Are you in need of a Business loan for your small or medium scale business in India? If yes! Then you should know that there are certain schemes which our government has started to help the medium and small scale enterprises to help them grow. Knowing about these schemes can help you a lot if you are an entrepreneur looking for a business loan.

Start-ups, small and medium enterprises/industries need a lot of financial aid and support to get establish, flourish and grow itself amongst the MNCs and big organisation as they are already well established in the market.

However, the small and medium enterprises are the backbone of Indian economy. And most of the SME owners face a lot of problem due to the non-availability of adequate monetary support at the reasonable rate of interest, arranging collateral security or third party guarantee are the tough proposition for some of them as well. Apart from all these a major part of their finance is absorbed in paying different taxes and paying lot on the process regarding the paperwork. Lack of reliable and proper credit information is one of the reason which pushed these SMEs back.

Guide to SME Business Loans in India

In India, there are various Government loan schemes specified for small and medium business enterprises both from state and central government to fulfil the financial requirement of these industries across the country. Even public sector banks such as State Bank of India (SBI), Andhra Bank, Canara Bank, Allahabad Bank and Bank of Baroda are offering various financial schemes to small business and medium businesses. These schemes provide financial help and services to the entrepreneurs which help them to survive, grow and flourish.

List of Government Loan Schemes for New Businesses

The Credit Guarantee Fund Scheme for Micro and Small Enterprises.

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) was launched by the Government of India in the year 2000 to provide monetary support to the micro and small enterprises in form of collateral-free credit. For this scheme, both existing as well as new the enterprises are eligible.

Under this scheme credit is provided in the form of working capital. The term loans up to INR 100 lakhs per borrowing unit is allowed. The amount leant is contributed by the government and SIDBI ( Small industries development bank of India). The ratio in which the contribution is made is 4:1.

NSIC Government Subsidy for Small Business

National Small Industries Corporation (NSIC) has provided two basic subsidies for small scale businesses

  1. raw material assistance
  2. marketing assistance

Raw Material assistance provides help to SMEs by financing the purchase of Raw Material both indigenous and imported. On the other hand the marketing support gives the SME’s funds to enhance competitiveness and market value of their products.

Thus NSIC is providing an opportunity to the small and medium enterprises to improve and grow their manufacturing quality along with its market value.

SME Financing: A Variety of Options

Credit Link Capital Subsidy Scheme for Technology Upgradation

Upgradation of the process involved whether it may be manufacturing process or any other process. To have important machinery is a very essential thing for the SMEs. This helps them to reduce the cost of production and to remain price competitive in the local as well as global market. Machineries and technology upgradation is a must for the SMEs as it help them to flourish in international trade markets as well.

The Ministry of Small Scale Industries (SSI) has a scheme for technology upgradations for Small Scale Industries known as the Credit Linked Capital Subsidy Scheme (CLCSS). The scheme aims to facilitate technology upgradations to SMEs by providing them upfront capital subsidy of 15%. The maximum limit of the subsidy is INR.15 lakhs. All the sole proprietorship, partnership firms, cooperative, private and public limited enterprises and companies are eligible for this scheme.

Market Development Assistance Scheme for MSMEs

The scheme aims to help Indian manufacturing SMEs to gain traction in the international markets. The Market Development Assistance Scheme for MSMEs offers fund to the SME’s to participate in the international trade fairs and exhibitions under MSME India stall. The scheme also offer fund for sector-specific market studies by industry associations, export promotion councils, and FIEO. Under this scheme reimbursement of 75% of a one-time registration fee and 75% of yearly fees (recurring) paid to GSI by SMEs for the first three years for the bar code is done.


Here, Mudra stands for Micro-Units Development and Refinance Agency Ltd. This organization was established by Government of India to provide development and refinancing help to the micro units with the vision of – ‘Funding the Unfunded’.

Small companies, organisations and start up entrepreneurs in India face the lack of monetary support in starting stage as well as in the growing stage of their small businesses too. Mudra bank loan provides low-cost credit/ funding to the MFI (MicroFinance Institutes). MUDRA Loans are basically responsible for refinancing the financial institutions engaged in the financing of Small Businesses, Trusts Section 8 Companies, Co-operative Societies, Small Banks, Scheduled Commercial Banks and Rural Banks which are indulged in the business of lending to micro or small businesses engaged in manufacturing, trading and services sector.

As per the MUDRA scheme, there are three loan structures:

  1. Sishu-Loan upto INR 50,000/-
  2. Kishore- Loan upto INR 50,000/- to 5,00,000/-
  3. Tarun- Loan from INR 5,00,000/- to upto INR.10 lakhs.

How to Prepare Your Organization for a Business Loan

National Bank for Agriculture and Rural Development (NABARD)

This scheme is basically launched to provide help and support to the agriculture based business enterprises in rural areas. Under this scheme village and cottage industries are the major beneficiaries and are provide financial assistance.

Below are the facilities provided by NABARD  to SMEs:

  1. NABARD is responsible for funding rural, social innovations and social enterprises in the rural hinterlands.
  2. NABARD fills in as a zenith financing office for the establishments giving speculation and creation credit to advancing the different formative exercises in rustic territories
  3. NABARD takes measures towards foundation working for enhancing absorptive limit of the credit conveyance framework, including observing, detailing of restoration plans, rebuilding of credit organizations, preparing of staff, and so forth.
  4. NABARD also coordinates the provincial financing exercises of all organizations occupied with formative work at the field level and keeps up contact with Government of India, state governments, Reserve Bank of India (RBI) and other national level establishments worried about approach detailing
  5. It embraces checking and assessment of tasks renegotiated by it.
  6. NABARD renegotiates the budgetary organizations which funds the country area.
  7. NABARD shares being developed of organizations which help the country economy.
  8. NABARD additionally keeps a mind its customer foundations.
  9. It controls the establishments which give monetary help to the country economy.
  10. It gives preparing offices to the organizations working in the field of provincial upliftment.

SMEs are the backbone of Indian economy and GoI and the top FIs in the country are ready to provide financial support to them through different schemes. SME owners can directly contact or visit these institutions to learn more about the application process and choose the scheme which suits them the best.

Factors Deciding the Eligibility Criteria to Qualify for the Government Business Schemes

The documents that the government bodies ask to provide borrowers is to verify & evaluate that whether the applicant is deserving of the schemes or not, the eligibility criteria set for different schemes vary but are decided on the following factors The factors –

  • Type of business
  • Business and Personal Credit Rating
  • Annual turnover from the Business
  • Capital Requirement
  • Business potential

How to Register/ Apply for the Government Business Loan Schemes

  • Visit the online portal associated with the particular scheme for which you want to register.
  • Register by providing the required details and information in the required field.
  • If asked to sign up or login do so by filling the information required.
  • Your one-time authentication password will be generated and you are done with the registration.
  • click on the checkbox below to agree for the terms & condition terms( read it properly before you agree).
  • Enter your financial credentials whichever asked.
  • Proceed further if willing to do so by continuing and uploading the required documents

(Updated – 21-06-2019)