Are you looking for a reliable financial aid for your business idea? In this post, we will discuss a few government loans for business in India. As business owners, you should then check the available options to choose the perfect one.
Today, India has over 40 million registered and unregistered Small and Medium Enterprises in varied sectors including manufacturing, IT, food processing, packaging and more. This sector has been one of the major drivers behind the country's progress. The Indian startup ecosystem is producing unicorns at double the speed than before, with multi-billion dollar findings from investors on the global level and celebrating high-profile exits. At the same time, the nation's micro, small and medium enterprises sector comprising 577 Cr companies is beating challenges of setting up and building the consumer base, among others.
But there are many problems with this path. Owing to their small size, SMEs and MSMEs, as compared to big companies, are burdened with multiple problems that come in the way of their growth. One of the most important is accessing finance at the right cost. An idea remains just thought if it does not get the requisite working capital on time. As per many studies, presently less than 5% of MSMEs have access to formal credit, while others rely on informal sources to fund their idea. For Indian startups, while there are a lot of private equity and debt funding options available, to get funding at the ideas or initial stage is a challenge. Recognizing the problem, the government of India has taken steps to empower the small scale and home businesses.
And, in a much-needed move to address this gap, the Indian government has introduced many initiatives to provide business loan for MSMEs and startups through authorized channels. Here is a list of some of the most popular and notable schemes by the government that provides business loans for businesses in India:
Launched in 2000, Credit Guarantee Fund Scheme for Micro and Small Enterprises or CGMSE was started to provide monetary support to micro and small enterprises. It provides collateral-free credit for new as well as existing business units that satisfy its eligibility criteria. Under it, one can work capital loan up to 10 lakh without any collateral.
The credit facilities over 10 lakhs and up to 1 crore, only primary security or mortgage of land and building associated with the building are obtained and such eligible accounts are covered under Credit Guarantee Fund Trust for Micro and Small Enterprises. An asset created through the credit facility associated with the business unit is also considered as security when the loan amount crosses 10 lakhs.
Another government loan for business in India, MUDRA aims to provide loans to micro-units and the small business sector. This government scheme is designed to maintain the startup's growth and funding needs of micro-units in mind. The process of this financial support is divided into three stages.
The first stage of MUDRA is Shishu, it has a loan amount of s. 50,000 and there are no collateral needs. The interest rate of this loan is 1% monthly and the loan is repayable for more than five years. The second stage is Kishor; here the loan amount ranges between Rs.50, 000 up to Rs. 5 lacs. On the third stage, the loan amount is from Rs. 5 lacs to s. 10 lacs.
One of the most talked-about business loans in India, MSME Business Loans in 59 Minutes, and a unique scheme that was started in the year 2018. This scheme provides financial assistance to MSME growth in India. The actual process of this government loan for business in India takes 8-12 days to complete, while the approval or disapproval is granted within the first 59 minutes of application.
The interest rate varies as per the business type and credit raining. No data is provided on subsidizing the principal amount or interest subvention. To apply for this business loan, you need GST verifications, Income Tax verifications, bank statements, KYC details, and owners related documentation.
Consider these loan options when you are looking for the best Government Loan for Business in India. The Indian government is working effectively to ensure that small and medium scale industries benefit from the loans.