Skip to content
Home » Discover the 10 Best MSME and Startup Business Loans Offered by the Government of India

Discover the 10 Best MSME and Startup Business Loans Offered by the Government of India

Did you know that small businesses in India contribute to almost one-third of the country’s Gross Domestic Product (GDP)? They also make up almost half of India’s exports. And startups are popping up all over the country and are a big part of making India a bigger player on the global stage. In fact, India is now the third-largest startup ecosystem in the world after the US and China!

To help these businesses grow even more, the Government of India has come up with multiple loan schemes for both MSMEs and startups. In this blog post, we’ll cover 10 of these loans that you should know about if you’re a small business owner or thinking of starting a business. With these loans, you can get the funding you need to take your business to the next level.

NABARD (National Bank for Agriculture and Rural Development)

NABARD stands for National Bank for Agriculture and Rural Development and was formed in 1982. NABARD is a big player when it comes to regulating regional rural banks and apex cooperative banks in India. But it’s not just about regulations – NABARD is also all about supporting social innovations and enterprises in rural areas.

One of the ways NABARD does this is by providing Long Term and Medium Term Refinance to banks, which then offer loans to farmers and rural artisans. NABARD also helps to develop cottage industries and rural projects, and provides funds for long-term irrigation and rural infrastructure development.

If you’re interested in getting a NABARD loan, it’s important to note that you can’t apply for one directly. Instead, you need to apply for a business loan with a commercial or cooperative bank to get a subsidy under the NABARD scheme. So, if you’re a farmer or rural artisan looking for funding, NABARD might be a good option to explore through your bank.

Credit-Linked Capital Subsidy Scheme (CLCSS)

The Credit Linked Capital Subsidy Scheme? It’s a financial scheme launched in 2000 to help small-scale industries in rural and urban areas of India grow and develop their technology. The scheme provides a 15% capital subsidy for an investment of up to Rs 1 crore in eligible plants and machinery. This means that if you invest in machinery or technology for your business, you can receive a subsidy of up to 15% of the cost, which can help you save money and grow your business.

Some of the major sectors under this scheme include drugs and pharmaceuticals, biotech industry, food processing, cosmetics, and khadi and village industries. To apply for this scheme, you’ll need some important documents, such as your Aadhar card, Voter ID, PAN card, address proof, business proof, recent photographs, and KYC documents.

In the fiscal year 2021-22, around 1800 businesses benefited from this scheme and received a net total of Rs 106.63 crores. This scheme can be especially helpful for manufacturing enterprises, fabrication units, and other small businesses that use machines and equipment to produce their products. If you’re looking to invest in machinery or technology for your business, the Credit Linked Capital Subsidy Scheme can be a great opportunity to get a subsidy and grow your business.

Bank Credit Facilitation Scheme

The Bank Credit Facilitation Scheme was started in 2014 to provide financial support to micro, small, and medium enterprises. This scheme helps businesses apply for loans easily and get assistance with documentation and filing proposals to financial institutions. It also provides non-fund-based limits such as guarantees and letters of credit.

This scheme can be beneficial for small enterprises that need a quick, short-term loan to expand and improve their operations. The amount of the loan that can be availed varies depending on the size of the startup or MSME. The repayment time for the loan varies from 5 to 7 years, and in exceptional cases, it can be 11 years.

Any registered business can apply for this scheme as long as their enterprise ID is recognized by the Government. To apply for loans under the Bank Credit Facilitation Scheme, businesses can approach the office of the NSIC branch and submit their application at any bank where they have an account. The bank must have a tie-up agreement with the NSIC, or the business can apply at any bank registered under this scheme.

Sustainable Finance Scheme

The Sustainable Finance Scheme is a program started by SIDBI to provide money to people who want to make projects that help save energy and make things cleaner. Some examples of these kinds of projects include labelling things as eco-friendly, building “green” buildings, and using renewable energy like solar power or wind power.

If you are an entrepreneur who wants to start a business that helps the environment, you can apply for this program. Depending on your project, you can get a loan for up to 90% of the total cost, with a minimum of 10 lakh rupees and a maximum of 150 lakh rupees. The time you have to pay back the loan is between 3 to 6 years.

To apply, you need to have a Detailed Energy Audit done on your project by a certified Energy Auditor. You also need to have a Detailed Project Report that has been approved by the EEC at SIDBI.

