The Indian government has launched a bunch of loan scheme to help budding entrepreneurs in the country in recent years. Here is a detailed guide to help you choose the perfect government loan scheme.
MSME
MSME are crucial to the growth of an economy (Micro, Small and Medium Enterprises). Its essential purpose is to preserve the balance between local growth and income equality. MSMEs are continually solving critical economic problems such as poverty, unemployment, income inequality, regional imbalances, etc.
Your company financing might be granted in minutes. Currently, the MSME sector is responsible for the generation of around 11.10 crore jobs in the country. This industry employs millions of people in our country and attracts local talent, contributing considerably to the GDP.
MSMEs contribute 8% of overall GDP, about 40% of total exports, and 45% of total industrial production. As a result, this industry has become known as India’s growth engine. MSMEs are found in both the organized and unorganized sectors. However, like other new businesses, an MSME organization has several obstacles in obtaining adequate financial backing for a variety of operations, such as acquiring infrastructure to support ongoing company activities or business expansion.
The government offers business loans to MSMEs to support business activities and drive expansion. Additionally, the startup business loan program provided by the Indian government makes it easier to convert bankable business ideas into profitable enterprises.
- MSME Loan in 59 minutes
The Indian government created a one-of-a-kind program for micro, small, and medium-sized enterprises (MSME) to acquire business and MSME loans in as little as 59 minutes. Applicants can apply for loans ranging from 1 lakh to 10 crores, and in-principle approvals are given in 59 minutes.
The Small Industries Development Bank of India (SIDBI) has created a fintech platform called PSB Loans in 59 Minutes in conjunction with five other public sector banks, including the State Bank of India, Bank of Baroda, Punjab National Bank, Vijaya Bank, and Indian Bank.
Type of loan:
Through this scheme, people can get business loans, personal loans, home loans, auto loans, and MUDRA loans.
Maximum limit:
Business loan: ₹ five crore
Home loan:₹10 crore
Personal loan:₹20 lakh
Auto loan:₹ one crore
MUDRA loan:₹10 lakh
How to apply:
- Visit the official website https://www.psbloansin59minutes.com/apply
- Register your account by entering your full name, email address, mobile phone number, and a one-time password (OTP).
- Answer the basic questions on the screen after registering.
- Now is the time to enter your GST Identification Number.
- You may upload your income tax returns in XML format or log in with credentials such as your PAN and date of incorporation at the following screen.
- You must now provide a PDF version of your bank account statement from the preceding six months. Contact your bank or log in to your net banking account to acquire this statement.
- Enter the director or proprietor’s details, ownership information, and the company/business address on the following page.
- You must now explain the objective of your loan, as well as any current or past loans you have obtained for your company.
- After inputting the previously specified information, you will be asked to choose a bank. It should be remembered that interest rates vary from bank to bank.
- To complete your application, pay the ₹1,000 convenience fee plus taxes.
- Within 59 minutes of making your payment, you will get an in-principle acceptance letter.
As soon as you receive the in-principle acceptance letter, you can visit the bank indicated in the letter for additional processing. Due to challenges uncovered during the inspection, the loan amount shown in the letter and the loan sanctioned by the bank may change due to challenges.
- Pradhan Mantri MUDRA Yojana (PMMY)
Micro-Units Development and Refinance Agency (MUDRA) is an abbreviation that stands for Micro-Units Development and Refinance Agency. The Pradhan Mantri Yojana was launched in 2015 to aid small businesses in expanding and prospering. Borrowers can apply for business loans ranging from Rs.50,000 to Rs.10 lakh under this scheme, divided into three categories: Sishu, Kishor, and Tarun.
Who can avail:
- RRBs (Railway Recruitment Boards)
- Institutions of Microfinance (MFIs)
- Banks, commercial
- Non-Banking Financial Corporations (NBFCs) (NBFCs)
- Small-Scale Finance Institutions
- Vendors of commercial goods
- Shopkeepers
- Agriculture industry
- Food manufacturing industry
- Handicraftsman
- Small-scale producers
- Self-employed business owners
- Shops for restoration and repair
- Companies that provide services
- Owners of trucks
Type of loan:
Shishu :Up to Rs.50,000
Kishor :Rs.50,000 to Rs.5 lakh
Tarun :Rs.5 lakh to Rs.10 lakh
How to apply
Step 1: Ensure that all essential paperwork is readily available. The vital documents you’ll need are evidence of identification, proof of address, and proof of business.
Step 2: Go to a lender who is a part of the MUDRA plan and fill out the application form.
Step 3: Submit the required paperwork.
