Get the Tata Capital App to apply for Loans & manage your account. Download Now


Equipment Finance

Avail Digital Equipment Loans
up to Rs. 1 Crore

  • Attractive ROIs
  • Customizable Loan tenure

Equipment Leasing

Avail Leasing solutions
for all asset classes

  • Up to 100% financing
  • No additional collateral required

New Commercial Vehicle Financing

  • First time user
  • Retail and strategic Clients

Used Commercial Vehicle finance

  • Repurchase
  • Refinance
  • Top up
  • Balance Transfer

Tata Capital > Blog > Loan for Business > Government Loan Schemes for Small Business in India

Loan for Business

Government Loan Schemes for Small Business in India

Government Loan Schemes for Small Business in India

India is a country with tremendous business opportunities for MSMEs (Micro, Small, and Medium Enterprises). The industry is witnessing an upward trend with a continuous increase in the number of MSMEs by a CAGR of 18.5% from 2019 to 2020. Over the years, the sector has significantly contributed to India's Gross Domestic Product (GDP), all thanks to the financial support provided by the government business loan schemes.

For perspective, in fiscal 2021, loans disbursed to MSMEs were Rs. 9.5 trillion, which was 40% more compared to Rs. 6.8 trillion in fiscal 2020. The government's support in the form of subsidy loans for small-scale industries continues to support and empower aspiring entrepreneurs and promote the growth of small businesses.

Are you a small business looking for financial assistance? This blog will walk you through some top government loan schemes for new businessesthat offer adequate financial support to start and sustain businesses. We will see how these government business loan schemescater to diverse needs, providing conducive conditions for business growth and success.

#1. Prime Minister's Employment Generation Programme (PMEGP)

The Prime Minister's Employment Generation Programme (PMEGP) is one of the top government loan schemes for small businesses that aims to promote self-employment and entrepreneurship among Indian citizens. PMEGP is implemented by the Khadi and Village Industries Commission (KVIC), State KVIC Directorates, and District Industries Centres (DICs).

This government loan scheme provides financial assistance to individuals and groups for establishing new micro-enterprises and small businesses. PMEGP offers credit and subsidy components, making it an excellent option for those looking for financial support to kickstart their entrepreneurial journey. One main eligibility criterion for this scheme is that the maximum cost of the project in the manufacturing sector should be Rs. 25 lakhs, and in the service sector, it is Rs. 10 lakhs.

#2. Pradhan Mantri Mudra Yojana (PMMY)

The Pradhan Mantri Mudra Yojana (PMMY) is a popular small-scale industry loan by the government for non-corporate, non-farm small/micro enterprises. PMMY has three categories of loans based on the stage of growth and funding requirements of the beneficiary:

  • Shishu: For loans up to Rs. 50,000
  • Kishor: For loans from Rs. 50,001 to Rs. 5,00,000
  • Tarun: For loans from Rs. 5,00,001 to Rs. 10,00,000

What makes this small-scale industry loan scheme highly beneficial is its collateral-free loan offering, making it easier for small business owners to get loans without providing any tangible assets as security. In the financial year 2022-23, the total number of PMMY loans sanctioned was more than six crores, making it a popular choice among entrepreneurs across various sectors.

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

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) is a government business loan scheme that facilitates credit flow to small businesses. One salient feature of this scheme is that the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) provides credit guarantee cover to eligible lending institutions. This encourages them to provide financial support to small enterprises without requiring any collateral.

By giving a credit guarantee, the government shares the risk with the lending institutions, making it easier for small-scale industries to secure loans. Existing and new enterprises are eligible under this scheme and can benefit from collateral-free credit.

#4. Stand-Up India Scheme

The Stand-Up India Scheme is a unique government business loan scheme that promotes entrepreneurship exclusively among women and individuals from Scheduled Castes (SC) and Scheduled Tribes (ST) communities. This special loan scheme provides financial assistance for setting up greenfield enterprises in the manufacturing, services, agri-allied activities, or trading sectors.

Under this scheme, eligible entrepreneurs can get composite loans (including term loans and working capital) ranging from Rs. 10 lakhs to Rs. 1 crore. By encouraging diversity and inclusivity in the business landscape, the Stand-Up India Scheme is playing a vital role in driving social and economic development.

#5. National Small Industries Corporation (NSIC) Subsidy

The National Small Industries Corporation (NSIC) offers different types of subsidy schemes to facilitate the growth and development of small businesses in India. These schemes offer raw material assistance, marketing assistance, performance & credit rating schemes, and more. The primary goal of NSIC subsidies is to alleviate the financial burden and provide subsidy loan for small scale industries.

Subsidy loans under this scheme make it easier for small businesses to compete and scale their operations in the market. Small business owners can utilise these subsidies to get raw materials at subsidised rates, improve their marketing efforts, and strengthen their credit ratings to maximise their overall business prospects.

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

With fast technological advancements, small businesses must embrace the latest technologies to remain competitive. The Credit Link Capital Subsidy Scheme for Technology Upgradation (CLCSS) is a unique government business loan scheme designed to help small businesses adopt new technologies to improve their productivity and efficiency.

Under this scheme of subsidy loans for small-scale industries, eligible MSMEs can avail of a capital subsidy for upgrading technology in specific sectors. By eliminating the financial gap for technology upgradation, this loan scheme empowers small businesses to stay ahead in a competitive market.

Final words

Government business loan schemes for small and medium businesses in India have helped them to grow and become a part of economic development. Small scale industries loan schemes like PMEGP, Mudra Yojana, Stand-Up India Scheme, and various subsidies offered by NSIC have opened up new doors of opportunities for aspiring entrepreneurs to realise their dreams.

Although these government loan schemes for small businesses are helping them grow and grab numerous opportunities, the process of availing these loans can be tedious due to lengthy paperwork and a slow approval system. To get quicker loans under small-scale industry loan schemes,turn to Tata Capital. With faster approval and disbursal of loans, you can get your funds in no time.

To learn about such loan schemes for small businesses in India, visit the Tata Capital website today.

Leave a Reply

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