business loans operate?
The government implemented its business loan programmes to help people, particularly those who own Micro, Small, and Medium-Sized Enterprises, obtain financial support through loans for their company’s needs.