The Micro, Small, & Medium Enterprises (MSMEs) sector in India contributes to 29% of the country’s GDP and is responsible for almost half of the nation’s exports. Additionally, India has emerged as the third-largest startup ecosystem in the world, following the US and China. To foster the growth of MSMEs and startups, the Government of India has introduced multiple loan schemes. Here are 10 significant government schemes designed to support small businesses and startups in 2024.
- Pradhan Mantri Mudra Yojana (PMMY)
Launched in 2015, the Pradhan Mantri Mudra Yojana (PMMY) provides loans up to ₹10 lakh to non-corporate and non-farm small/micro enterprises. These loans are classified as MUDRA (Micro Units Development & Refinance Agency) loans under PMMY. The scheme has three categories:
Shishu: Loans up to ₹50,000
Kishore: Loans from ₹50,001 to ₹5 lakh
Tarun: Loans from ₹5,00,001 to ₹10 lakh
The MUDRA Card, a debit card on the RuPay platform, provides a flexible working capital limit. In 2023-24, the scheme sanctioned over 6.67 crore loans. The loans can be used for business loans to vendors, traders, shopkeepers, working capital loans, equipment finance, transport vehicle loans, and loans for agri-allied activities.
- Stand Up India Scheme
The Stand-Up India Scheme, launched in 2016, facilitates bank loans between ₹10 lakh and ₹1 crore to SC/ST or women entrepreneurs in the manufacturing, services, and trading sectors. It aims to support first-time ventures in these sectors. The loan must be repaid within 7 years with a maximum moratorium period of 18 months (about 1 and a half years). The scheme encourages banks to lend to at least one SC/ST and one-woman entrepreneur annually.
- Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE)
Introduced in 2000, the CGMSE scheme offers collateral-free credit to micro and small enterprises. The scheme is implemented by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), established by the Ministry of MSMEs and SIDBI. New and existing businesses can avail themselves of collateral-free loans up to ₹10 lakh, with primary security or mortgage required for loans above ₹10 lakh up to ₹1 crore. In FY24, the scheme approved ₹2 lakh crore in guarantees.
- Small Industries Development Bank of India (SIDBI)
SIDBI, established in 1990, is the apex regulatory body for MSME finance companies in India. SIDBI offers three types of financial assistance:
Direct Finance: Includes working capital assistance, term loan assistance, foreign currency loan, support against receivables, equity support, and energy-saving schemes.
Indirect Finance: Refinance primary lending institutions (PLIs).
Microfinance: Term loans for MSMEs.
SIDBI has tie-ups with banks worldwide and provides loans up to ₹1 crore without security.
- Udyogini Scheme
Udyogini, a women-focused business loan scheme, is implemented by the Women Development Corporation for the welfare of Indian Women Entrepreneurs. It provides interest-free loans to women across various sections of society. The scheme can be used by businesses in the SSI sector, retailers, manufacturers, self-employed professionals, and traders. The loan amounts vary by lending institution, with some offering up to ₹3 lakh and others up to ₹2 crore.
- Coir Udyami Yojana (CUY)
Launched in 2014, the Coir Udyami Yojana (CUY) supports entrepreneurs in setting up coir manufacturing units. The scheme provides a mix of subsidy (40%) and loan (55%), with the entrepreneur contributing 5% of the project cost. The maximum loan amount is ₹10 lakh plus working capital, not exceeding 25% of the project cost. The scheme is available to individuals, NGOs, SHGs, registered societies, charitable trusts, and joint liability groups.
- Bank Credit Facilitation Scheme
Introduced in 2014, the Bank Credit Facilitation Scheme provides financial support to MSMEs through credit and assistance with documentation and proposal submission. The scheme helps businesses avail themselves of loans at competitive interest rates and receive non-fund-based limits like guarantees and letters of credit. The repayment period ranges from 5 to 7 years, extendable to 11 years in exceptional cases.
- Sustainable Finance Scheme
Launched by SIDBI, the Sustainable Finance Scheme funds projects promoting energy efficiency and cleaner production. Eligible projects include eco-friendly labeling, green buildings, green microfinance, and renewable energy projects. Loans ranging from ₹10 lakh to ₹1.5 crore are offered at 90% of the project cost. For loans below ₹50 lakh, the repayment period is up to 3 years and for loans above ₹50 lakh the repayment period is up to 6 years.
- Credit-Linked Capital Subsidy Scheme (CLCSS)
The Credit-Linked Capital Subsidy Scheme (CLCSS) was introduced in 2000 and is aimed at encouraging technological upgrading by small-scale enterprises with well-established facilities in rural and urban areas. These subsidies provide a capital subsidy of 15 percent on investments of up to ₹1 crore in eligible plant & machinery industries. Important sectors under this scheme include pharmaceuticals, drugs, biotech industry, food processing, cosmetics and khadi and village industries.
- National Bank for Agriculture and Rural Development (NABARD)
NABARD which stands for National Bank for Agriculture and Rural Development was established in 1982 as an apex regulatory body for RRB’s as well as cooperative banks across India. It provides long-term refinance and medium-term refinance to banks for credit to farmers, artisans etc., who innovate socially in rural areas while also focusing on cottage industries and rural projects developing these areas. The loans are provided indirectly through commercial or cooperative banks.
How to Apply for Government Loan Schemes
You can apply either online or offline when seeking MSME or startup business loans from Government of India. Common eligibility criteria:
Not more than five years old company
Total turnover not more than =₹25cr
Eligible only Limited Liability Partnerships (LLP)/Private Limited companies.
Applicants must have DIPP approval including support guarantee from Indian Patent and Trademark Office.
Common documents required are address proof, age proof identity proof bank statements proof of income other relevant documents etc.
Conclusion
Various schemes have been designed by Government of India to promote the growth and development of MSMEs /start-ups. By availing themselves of these schemes, they can get funding to expand their businesses as well as developing the country’s economy. These programs provide a great chance to achieve your business goals whether you need a short-term loan or subsidy for technology up gradation.