India is among those countries where a great number of start-up firms are flourishing at a faster pace. The Indian Government ever encourages those startup business by various means. Sometimes by providing government-funded skill enhancing or some other times by providing funds for the SMEs and startups, Indian government always stands by those young and enthusiast entrepreneurs who were in need of support to stand strong.

The Indian government has partnered with numerous government bodies so that an easy credit availability can be provided to SMEs. If you have a plan to start a new business or you have a small business which is in need of fund, you can take help of the business loans provided by the government. Let’s look at some of the significant government loan schemes available in India.

Top Government Loans for your Business

Top Government Loans for Your Business

The Micro-Units Development and Refinance Agency (Mudra) loan

A mudra loan is a government subsidy loan for business for the micro-units and the non-corporate small business sectors. The Micro-Units Development and Refinance Agency (Mudra) is an agency generated by the government to implement the scheme of providing loans to SMEs. The Mudra loan is designed in such a way that along with the growth of the business, the funding will be increased. The businesses are categorised in three parts and according to their category, the loan amount is decided. This is once again a collateral free business loan hence businesses with no or minimum net worth can easily avail the loan. A Mudra loan can be availed in three categories which are decided on the basis of the need and net worth of the business.

Shishu: The maximum loan amount up to Rs. 50,000 with no collateral, @1% rate of interest/month, repayable over a period of 5 years

Kishor: The loan amount is more than Rs. 50,000 and up to Rs 5 Lakhs.  

Tarun:  A Tarun business loan amount starts from Rs. 5 Lakhs and can be up to Rs. 10 Lakhs.

Pradhan Mantri Mudra Yojana for Startups

The Credit Guarantee Fund Scheme for Micro and Small Enterprises

This is a collateral free government business loan which makes business get loan up to Rs.100 lakh per borrowing unit. The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) was launched by the government with the collaboration of the Ministry of Micro, Small and Medium Enterprises and Small Industries Development Bank of India (SIDBI). The Indian government and SIDBI formed a trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the scheme. This loan can be availed by both existing business and new business. The maximum loan amount depends on the eligibility of the borrower.

New Business Loan Schemes for SMEs

Stand-Up India Scheme

Stand-Up India is the next government loan for new businesses. Stand-Up India is the initiative taken by the Indian government especially to encourage entrepreneurs from Scheduled Caste (SC) or Scheduled Tribe (ST) who are involved with Greenfield enterprises. Even the women entrepreneurs get a reservation in this government business loan. A stand-up India loan can be between Rs. 10 Lakhs and 1 Crore. The main motive of Stand-up India is to financially empower the SC, ST, and women entrepreneurs of India.  The loan which you have taken has to be repaid within 7 years. One can use this loan amount to set a manufacturing, trading or service unit.

START UP INDIA: Boon for Start-ups

Coir Udyami Yojana

The Coir Udyami Yojana (CUY) is a credit linked subsidy scheme headed by the coir board of India to establish coir units in India. This industry is an evolving industry which holds a lot of potentiality in future within the nation and globally. The CUY is a government loan provided to set up and run coir crafting businesses so that the production and promotion both can be enhanced. In this scheme, you will get up to Rs.10 lakhs plus one cycle of working capital. The loan amount should not be more than 25% of the project cost. The loan repayment should be done within 7 years.

How to Apply for Government Loans in India?

If you want to avail a government loan you are to prepare well. Here are some points which are needed to be checked in order to get a government loan easily.

The Borrower’s Personal Background

 Before you apply for a business loan, you are to check your personal and financial background. Any crimes committed in past or bad remarks on credit report can make the loan application get rejected.

The Business Background

 Along with the personal verification, the verification of the business will also be done. The previous credits and the turnover of the business have great roles to play when it comes to getting a business loan.

Consider these 5C’s of Credit to Qualify for a Business Loan

The Business Plan

Before the loan is sanctioned, you are to mention how you are going to utilise the fund. Effective use of the loan will make you get the loan easily.

The IT Returns Document

 The IT returns documents are mandatory for both the loan applicant and the business.

The Financial Statement of the Business

Along with the loan application, the loan seeker must submit the financial statement of the business which includes profit and loss statements, bank statements, balance sheets, and cash flow forecasts.

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The Other Documents Needed

All the legal document of the business has to be furnished.

The Bottom Lines

Start-ups are one of the strongest pillars of the Indian economy. But many of the start-ups vanish every year because of the lack of fund which is a great hit for the growth of the economy. Hence, the government has come up with all those schemes so that more and more start-ups can survive and contribute to the overall growth of the nation.