Need a loan? Government schemes for MSMEs in India

Need a loan? Government schemes for MSMEs in India

Finance & Accounting

GlobalLinker Staff

GlobalLinker Staff

260 week ago — 10 min read

The Gross Domestic product (GDP) contribution by SMEs in India is around 6.11% in manufacturing GDP and 24.63% in the service sector GDP.  Twigging this enormous contribution of SMEs in fuelling the country’s economy by generating nearly 80 million jobs, and contributing towards the country’s GDP, the government has announced various SME loans for entrepreneurs in India.

Here is a list of 9 government loan schemes available for SMEs in India:

1. PSB Loans in 59 minutes

The MSME loan within 59 minutes was announced by the Prime Minister on 2 November 2018. This was a sweet welcome note for millions of MSMEs in India struggling with financial constraints. Recently the scheme was recapped in the Union Budget 2019-20 to provide an ease of access to loans through a dedicated online portal.

Under this scheme, both new and existing businesses can avail a loan of up to INR 5 crore in 59 minutes from Public Sector Banks. This is a collateral free loan and the interest rate depends on the rate of interest in the market at that time.

How to apply:  The loan can be applied for here. You need the following documents to apply for the loan:

  • GST number
  • Income tax returns in XML format
  • Bank statements for the last six months
  • Details of the director/owners (basic, personal, educational and ownership details)

The loan approval/disapproval is announced within 59 minutes but the entire process till you get the loan takes somewhere around 8-12 days.

2. Mudra loans

The Pradhan Mantri Mudra Yojna was launched in the year 2015 by Micro Units Development and Refinance Agency Ltd (MUDRA), this business loan in India can be availed by all non-corporate small business segment (NCSB) comprising partnership or proprietorship firms in rural and urban areas, for example, shopkeepers, fruit vendors, truck owners/operators, repair shops, artisans, service sector units etc.

A loan requirement of up to INR 10 lakhs can be fulfilled through this scheme. Under the aegis of PMMY, various interventions have been created:

  • Shishu- Covering loans of up to INR 50,000
  • Kishor- Covering loans in between INR 50,000 – 5 lakhs
  • Tarun- Covering loans above INR 5 lakhs and up to 10 lakhs

How to apply:
You can approach any financial institution to apply for this SME loan. The necessary documents required to avail a MUDRA loan are identity proof (Aadhaar, Voter ID, PAN, Driving License, etc.), address proof (electricity bill, telephone bill, gas bill, water bill, etc.), proof of business (business registration certificate, etc.).

Generally loans up to INR 10 lakhs are collateral free loans.

3. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

The CGTMSE  was launched in the year 2000 to provide monetary support for micro and small enterprises. This is a collateral free loan (up to INR 10 lakhs) and both new and existing businesses can avail it. However for availing a loan of INR 10 lakhs up to INR 1 crore, a primary security or mortgage of land and buildings are considered as collaterals.

Under the scheme, the guarantee cover provided is up to 75% of the credit facility up to INR 150 lakh. Around 85% of credit facility for loans up to INR 5 lakhs is provided to micro enterprises and 80% of credit facility for loans of up to INR 5 lakhs is for women entrepreneurs and North East Region including Sikkim. For MSME Retail trade, the guarantee cover is 50% of the amount in default subject to a maximum of INR 50 Lakh. The tenure of repaying the loan is 5 years from the point loan is granted.

How to apply: All major public and private sector banks provide the CGTMSE loan. You need to choose and apply. You also are required to submit your business model along with the application for loan approval.

Also read: 6 limiting financial beliefs that prevent SMEs from achieving business success

4. Credit Link Capital Subsidy Scheme for Technology Upgradation

The Credit Link Capital Subsidy Scheme for Technology Upgradation scheme was launched in October 2000. This scheme allows small businesses to upgrade their technology by providing 15% upfront capital subsidy up to a maximum capital of INR 15 lakhs to MSME units. Credit from INR 40 lakhs up to INR 1 crore can be availed. The rate of interest has been increased to 15% from the initial 12 % since 29 September 2005.

