5 Government Loan Schemes for Small Businesses

Noteworthy Government backed small business loans which can be availed from partner banks across the country.


SME (Small and Medium Enterprises) and small businesses have been worst affected by the pandemic. To revive the sector, the government is working hard to ensure access to a number of schemes under which small business owners can avail loans with minimum collateral and paperwork. The small business sector is a 40% contributor to the Indian GDP (Gross Domestic Product). It’s important for small businesses to take full advantage of the available government schemes to help revive the economy and subsequently scale up their operations.

Mudra

The MUDRA organisation is a Bank backed by the government aimed at providing financial support for the entrepreneurial landscape of India. It comes under the purview of the Pradhan Mantri MUDRA Yojana (PMMY) scheme for small and micro enterprises in India. MUDRA is a refinancing institution that will facilitate loans up to INR 10 Lakh to small businesses via their partner institutions including Commercial Banks, RRBs (Regional Rural Banks), Small Finance Banks, MFIs (Monetary Financial Institutions) and NBFCs (Non-Banking Financial Institutions.

National Small Industries Corporation Subsidy

The National Small Industries Corporation is an enterprise by the Government of India for providing support to Indian small businesses and SMEs. Their loan scheme subsidy provides finance, market, and technology services for small businesses. Categories under the NSIC Subsidy:

The NSIC subsidy is divided into two categories namely, the Marketing Support Scheme, and the Credit Support Scheme. Under the Marketing Assistance Scheme, NSIC helps SMEs organise and participate in Domestic and International Exhibitions and Trade Fairs. They also facilitate buyer-seller meets and conduct Intensive Campaigns and Marketing Promotion Events for small businesses.

Under the Credit Support Scheme, NSIC facilitates credit from a list of partner banks. NSIC does handholding for small businesses to avail credit from these banks by assisting with the application process and doing follow ups.

Credit Link Capital

The Credit Linked Capital Subsidy Scheme provides technology upgradation assistance for Micro and Small Enterprises in India. It provides an upfront capital subsidy of 15% for upgradation of their technology. The scheme is being implemented through nodal banks and agencies including SIDBI (Small Industries Development Bank of India), NABARD (National Bank for Agriculture and Rural Development), SBI (State Bank of India), PNB (Punjab National Bank), BoB (Bank of Baroda), Canara Bank and Corporation Bank, Indian Bank, Bank of India, and TIICL (Tamil Nadu Industrial Investment Corporation Limited).

Credit Guarantee Trust Fund for Micro and Small Enterprises (CGT SME)

The Credit Guarantee Trust Fund for Micro and Small Enterprises is a government loan scheme for small businesses under the Ministry of Micro, Small and Medium Enterprises. The corpus of this trust fund is a joint effort by the Government of India and SIDBI. Under this scheme, small businesses can avail a loan up to INR 200 Lakh. Established small businesses and upcoming firms are both eligible to apply for this business loan.

Stand Up India

Stand Up India is a government run scheme exclusively for small businesses run by Scheduled Caste and Tribe members especially women. The unique aspect of this scheme is that it is also operated by Schedule Caste and Tribe members. Small businesses belonging mainly to the trading and manufacturing sectors can avail a business loan between INR 10 Lakh – 1 Cr. The loans are being facilitated by SIDBI. This scheme is aimed at empowering and fostering entrepreneurship among the marginalised SC/ST communities, especially women from these communities.

Other small business loans under government schemes

A few other notable government backed small business loans include Udyogini for rural women entrepreneurs, and the Subsidy Scheme for Technology Upgradation.

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Small businesses belonging mainly to the trading and manufacturing sectors can avail a business loan between INR 10 Lakh - 1 Cr.

What’s in it for me?

To avail loans for your small business under the schemes, you need to be ready with your GST (Goods and Services Tax) and Income Tax documentations. You will also be required to furnish your bank statements for a specific period before the date of application (at least 3-6 months prior). Also, you need to be transparent about the company ownership and KYC (Know Your Customer) details of the owners.

Most of the small business loans can be availed by directly approaching partner banks of the relevant scheme. For instance, to avail MUDRA loan, you can approach almost all branches of recognised banks to apply. Depending on the loan amount and requirements, you will be categorised under the schemes. Read up on the eligibility criteria and industry sectors on the concerned government websites and online portals before applying. Also go through the Rate of Interest, and Repayment Tenures for the respective schemes during your application process.

Anju Nambiar
Anju Nambiar
Anju has 5 years of experience covering business. She writes on startups, business life cycle and startup ecosystem. Her stints include Amazon and Adjetter Media Network.

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