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How To Get A Business Loan From The Government? Government Loan Schemes for New Businesses

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How To Get A Business Loan From The Government

If you are reading this page, then we are pretty sure that you were searching for the answer to the question “How to Get a Loan to Start a Business From the Government in India?”. The answer to the question lies on this page. The government of India offers various business loans to business owners, those who run their own companies, and self-employed individuals. Loans are designed with the primary purpose of helping people create a business venture and providing them with the support they need in order to make this happen correctly.

Luckily, there are numerous options when it comes to choosing a government business loan and they can be found through either local banks or even other investors who fit the bill if your first choice institution happens to fail you. Here is more information on what kinds of government subsidy loans for businesses are available today as well as what requirements have been set for both businesses seeking funding and individual entrepreneurs throughout India, and how you can get started today. Scroll down to find out more.

Table of Contents

Government Loan Schemes for New Businesses

There are multiple government loan schemes available for unemployed youth in India, which are listed out below:

  1. Bank Credit Facilitation Scheme by NISC
  2. The Credit Guarantee Scheme
  3. Loans for Small and Medium-Sized Enterprises in 59 Minutes
  4. PMMY – Pradhan Mantri Mudra Yojana.
  5. SIDBI Make in India Loan For Enterprises (SMILE)
  6. Stand-Up India Scheme

It’s important to recognise that every government business loan offers diversity when it comes to the nature of the business and the requirements for eligible people or organisations to apply for it. As such, different types of loans will suit different people for a variety of reasons. Thus, it is important for one to carefully research what type of business loan will suit their venture.

1. NSIC’s Bank Credit Facilitation Scheme

The loans available under the Bank Credit Facilitation Scheme aim to help meet the capital requirements of small-scale manufacturing units by facilitating access to bank credit. They are provided through the National Small Industries Corporation (NSIC) and its tie-ups with various banks and lending institutions. Therefore, beneficiaries are allowed to choose from a range of loan options, including working capital and long-term funds from private and public sector banks, according to their needs. NSIC will also offer them quick facilitation by offering necessary services related to appraisal, documentation, etc.

Features of the National Small Industries Corporation Scheme

  • Under the NSIC marketing assistance programme, the government is offering several tenders that can be applied for without any cost.
  • There is no security deposit required if the cost of the project being carried out is less than Rs. 25 lakh.
  • SSI units are also offered land and building financing under a scheme to help their businesses grow, however small they may be.

How To Start a Business in India?

2. Credit Guarantee Schemes

The credit guarantee scheme was launched by the government to assist small businesses that are unable to secure credit because they don’t have the collateral required by banking organisations. Under this scheme, loans of up to Rs 50 lakh can be repaid with an interest rate of 5% over a seven-year period. All the public, private, foreign, and rural banks, SBI and its associate banks are the lending institutions that offer credit guarantee schemes for business owners.

Under the credit guarantee scheme, all new and existing micro and small enterprise business owners who are not involved in retail trade, educational institutions, agriculture, training institutions, or self-help groups can apply for business loans. In other words, MSMEs who are working in manufacturing or service activities can avail of the credit guarantee scheme loans.

Features of the Credit Guarantee Scheme

  • MSME loans are available for business owners and members of self-help groups. Qualifying units may receive term loans or a working capital loan of up to Rs. 2 crores per borrowing unit.
  • Each company eligible for an MSME loan is allotted up to 75% of the loan value with a guarantee cover of up to Rs. 1.5 crore.
  • For the northern and eastern regions specifically, including Sikkim, as well as women-owned businesses, 80% of this value is guaranteed.
  • All retail trade entrepreneurs may be given up to 50% in cases where the principal amount has been defaulted on by up to Rs 50 lakhs.

3. Loans for Small and Medium-Sized Enterprises in 59 Minutes

PSB Loans in 59 Minutes is an online marketplace in which self-employed individuals can apply for business loans at an interest rate of 8.50% p.a. onwards from public and private sector banks (PSBs), non-banking financial companies (NBFCs), etc. Under this scheme, MSMEs can get loan amount approval ranging from Rs. 1 lakh to Rs. 5 crores within 59 minutes.

Features of MSME Loans in 59 Minutes

The features of MSME loans in 59 minutes are as follows:

  • You can access an MSME loan of up to Rs 5 crore, which will be deposited directly into your account in 60 minutes or less.
  • Collateral-Free Loans: Collateral or security is not required because we directly link to the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSME) scheme. This helps with fast access to financial instruments.
  • You can expect to receive your funds in 7–8 days after you have received approval for your loan.
  • Minimal documentation process.

How To Get a Business Loan From a Bank?

4. PMMY (Pradhan Mantri Mudra Yojana)

The government has set up this scheme to provide finance to non-corporate, non-farm small and micro-enterprises. The Mudra scheme is applicable to SMEs and startups who require low-cost funding. Mudra loans are available from a variety of lending institutions, including public sector banks (PSBs), private sector banks, particularly licenced non-banking financial companies (NBFCs), regional small finance banks, and the Micro Units Development Refinance Agency (MUDRA). With a large number of lenders available to business owners, there is no need to depend on large firms to provide them with the loans they so desperately need. Moreover, financing loans can be accessed online.

The minimum age of the applicant must be less than 18 years old, and the maximum age of applicants can’t be greater than 65 years. Furthermore, the loan is available to the non-corporate small business (NCSB) segment, which includes individuals, MSMEs, and sole proprietorships/enterprise firms in both rural and urban areas, as well as Self-Help Groups (SHGs).

