Government Loan Schemes for Small Business Funding in India

Securing the right funding for a startup is crucial but can be challenging. Small businesses must meet specific eligibility criteria, provide the right documentation, and go through various processes to obtain the necessary funds.

To address these challenges, the Government of India has developed various schemes to provide small businesses with funding across different sectors, including technology, manufacturing, agriculture, and healthcare. These initiatives are designed not only to help entrepreneurs achieve their goals but also to strengthen the overall economy.

Each scheme has specific eligibility criteria and an application process that must be followed. This blog will walk you through the available government schemes, highlight their benefits, and suggest which sectors they best serve.

Let’s get started!

Small Business Loans in India

Small business funding in India encompasses a variety of financing options designed to support micro, small, and medium enterprises (MSMEs) in their operations, growth, and expansion. 

There are several fintech platforms, such as Recur Club, that provide financial assistance to small businesses, helping them secure the necessary capital to launch, expand, or capitalize on new opportunities.

Recognizing the critical role that these businesses play in the economy, the Indian government has launched several loan schemes and initiatives aimed at making funding more accessible to them.

We have discussed various Government schemes for small business funding in the section below.

List of Government Schemes for Startups

The Indian government has launched various schemes to support the country's startup ecosystem. These initiatives provide financial, infrastructural, and regulatory assistance to help entrepreneurs turn their ideas into successful businesses.

Startups drive economic growth, create jobs, and solve societal challenges. Government schemes like the MSME Loan Scheme in 59 Minutes, SIDBI Loan, and Pradhan Mantri MUDRA Yojana offer comprehensive support for startups at different stages.

We have discussed each of them in detail below.

MSME Loan Scheme in 59 Minutes

The MSME Loan Scheme in 59 Minutes is an initiative by the Government of India aimed at providing quick and efficient access to financing for micro, small, and medium enterprises (MSMEs). 

This scheme addresses the common challenges faced by small businesses in securing timely credit, which is essential for their growth and operational needs. Under this scheme, MSMEs can apply for collateral-free loans ranging from ₹10 lakh to ₹5 crore. 

Some key features of the MSME Loan Scheme in 59 Minutes.

• Loan Amount: ₹10 lakh to ₹5 crore.
• Collateral: Collateral-free loans.
• Uses: Invest in equipment, expand operations, manage working capital.
• Approval Time: Loan offers within 59 minutes of application submission.
• Interest Rates: Competitive rates start around 8% per annum, varying based on creditworthiness, business performance, and market conditions.

Did you know? Recur Swift provides collateral-free loans of up to ₹10 lakh that can be disbursed rapidly. Apply now and get the funding you need to scale your business.

Next up is the Pradhan Mantri MUDRA Yojana, an incredible choice for businesses of all kinds seeking to boost their growth. 

‍

Pradhan Mantri MUDRA Yojana (PMMY)

The Pradhan Mantri MUDRA Yojana (PMMY), launched by the Government of India on April 8, 2015, aims to provide financial support to micro and small enterprises in the non-farm sector. The scheme focuses on "funding the unfunded" by offering small business funding up to ₹10 lakhs for income-generating activities such as manufacturing, trading, and services.

Administered through the Micro Units Development and Refinance Agency (MUDRA), PMMY enables borrowers to approach various financial institutions, including public and private sector banks, microfinance institutions (MFIs), and non-banking financial companies (NBFCs), to secure the necessary funding.

PMMY is further divided into three types— Shishu MUDRA Loan, Kishor MUDRA Loan, and Tarun MUDRA Loan. 

Shishu MUDRA Loan

The Shishu MUDRA Loan is for new businesses and startups needing up to ₹50,000. It helps entrepreneurs cover initial expenses and establish their operations, offering vital financial support to turn their ideas into reality.

Kishor MUDRA Loan

The Kishor MUDRA Loan provides funding between ₹50,000 and ₹5 lakhs for established businesses. It's ideal for micro and small enterprises looking to expand operations, purchase equipment, or enhance services.

Tarun MUDRA Loan

The Tarun MUDRA Loan is for more established businesses needing larger financing, from ₹5 lakhs to ₹10 lakhs. It's aimed at businesses lookinhttps://krestonpedabo.com/working-without-a-business-plan-odds-of-success/g to invest in significant growth initiatives like expanding product lines, entering new markets, or upgrading technology.

After understanding the Pradhan Mantri MUDRA Yojana, let’s jump to the next scheme, the SIDBI Loan. These loans provide your business the financial boost it needs to reach new heights.

‍

SIDBI Loan

The Small Industries Development Bank of India (SIDBI), established in 1990, promotes and supports the growth of Micro, Small, and Medium Enterprises (MSMEs) in India. As a principal financial institution, SIDBI provides credit and developmental support, enhancing the competitiveness and sustainability of small businesses.

SIDBI offers various financial aid options, including direct financing through term loans, working capital loans, and equipment financing. It also provides indirect financing through refinancing arrangements with banks and specialized schemes like the SIDBI Make in India Soft Loan Fund for MSMEs (SMILE) and Smile Equipment Finance (SEF).

SMILE

The SIDBI Make in India Soft Loan Fund for MSMEs (SMILE) supports MSMEs in the "Make in India" campaign. These loans start at ₹10 lakhs for equipment and ₹25 lakhs for other purposes, with a repayment tenure of up to 10 years, including a 3-year moratorium. The interest rates are 9.15% to 9.35% for the first 3 years and 11.70% to 12.70% after that.

SEF

SMILE Equipment Finance (SEF) by SIDBI helps MSMEs acquire new equipment under the "Make in India" campaign. These loans start at ₹10 lakhs with a repayment tenure of up to 6 years. Eligible MSMEs must be in business for at least 3 years and in good financial standing. 

Below, we’ve compiled a list of sectors along with the government schemes that are best suited for each. This table will help you match your industry needs with the most appropriate funding options.

In addition to the above-discussed loans, there are many other government schemes available to support small businesses. These programs offer financial, infrastructural, and advisory help to startups and SMEs.

Recur Club offers tailored funding solutions across sectors like SaaS, Tech Services, Manufacturing, Staffing Services, and OTT, helping you find the right financing for your needs.

‍

The Takeaway

Hopefully, this blog has given you valuable insights into the various government schemes for small business funding. It’s essential to thoroughly research each scheme to understand what they offer and how well they align with your business needs.

At Recur Club, we know that choosing the right financing option can be overwhelming with so many choices available. We're here to simplify the process for you.

‍Reach out to us, and our expert team will guide you through the options, making your journey to secure funding much smoother.