Top 6 GOVERNMENT BUSINESS LOAN SCHEMES 2024

Recognising the essential contribution of MSMEs in driving the nation’s economic growth and generating employment, the Government of India has introduced several government business loan schemes. These schemes facilitate collateral-free business loans, subsidised business loan interest rates, credit guarantees and flexible repayment terms. This curbs the challenges faced by MSME businesses with traditional lending institutions which tend to reject loan applications due to inadequate financial history or lack of collateral.

1. Pradhan Mantri MUDRA Yojana (PMMY)

Launched in 2015, the Pradhan Mantri MUDRA Yojana is a government initiative aimed at providing financial support to small and micro enterprises that are non-corporate and non-farm-based. It offers collateral-free business loans to promote entrepreneurship and business growth, especially among underserved segments of society.

Key Features:

• Loan Categories: PMMY provides loans under three categories:
  • Shishu: Loans up to ₹50,000
  • Kishore: Loans from ₹50,000 to ₹5 lakh
  • Tarun: Loans from ₹5 lakh to ₹10 lakh
• Loan Amount: Up to ₹10 lakh
• Interest Rates: Competitive rates (8-12% per annum)
• Lenders: Available from banks, NBFCs, MFIs and other financial institutions.

2. Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE)

The Credit Guarantee Fund Scheme for Micro and Small Enterprises facilitates unsecured business loans of up to ₹2 crore for micro and small enterprises (MSEs).

Key Features:

• Loan Amount: Up to ₹2 crore
• Lender Security: Guarantee coverage of up to 85% for lenders in case of default
• Loan Type and Tenure: Applicable to term loans and working capital facilities for up to 5 years
• Lenders: Available through scheduled banks, Regional Rural Banks, NSIC, NEDFi and SIDBI
• Charges: One-time guarantee fee (1-1.5%) and annual service fee (0.50-0.75%)

3. Prime Minister’s Employment Generation Programme (PMEGP)

The Prime Minister’s Employment Generation Programme is a credit-linked, subsidised government loan for businesses, designed to promote employment by facilitating the creation of new micro-enterprises. It was implemented by the Khadi and Village Industries Commission (KVIC) at the national level. With a streamlined online application process, it offers financial assistance and attractive loan terms at competitive business loan interest rates to support entrepreneurship.

Key Features:

• Subsidy: Margin of 15-35% for loans
• Loan Amount: Up to ₹25 lakh for manufacturing and ₹10 lakh for services
• Eligible Beneficiaries: Individuals above 18 years, SHGs, societies, and trusts
• Loan Tenure: Up to 7 years
• Lenders: SIDBI, NABARD and Dalit Indian Chamber of Commerce and Industry (DICCI)

4. Stand-Up India Scheme

The Stand-Up India Scheme encourages entrepreneurship among women and SC / ST communities by providing financial support for establishing greenfield enterprises. It ensures business loans are accessible to underrepresented groups.

Key Features:

• Loan Amount: ₹10 lakh to ₹1 crore
• Mandate: Each bank branch must sanction one loan to an SC / ST borrower and one business loan for women
• Loans Tenure: 7 years
• Moratorium Period: Up to 18 months
• Lenders: Assistance through agencies like SIDBI, NABARD and DICCI

5. Credit Linked Capital Subsidy Scheme (CLCSS) for Technology Upgradation

The Credit Linked Capital Subsidy Scheme (CLCSS) supports the modernisation of small-scale industries by providing capital subsidies for technology upgrades in identified sectors. This government business loan scheme covers 51 sub-sectors across a wide range of industries providing MSME loans. The scheme is implemented by 11 nodal banks and agencies, including SIDBI, NABARD, SBI and PNB, making it a widely accessible loan option for businesses looking to upgrade their operations.

Key Features:

• Loan Amount: Up to ₹1 crore
• Subsidy Rate: 15% upfront capital subsidy on institutional finance
• Lenders: All Scheduled Commercial Banks, Small Finance Banks (SFBs), and some Regional Rural Banks (RRBs)

6. Micro and Small Enterprises Cluster Development Programme (MSE-CDP)

The Micro and Small Enterprises Cluster Development Programme promotes the growth and sustainability of MSEs by tackling common challenges like technology improvement, skill development and market access. This loan scheme provides funding support for project development, infrastructure upgradation and the establishment of common facility centres. The loan amount for MSE-CDP varies depending on the project and the project cost.

Additional Government Loan Options for Businesses

1. NABARD Loan Scheme

The National Bank for Agriculture and Rural Development (NABARD) Loan Scheme supports rural development and the growth of the agricultural sector by providing financial assistance of up to ₹2 crore for various farming and non-farming activities. The scheme is focused on promoting rural infrastructure and agricultural businesses.

Key Features:

• Loans available for agriculture, irrigation rural infrastructure and small-scale industries.
• Funding for projects like dairy, poultry, horticulture and rural enterprises.
• Implemented through Regional Rural Banks (RRBs), Cooperative Banks and other financial institutions.

2. Udyogini Scheme

The Udyogini Scheme promotes women’s entrepreneurship by offering financial support and training for starting micro-enterprises.

Key Features:

• Loans of up to ₹3 lakh are available for women in sectors like retail, agriculture and small-scale industries.
• Special focus on women from economically weaker sections.
• Interest subsidy is provided for certain categories, with no collateral required for smaller loans.
• Training and skill development provided alongside financial support.

Conclusion

Government loan schemes play a vital role in supporting the growth and development of the MSME sector in India. With a wide range of loan options for businesses, these schemes cater to various requirements and segments, providing access to affordable credit without collateral.

If you are an MSME owner seeking quick and affordable financing, consider exploring an online business loan from FlexiLoans, a trusted partner that offers collateral-free loans with flexible repayment options and limited credit history requirements.

FAQs

1. What is a collateral-free business loan?
   A collateral-free business loan is a type of loan that does not require any security or collateral to be pledged by the borrower.
2. Can I get a business loan for women under government schemes?
   Yes, several government schemes, such as Mudra Loan for Women, Udyogini Scheme, and more, specifically cater to women entrepreneurs, offering loans at attractive interest rates and with extended repayment periods.
3. How can I apply for an MSME loan online?
   To apply for an MSME loan online, you can visit the official portal of the respective government scheme or apply through digital lending platforms like FlexiLoans, which offer a simple and convenient online application process.
4. What are the benefits of a line of credit for businesses?
   A line of credit is a flexible loan option that allows MSME businesses to withdraw funds as needed, up to a pre-approved limit. This can help MSMEs manage their working capital requirements, cover unexpected expenses and take advantage of business opportunities as they arise.