Document needed:
- Form of Application Application form is duly completed based on the loan category
- Identity Documentation
- Photographs of Address Proof
- Certificate of Caste (If applicable)
- Additional documents: Quotation for the commodity or commodities to be purchased and utilized in the business
- Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE)
The Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE) is a trust established by the Indian government through the Ministry of Micro, Small, and Medium Enterprises (MoMSME) and the Small Industries Development Bank of India (SIDBI). Under the CGTMSE plan, both new and existing micro and small businesses, including service organizations, are eligible for a collateral-free loan with a credit ceiling of Rs. 2 crores.
CGFSI
CGTMSE will apply to fund-based and non-fund-based loan facilities made available to MSE borrowers by Member Lending Institutions (MLIs). These credit facilities may take the shape of term loans or working capital loans, with the following restrictions:
- Regional Rural Banks and several financial institutions are not permitted to make loans over Rs.50 lakh.
- Not more than Rs.200 lakh for scheduled commercial banks, NBFCs, and certain financial institutions
- Loans of up to Rs.50 lakh are available from small finance banks.
In addition, CGTMSE has created a new Hybrid Security product, via which MLIs can get collateral security for a portion of the credit facility. At the same time, the remaining unsecured component is protected by CGS-I. This unsecured portion has a ceiling of Rs.200 lakh. It should be reminded that the supplied securities will be subject to a pari-passu charge by CGTMSE.
How to apply
Submit the business plan or project report to the appropriate banks that supply CGTMSE Scheme loans and acquire bank loan sanctions from the banks that provide CGTMSE Scheme loans. A term loan and working capital facilities may be requested in a bank loan request. The loan application will be reviewed and approved following the bank’s policies.
Once the bank loan has been granted, the bank will apply to the CGTMSE organization for loan coverage under the CGTMSE plan. Once recognized by the CGTMSE organization, the loan will be subject to the CGTMSE scheme, and the borrower will be required to pay the CGTMSE guarantee and CGTMSE service charge.
- The National Small Industries Corporation (NSIC)
The National Small Industries Corporation (NSIC) is a non-profit organization that helps and promotes the growth of Micro, Small, and Medium Enterprises (MSMEs) throughout the country. NSIC works with the Ministry of Micro, Small, and Medium Enterprises (MSME) to encourage these firms.
Eligibility
- MSMEs have been in operation for at least three years and have a revenue of Rs. 5 crores or more and up to Rs. 250 crores.
- Banks seek extensive information about the company and its viability when making collateral for cash credit loans.
- Previous loan repayment history, if applicable.
- Exceptional CIBIL score
How to apply
To apply for a loan through NSIC, an applicant must first visit the NSIC official website to get the Bank Credit Facilitation Scheme application form, then go to the nearest bank branch and submit the application form along with the necessary papers.
Types of loans:
- Loan for SME
- Loan for working capital
- Temporary loan
Loan for working capital: Many loans are made available to MSMEs under the working capital loan to help them grow. These include:
- Current Account with Overdraft Protection
- Credit facility for cash
- Bills Discounting Unsecured Short-Term Business Loans
- Loans under the CGTMSE program
- Letter of Credit Guarantees
- CLCSS
The Ministry of Micro, Small, and Medium Enterprises (M/o MSME) has developed a subsidy program called the Credit Linked Capital Subsidy Scheme (CLCSS complete form) to assist Micro and Small Enterprises (MSEs) in upgrading their technology. The primary purpose of this strategy is to support the establishment and development of Small Scale Industries (SSI) in both rural and urban areas.
Documents required
- PAN card / Aadhar card / Voter ID
- Address verification
- Proof of business
- Recently taken images
- KYC documentation
Who is eligible for MSME?
Eligibility
- The scheme’s capital subsidy of 15% on qualified plants and machinery would be accessible only for projects where an eligible PLI has sanctioned term loans.
- Industries upgrading from small to medium size due to the approval of extra loans under CLCSS are eligible for support.
- The plan’s eligibility for capital subsidies is not related to any refinancing scheme for nodal agencies.
- This plan will examine new export-oriented and labor-intensive sectors/activities.
Conclusion
The small-scale business sector, commonly known as the Small and Medium Enterprises (SME) sector, accounts for around 40% of India’s total GDP (GDP). Although it faces stiff competition from privately backed enterprises, this industry is essential for employment in India. Recognizing this, the Indian government has suggested a variety of loan packages to assist in financing the small-scale business sector. SMEs can utilize these loans to fund their day-to-day operations, expand their business, purchase new equipment, and so on.