Coir Udyami Yojana

Coir Udyami Yojana (CUY) is a program that started in 2014 to help people in India start businesses that make coir products. Coir is a natural fiber made from coconut husks, and it can be used to make things like mats, carpets, and ropes.

The program is a mix of a subsidy and a loan. The entrepreneur has to contribute 5% of the project cost, and the rest is divided into a 40% subsidy and a 55% loan. The maximum amount that can be borrowed is Rs 10,00,000 plus working capital, which is limited to 25% of the project cost.

CUY grants loans to individuals, NGOs, self-help groups, registered societies, charitable trusts, and joint liability groups. However, if the project has already received a subsidy from any other government scheme, it is not eligible for this program. Also, working capital is not included in the loan or subsidy.

To be eligible for CUY, you will need to provide various documents like a business plan, identification proof, property documents, and proof of coir industry experience. The loan is covered under the CGTMSE scheme, which is a government program that helps small businesses get loans.

If you want to start a coir manufacturing business, CUY can be a good option to get funding and support from the government.

Udyogini

Udyogini is a special loan scheme aimed at helping women entrepreneurs in India. The scheme is implemented by the Women Development Corporation and provides interest-free loans to women from all backgrounds, without discrimination. This scheme is available through various banks and NBFCs such as Karnataka State Women’s Development Corporation, Punjab and Sind Bank, and Saraswat Bank.

Women entrepreneurs from various sectors such as small-scale industries, retailers, manufacturers, self-employed professionals, traders, etc., are eligible to apply for this loan. The eligibility criteria for this scheme is simple – the applicant must be a woman entrepreneur, must not have defaulted on any past loan, and must have a good credit score and repayment capability.

To apply for the loan, women entrepreneurs need to submit a few documents such as a duly filled application form, Aadhaar Card, Birth Certificate, Below Poverty Line (BPL) card & Ration Card, address and income proofs, caste certificate (if applicable), copy of bank passbook, and any other documents required by the bank/NBFC.

It’s important to note that each lending institution may have different requirements and rules for availing business loans.For example, the maximum loan amount under the Udyogini scheme from Bajaj Finserv is Rs 3,00,000, while that of Saraswat Bank is up to Rs 200 lakhs.

Small Industries Development Bank of India (SIDBI)

Small Industries Development Bank of India (SIDBI) is all about. It was created in 1990, and it is the top regulatory body in India for managing and controlling finance companies that support small, medium, and micro-enterprises.

SIDBI’s primary aim is to provide refinance facilities to banks and financial institutions, as well as offer term lending and working capital finance to industries. They are also the primary financial institution in the MSME sector, and they focus on promoting and developing rural enterprise and entrepreneurship development.

SIDBI provides financial assistance to MSMEs in various ranges, and they can help entrepreneurs avail loans up to INR 1 Crore without providing any security. They offer direct finance such as working capital assistance, term loan assistance, and foreign currency loans, while their indirect finance is through refinance to Primary Lending Institutions (PLIs) that include banks, state-level financial institutions, and others. Additionally, they offer microfinance loans in terms of term loans for MSMEs.

SIDBI has several schemes for MSMEs and start-up businesses, and each has different eligibility criteria. Therefore, it’s important to check the criteria for each scheme before applying.

What is the eligibility criteria for Startup Business Loan?

Common Eligibility Criteria for Startup Business Loans in India

If you’re a startup or a small business in India looking for a loan, there are a few things you need to know. Firstly, every lender has their own specific requirements, but there are also some common criteria that you need to fulfill. These include:

  • Business Age: To be eligible for a startup business loan, your existing enterprise should not be older than 5 years.
  • Business Turnover: Your total business turnover must not exceed Rs 25 crores to qualify for the loan.
  • Business Structure: Only Limited Liability Partnerships or Private Limited companies are eligible to apply for these loans.
  • DIPP Approval: Approval from the Department of Industrial Policy and Promotion (DIPP) is necessary to apply for the loan.
  • Patent and Trademark Guarantee: Finally, you must have a patron guarantee from the Indian Patent and Trademark Office to qualify for government startup loans.

Make sure you meet these common eligibility criteria if you’re thinking of applying for a business loan from the government in India.

