Top 3 Government Loan Schemes For SMEs In India

India is one of the truly emerging markets in the world at the moment. And a part of this growth is fuelled by the MSME sector of the country. The MSME sector contributes approximately 40% of the total GDP and is also a critical source of the employment generation. Recognizing the value of the MSME sector, the Indian government is offering business loans schemes. Let’s take a look at the best MSME loan schemes offered by the government that a small business owner can avail.

MSME Loan in 59 Minutes

MSME loan in 59 minutes is perhaps the most talked about business loan scheme by the government. It was first announced in September 2018. Under this scheme, the loans are given to encourage the MSMEs and provide them financial assistance. Both new and existing MSMEs can avail the scheme for a loan of up to Rs. 1 crore. The applicant gets approval or disapproval for the loan in just 59 minutes of the application. However, the actual process takes somewhere between 8-12 days. Notably, it is a refinancing scheme where five authorized public banks will grant the loan. The business loan interest rate will depend on the industry and nature of the business and credit report.

To apply for the MSME loan in 59 minutes, the applicant needs to provide GST verifications, bank account statement for the previous six months, Income Tax verifications, business ownership documents, and KYC details.

MUDRA Loan

MUDRA loan – Micro-units Development and Refinance Agency is an organization which is established by the Indian government to provide finance to the micro business units. The loans under this scheme are offered under the pretext of funding the unfunded. Since the small companies are often left unfunded or are not provided funds, the government has created a concept for them.

Also, a refinance business loan, MUDRA loans are approved and disbursed by public and private sector banks, small banks, co-operative societies, rural banks, and scheduled commercial banks that come under the scheme. Generally, the loans are given to SME businesses operating in the manufacturing, trading, and services sector. The structure of the loan scheme is as follows:

  • Shishu Loans: Rs. 50,000
  • Kishor Loans: Rs. 5,00,000
  • Tarun Loans: Rs. 10,00,000

CGMSE

Launched in 2000, CGMSE- Credit Guarantee Fund Scheme for Micro and Small Enterprises was started to provide monetary support to SMEs. Under the scheme, an SME can avail a collateral-free business loan if it satisfies the eligibility criteria. Under the scheme, one can avail an unsecured working capital loan of up to Rs. 10 lakhs. However, to avail credit of more than Rs. 10 lakh, one has to provide security or mortgage asset in terms of land or building.

Also, the asset created through this credit facility is considered to be security if the loan amount exceeds Rs. 10 lakhs. The business loans under CGMSE are financed by the public as well as private sector banks which are covered under the scheme.

All government loan schemes are designed to promote and encourage the MSME sector. And with the MSME sector flourishing in the country, India’s GDP is undoubtedly expected to rise high in the future.