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Best Government Loan Schemes for Businesses in India

Created on 29 Nov 2023

Wraps up in 5 Min

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Updated on 07 Feb 2024

Running a business has many layers. Securing office space, transforming ideas into reality, procuring raw materials & machinery; the journey of an entrepreneur is a symphony of interconnected tasks.  🎶

And let’s not forget the financial aid required to complete all of them. Businesses often suffer from a shortage of funds, for which they turn towards lenders. However, private lending institutions result in costs that are much larger than expected due to high interest rates.   

In such times, government loan schemes emerge as a beacon of hope for aspiring entrepreneurs and established enterprises. The caretaker of the nation brings out a variety of schemes and programs to support the businesses, large and small alike. But, finding the right program amidst hundreds of available options can be perplexing.

This is where the article will lend you a helping hand. The five best government loan schemes for businesses will be discussed here, along with their unique eligibility criteria, interest rates, and other complicated details.

So, bring out your idea notepad and start jotting down notes as the class is about to begin. 📑

5 Government Business Loan Schemes

There are a multitude of loan schemes available to choose from, and the best five are mentioned below ⬇️:

1. 59 Minutes MSME Loan: Swift & Easy Capital Support  

Amidst the many sectors in the business world, manufacturing plays a vital role. As per the government’s plan to make India a global manufacturing hub and a digitally advanced land, further development of this sector is essential. However, manufacturing requires constant and extensive investments in equipment, raw materials, and others, wherein the MSME Loan comes in.

The Micro, Small and Medium Enterprise (MSME) Loan Scheme begins with an interest rate of 7.65% per annum and onwards. It was announced on 13 May 2020 by the Government of India, and consists of the following classification in terms of eligibility:

A variety of MSME loan schemes are available for businesses to apply. Read MSME Loan: User Manual to Control Dilution for in-depth details about MSME Loan Scheme.

The next scheme justifies its name by helping businesses to gain a firm footing in their respective sectors. 💰

2. MUDRA Loan: A Catalyst for Entrepreneurship

Aka Pradhan Mantri Mudra Yojana (PMMY), the Mudra Loan was introduced by the Government of India in 2015. The “MUDRA” here refers to the Micro Units Development and Refinance Agency and was brought forth to promote entrepreneurship and support micro & small enterprises (MSEs).

The program was implemented to extend financial assistance of up to ₹10 lakhs to these organisations with a varying interest of 1 to 12% per annum. These loans are available through any Non-Bank FinancialCompanies (NBFCs), MicroFinance Institutions (MFIs), Commercial Banks, Small Finance Banks, or Regional Rural Bank (RRBs). The eligibility criteria for the loan scheme is that any citizen with a non-farm income-generating activity, like manufacturing, services, etc., can apply for it.

PMMY is categorised into three divisions and is adopted by businesses based on their requirements:

  • Shishu: Loans for up to ₹50,000 for early-stage businesses.
  • Kishor: Loans for ₹50,000 to ₹5 lakh for growing businesses.
  • Tarun: Loans for ₹5 lakh to ₹10 lakh for established businesses.

Refer to the article Mudra Loan: Everything about Pradhan Mantri Mudra Yojana for valuable insight into the loan scheme.

3. National Small Industries Corporation: Backbone of Business Funding

Abbreviated as NSIC, the National Small Industries Corporation is an ISO-certified organisation established by the Government of India. It plays a pivotal role in fostering MSEs by providing a range of services, including credit facilitation, training, and technology support. It has an interest rate of 9-10% per annum based on the kind of enterprise to which a business belongs.

Vision of NSIC:

  • Enable MSMEs to achieve their full potential.
  • Promote entrepreneurship and skill development.
  • Foster innovation and technology adoption.
  • Expand market access and enhance competitiveness.
  • Empower businesses to contribute to inclusive development.

NSIC Loan scheme provides a variety of schemes for businesses, some of them are:

  • Marketing Support Scheme: NSIC assists MSMEs in expanding their market reach and fostering international trade. It organises trade fairs, exhibitions, and buyer-seller meets to connect MSMEs with potential clients.
  • Credit Support Scheme: NSIC acts as a facilitator for MSMEs seeking access to affordable financing. It collaborates with banks and financial institutions to provide loans, working capital, and equipment finance to MSMEs.
  • Technology Support: NSIC promotes technology adoption among MSMEs through various initiatives, such as technology centres, prototyping facilities, and technology parks. It also provides guidance and support in implementing technology solutions.

Know all the amazing factors of the NSIC loan scheme by clicking here.

There are amazing schemes focused on assisting women entrepreneurs to achieve success and financial security? Read the Top 5 Government Schemes for Women Empowerment article for all the details.

4. Prime Minister Employment Generation Programme: Fueling Entrepreneurship & Job Creation

The Prime Minister's Employment Generation Programme (PMEGP) stands as a flagship initiative of the Government of India and was launched in 2008. It was designed to promote self-employment and generate job opportunities in both rural and urban areas. This comprehensive scheme consists of a range of financial assistance and support services to empower aspiring entrepreneurs and established businesses.

People from 18 to 55 years of age with a maximum earning of ₹6 lakh per annum are eligible to apply.

PMEGP supports a wide range of projects, including:

  • Manufacturing: Establishment of manufacturing units for various products, such as textiles, garments, furniture, and handicrafts. The maximum cost of the project admissible is ₹25 lakh.
  • Services: Setting up service-based businesses, such as salons, beauty parlours, repair shops, and catering units. The maximum cost of the project admissible is ₹10 lakh.
  • Agro-based Ventures: Agriculture-related projects, such as poultry farming, dairy farming, and food processing units. The maximum cost of the project admissible is ₹10 lakh.

Last but not least, the custom-made scheme to suit individual enterprises to the best of their abilities is…

5. Small Industries Development Bank of India: Empowering Businesses with Tailored Solutions

Abbreviated as SIDBI, the Small Industries Development Bank of India loan scheme was established under a special act of the Parliament in 1990. This loan scheme provides a comprehensive range of loan solutions to fuel the growth aspirations of micro, small and medium enterprises.

SIDBI specialises in providing a diverse loan scheme for various needs. Their portfolio encompasses a wide spectrum of products tailored to address the specific needs of MSMEs at different stages of their growth cycle. From financing the establishment of new ventures to supporting the expansion and modernisation of existing businesses, SIDBI caters to diverse requirements across various industries.

Eligibility: MSMEs with 3 years of running the show, a satisfactory financial position and new enterprises in the manufacturing & service industries are eligible to apply for this loan scheme.

Promoting Self-Employment: Closer Look at the Stand Up India Scheme.

The Bottom Line

As India strives towards a more inclusive and prosperous future, these schemes are powering up the spirits of young minds and experienced entrepreneurs rapidly. Now, entrepreneurs can stand on their own feet without worrying about funds for a business venture and contribute towards making the nation a global hub for varying sectors.

Read latest and premium articles on stock market, personal finance, business and entrepreneurship with trending market news on Insider by Finology.

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A book-lover who adores everything fictional, Preeti has undertaken the life mission of tasting every flavour available in the pantry. A science student with a Master's in Mass Communication, she now wishes to conquer the Finance world as a writer. With the power invested by the randomly chosen music, she is here to make Finance fun for you.

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