Top 5 Government Loan Schemes for SMEs In India

By Sthitaprajnya Panigrahi Thursday, 26 August 2021

Including the registered and unregistered ones, India has approximately 40 million Micro Small and Medium Enterprises (MSMEs) which fall under the categories of both organized as well as unorganized sectors. Contributing about 40% of the total GDP of India, MSMEs not only remain a critical source of employment but also provide solutions to critical issues in the country like poverty, unemployment, income inequality, regional imbalances, and more. To help the budding entrepreneurs across the MSME sectors in boosting their business and their economy, Govt. of India has purposedly introduced many loan schemes. The rising entrepreneurs of the MSME domains can borrow money in the form of a loan through any of the below-mentioned schemes that satisfy their requirements.

1.    MUDRA Loans

Sanctioned by the Micro-Units Development and Refinance Agency organization, the scheme of MUDRA loans has been established by the Govt. of India to ensure financial assistance to the units of micro-business. With the theme behind the scheme is to ‘fund the unfunded’, almost all bank branches across India offer MUDRA loans. Creating a low-cost credit perception for micro and small businesses, the MUDRA loans are categorized as under three groups including Sishu Loans, Kishore Loans, and Tarun Loans. While a sum of up to 50, 000 is provided under Sishu Loans, an amount between 50,000 to 5,00,000 and 5,00,000 to 10,00,000 are delivered under Kishore loans and Tarun loans respectively. All businesses relevant to partnership firm, proprietary concern, Public Company, Private Ltd. and other legal entities are suitable to avail loan under this scheme.

2.    Udyogini

Interpreted as ‘women empowerment’, Udyogini scheme has been initiated under the Government of India by the Women Development Corporation for empowering Indian women. This scheme deals with funding of loans which is granted to support women in meeting their principal requirements for opening a business. While the maximum loan amount that can be granted under this scheme is Rs. 15,00,000, the yearly income of the family of the woman must not be above Rs. 15,00,000. A woman entrepreneur within the age group of 18 years to 55 years are eligible to get advantage of this scheme. With no limit of income for women who are physically challenged or widowed, there are about 88 categories of businesses that for which loans can be availed by eligible women.

3.    National Small Industries Corporation Subsidy (NSIC)

A government enterprise under the MSMEs, NSIC is ISO certified with one of its primary functions is to support the progress of MSMEs by ensuring services comprising of finance, technology, market and other services across the country. There are two schemes which are initiated under NSIC to promote the growth of MSMEs - Marketing Support Scheme and Credit Support Scheme. The Marketing Support Scheme favours the growth and expansion of any business by formulating the Consortia and Tender Marketing schemes. In Credit Support Scheme, the NSIC offers for monetary aid to obtain raw materials, for events in relation to marketing and for financing with banks through syndication to MSMEs. Not only this scheme offers the small-scale industries access to tenders without bearing any costs, but the MSMEs also do not have to pay the security deposits for availing monetary aid under this scheme.

4.    Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGFMSE)

A loan scheme that is launched by the government of India, CGFMSE allows for subsidy through loans without collateral MSME businesses. These loans can be availed by both novel and present enterprises and the funding under this scheme can provided for working capital loans up to Rs. 200 lakhs along with eligible women entrepreneurs. The businesses who are into manufacturing activity such as educational institutions, retail trade, training institutions, self-help groups, and service sector are eligible to avail funding under this scheme.

5.    Stand-Up India

Introduced by the Government to ensure loans for businesses run by SCs, STs and women entrepreneurs, Stand-Up India is governed by Small Industries Development Bank of India (SIDBI). Ranging from Rs. 10 lakhs to Rs. 1 crore, loans under Stand-up India scheme is provided by almost every bank in India. As per this loan, the fund is anticipated to cover about 75 percent of the cost of the total project. These loans are eligible for businesses which are majorly engaged in trading, manufacturing or service sector. If the business is managed by a group, then at least 51 percent of the shares must be apprehended by an individual who is either a woman or belongs to the SC or ST community.

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