How can I register for government loan schemes in India?

If you want to apply for a business loan provided by the Government of India, the process is similar to applying for other loans. There are two ways to do it:

Online Application:

You can visit the lender’s website and fill out the online application form. You will need to provide all the necessary documents required by the lender. You can either upload these documents online or submit them offline, depending on the lender’s rules.

Offline Application:

You can visit the lender’s physical branch and fill out their application form. You will also need to submit the required documents at the branch.

In both cases, you will need to provide all the necessary documents, such as your ID proof, address proof, business plan, bank statements, and any other documents required by the lender. Once you submit your application and documents, the lender will review your application and determine your eligibility for the loan scheme.

Factors Affecting Eligibility for a Government Startup Loan

If you’re a startup looking to apply for a business loan from the government, it’s important to know that financial institutions have some discretion in approving loans. There are certain factors that can affect your eligibility for the loan, and we’ve summarised the top five below:

Type of Business: The type of business you have can be a crucial factor in getting a loan. Some businesses are riskier than others, which can make banks hesitant to lend to them.

Profitability: Your business’s profitability can directly impact how much loan you can get. Many financial institutions have a minimum turnover eligibility for sanctioning loans. The more profitable your business, the higher your chances of getting a loan.

Credit History: Banks and other financial institutions will only give loans if they are sure the entrepreneur can repay them. This is usually assessed through the CIBIL score. A higher CIBIL score can increase your chances of getting a loan.

Business Plan: A solid business plan is important in securing a loan. A properly written business plan that outlines how the loan will be used can improve your chances of approval.

Documents: Submitting all the required documents to the lending institution is essential in successfully availing a business loan. Ensure that you have all the necessary documents before approaching the institution for the loan.

What factors affect a startup’s eligibility for a government loan scheme?

things to keep in mind.

First, the type of business you have can play a role in your eligibility for a loan. Some businesses are considered riskier than others, which can make banks hesitant to lend to them.

Secondly, your business’s profitability is an important factor in determining how much loan you can get. Financial institutions usually have a minimum turnover eligibility for sanctioning loans, so the more profitable your business is, the higher your chances of getting a loan.

Thirdly, your credit history is critical to getting a loan. Banks and other financial institutions will only lend to entrepreneurs who they believe can repay the loan. They usually assess this through the CIBIL score. A higher CIBIL score can increase your chances of getting a loan.

Fourthly, having a solid business plan is essential in securing a loan. A well-written business plan that outlines how the loan will be used can improve your chances of approval.

Lastly, submitting all the required documents to the lending institution is vital in successfully availing a business loan. Make sure you have all the necessary documents before approaching the institution for the loan.

Overall, these are the top five factors that can affect your eligibility for a government startup loan. By keeping these in mind and preparing accordingly, you can increase your chances of securing a loan to help your startup grow and succeed.

What documents are required for MSME and Startup Business Loan?If you’re interested in obtaining a startup business loan from the Government of India, there are some essential documents you’ll need to provide.

Two passport-size photographs: This is a standard requirement for most types of official documentation. The photographs should be recent and clearly show the applicant’s face.

  • Proof of identity: This document is required to verify the applicant’s identity. The acceptable forms of identification include PAN Card, Passport, Aadhaar Card, Voter’s ID, or Driving License.
  • Address proof: This document is required to verify the applicant’s address. The acceptable forms of address proof include Passport, Driving License, Aadhaar Card, Postpaid Phone Bill, or Voter’s ID.
  • Age proof: This document is required to verify the applicant’s age. The acceptable forms of age proof include Passport or PAN Card.
  • Bank statements from the last six months: This document is required to verify the applicant’s financial standing. The bank statements should show the applicant’s account transactions and balance for the last six months.
  • Income Proof: This document is required to verify the applicant’s income. The acceptable forms of proof of income include Income Tax Returns or Salary Slips.
  • Signature proof: This document is required to verify the applicant’s signature. The acceptable forms of signature proof include bank-verified signature, PAN Card, or Passport.
  • IFSC code proof: This document is required to verify the applicant’s bank account details. The acceptable forms of IFSC code proof include a canceled or scanned cheque or a copy of the passbook’s front page of the same bank account.

Leave a Reply

Your email address will not be published. Required fields are marked *