Existing small-scale industry (SSI) startups (including khadi, choir and village industrial units) registered with the State Directorate of Industries are eligible for this scheme. Also, new SSI units registered with the State Directorate of Industries duly approved by the Governing and Technology Approval Board (GTAB)/Technical Sub­Committee (TSC), are eligible.

How to apply: You can download the form issued by government of India and fill in the details accordingly.

5. Sustainable Finance Scheme

Offered by the Small Industries Development Bank of India (SIDBI), the aim of this scheme is to assist the entire value chain of energy efficiency (EE)/cleaner production (CP) and sustainable development projects. All new and existing MSME units will be eligible to avail this loan.

Any renewable energy projects such as solar power plants, wind energy generators, mini hydel power projects, biomass gasifier power plants etc can apply for this scheme. The rate of interest will depend on the credit score of MSMEs.

How to apply: You can send an online enquiry on the SIDBI portal.

6. Standup India

This scheme was launched in April 2006 by SIDBI. All small and medium scale enterprises in trading, manufacturing or services industry is eligible to apply for this loan. The main aim of this scheme is to sanction loans between INR 10 lakhs to INR 1 crore to atleast one scheduled cast (SC) or scheduled tribe (ST) and alteast one woman borrower per branch for setting up a greenfield enterprise. ‘Greenfield’ in this context signifies a first time venture of the entrepreneur in the manufacturing, services or the trading sector.

In-case of a non-individual enterprise, 51% of the shareholding and controlling should be held by SC/ST and/or woman entrepreneur. The loan offers to cover 75% of the project inclusive of the term loan and working capital. However, the stipulation of the loan being expected to cover 75% of the project cost would not apply if the borrower’s contribution along with convergence support from any other schemes exceeds 25% of the project cost. The rate of interest would be the lowest applicable rate of the bank for a particular category.

How to apply: You simply need to fill out the registration form or else you can apply directly at a bank branch or through your Lead District Manager.

Also read: Why lenders hesitate to extend loans to SMEs?

7. SIDBI Make in India Soft Loan Fund for MSMEs (SMILE)

This scheme was introduced by SIDBI in august 2015 with an aim to provide soft loans in the nature of quasi-equity and term loan on relatively soft terms to MSMEs to meet the desired debt-equity ratio in order to establish an MSME.

Mostly new enterprises in the manufacturing and the services sector are eligible to apply for this loan. A minimum loan of INR 10 lakhs for equipment finance and INR 20 lakhs for the general category covering 10% of the project cost can be sanctioned. The repayment tenure is up to seven years.

How to apply:  You can download the application form here.

8. Coir Udyami Yojana

The Coir Udyami Yyojna is aimed at supporting coir units in India. All coir processing MSME startups registered with the coir board under the Coir Industry Rules 2008 are eligible for this loan scheme. All Individuals, companies, self-help groups, non-governmental organisations, institutions registered under Societies Registration Act 1860, Production Co-operative Societies, Joint Liability Groups and Charitable Trust are applicable for this loan.

A loan to support a project cost of up to INR 10 lakhs plus one cycle of working capital which shouldn’t exceed 25% of the project cost is sanctioned by banks. The rate of interest charged by banks is at par with base rates. Repayment tenure is seven years from the time the loan is sanctioned.

How to apply: You can apply for the loan here.

9. 4E (End to End Energy Efficiency)

Launched by SIDBI in September 2016, this scheme was aimed at implementing energy efficiency measures. Through this scheme, MSMEs in the manufacturing and services sector who have been running their business for the last three years can apply for this loan.

MSMEs can avail all the services of a technical consultant at a very reasonable price with assurance on quality. The business loans for startups under this scheme meet part costs of capital expenditure, including the purchase of equipment/machinery, installation, civil works, commissioning, etc. Any other related expenditure required by the unit provided it is not more than 50% of capital expenditure.

The MSME startup has to pay only INR 30,000 and applicable taxes and the balance fee will be paid by SIDBI to auditors. Up to 90% of the project cost with a minimum loan amount of INR 10 Lakh and a maximum loan amount not exceeding INR 150 Lakh per eligible borrower can be granted under this scheme. Eligible loan amount should not exceed one-fifth of the total turnover of the applicant unit.

How to apply: Click here to apply.

Also read: 6 tips to improve the financial health of your business

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