Basically, under the Pradhan Mantri Mudra Yojana, or PMMY, the loans are distributed into three categories, namely: Shishu, Kishor, and Tarun. The highlights of all these three categories are as follows:

Category Name Loan Offered Interest Rate
Shishu Can avail loan Up to 50,000 1% to 12% Per annum
Kishor Can avail loan from 50,000 to 5 Lakhs 8.60% to 11.15% Per annum
Tarun Can avail loan from 5 Lakhs to 10 Lakhs 11.15% to 20% Per annum

Features of the Pradhan Mantri Mudra Yojana

The features of a PMMY (Pradhan Mantri Mudra Yojana) loan are as follows:

  • Loans with no collateral
  • Banks and NBFCs provide competitive interest rates on loans up to Rs. 10 lakhs
  • There is no processing fee
  • There are no fees for paying in advance
  • Repayment terms range from 12 to 5 years
  • Special Interest Rates for Women Entrepreneurs

5. Make in India Loan for Enterprises (SMILE) from SIDBI

SMILE which was launched in 2015 is a government programme that helps MSMEs by lending them funds to expand and grow their businesses, ensuring they are able to compete with larger companies. The interest rate offered under SMILE Timely Working Capital Assistance during the COVID times scheme is 8.25% onwards. All accounts (existing and new) with an outstanding amount of up to Rs 25 crores that meet the credit terms as of February 29th, 2020 are eligible to avail of this loan.

Features of the SIDBI Make in India Loan:

  • The scheme has been designed to facilitate innovation, enhance skill development, and facilitate investment.
  • The repayment tenure is long.
  • The interest rates are competitive.
  • Under SMILE, the loans will be offered in the form of soft loans and term loans.

6. Standup India Initiative

Governed by the Small Industries Development Bank of India (SIDBI), Stand Up India provides backing to entities based on criteria such as gender, location, and social standing. This scheme provides bank loans between Rs. 10 lakh and Rs. 1 crore for at least one SC/ST borrower and one woman borrower per bank branch.

Enterprises classified under the trading, manufacturing, or service sectors are eligible for participation with loans made available via this program. In the case of non-individual enterprises, at least 51% of the shareholding stake should be held by an SC/ST or woman entrepreneur.

Features of the Standup India Scheme

  • The features of the Standup India Scheme are as follows:
  • designed specially to meet the fund requirements of scheduled caste (SC) or scheduled tribe (ST) and women entrepreneurs for the purpose of setting up a greenfield enterprise.
  • The standup interest rate is the bank’s (Base Rate (MCLR)) + 3% + Tenor Premium.
  • A composite loan of between 10 lakhs and 1 crore can be availed under the Standup India Scheme.

Government Business Loan Eligibility Criteria

The eligibility criteria for availing business loans from the government varies from one scheme to another. However, the eligibility criteria that go with all the government schemes are listed below.

  1. Business owners from all the professions included in the business of trading, manufacturing, and services sector professionals such as architects, doctors, and CAs are eligible to apply for the government scheme loan.
  2. The applicant should be a resident of India.
  3. The age limit of the applicant must range between 25 years and 66 years.
  4. New business owners or existing business owners can also apply for the loan.
Business Loan in Mumbai Business Loan in Pune
Business Loan in Bangalore Business Loan in Delhi NCR
Business Loan in Hyderabad Business Loan in Chennai

Documents Required for Government Loan Schemes for New Businesses

The list of documents that are required for applying for a government business loan is as follows:

  1. Filled application form of the chosen scheme under which the applicant is applying for the business loan.
  2. KYC documents such as business entity proof, partnership deed, incorporation certificate, establishment certificate, and Articles of Association
  3. Business Entity Pan Card
  4. Business Owner’s Pan Card
  5. Details of projected turnover
  6. Current Year Financial Results
  7. Proof of the business entity’s address
  8. Proof of the business owner’s address
  9. Bank statements of the last 6 months
  10. Passport size of the applicant

How to Apply for a Government Business Loan in India?

Applying for a government business loan just takes a few minutes. The steps to apply for a business loan from the government are outlined below.

  • 1st Step: Visit the nearest bank that offers business loans. Alternatively, you can also use the official websites of the banks which have the facilities to offer government business loans.
  • 2nd Step: With six or more government business loan schemes, choose the scheme that is suitable for you.
  • 3rd Step: Now register on the portal. When you register for the government scheme business loan, you will have to log in with the help of your OTP, which will be sent to you by the bank officials.
  • 4th Step: Agree to the “Terms and Conditions” of the government loan scheme.
  • 5th Step: Now provide your financial credentials and other details that are requested by the bank or portal.
  • 6th Step: Submit all the necessary documents.
  • 7th Step: Process the application fee if available.

Once you have submitted your application, the bank officials will carefully scrutinise your documents and process the loan directly into your bank account.

Now that you have been provided with all the necessary information on how to avail a government business loan. Government programmes give loans to individuals, business owners, and most small-to-mid-sized businesses. There are several loan programmes from the government for every type of person. There are many loans offered by banks, private companies, and the government that can be utilised based on the nature of your business and its needs. It’s important to know exactly what is required so that you can apply for a loan that will allow you to avoid any unnecessary expenses or penalties. Before applying for government business, carefully study and research which scheme is best suited for you and start applying for the same.

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