Top 10 MSME and Startup Business Loans by Government of India 2024

Posted by on January 8, 2024 in Finance | Comments Off on Top 10 MSME and Startup Business Loans by Government of India 2024

In India, micro, small, and medium-sized enterprises (MSMEs) play a significant role, accounting for a substantial 29% of the country's GDP and a substantial portion of the nation's exports. Meanwhile, the country's startup scene has been rapidly expanding, and these young companies are a Top 10 MSME and Startup Business Loans by Government of India 2024 factor in propelling India to a higher position on the global stage.

India has now become the third-largest startup ecosystem in the world, following the US and China. To support the growth of these enterprises, the Indian government has introduced a variety of loan schemes for MSMEs and startups. This article will delve into 10 government-backed loan options for MSMEs and startups in India that you should be aware of.

Did you know that India boasts an astonishing 3.64 crore micro, small and medium enterprises (MSMEs) as of 5 February 2024, as revealed by the Ministry of Micro, Small & Medium Enterprises?

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Pradhan Mantri Mudra Yojana

The Pradhan Mantri Mudra Yojana, launched in 2015, offers loans of up to 10 lakh rupees to non-corporate, non-farm small and micro enterprises, classified as MUDRA loans under PMMY.

These loans are provided by a range of lenders, including commercial banks, regional rural banks, small finance banks, microfinance institutions, and non-banking financial companies. As of 2023-24, the scheme had sanctioned 67,770,013 loans. Top 10 MSME and Startup Business Loans by Government of India 2024 loans are provided under two funding models:

  • The Micro Credit Scheme, offered through microfinance institutions, and the Refinance Scheme, available to commercial banks, regional Top 10 MSME and Startup Business Loans by Government of India 2024 banks, small finance banks, and non-banking financial companies.
  • The Refinance Scheme offers loans to commercial banks, regional rural banks, small finance banks, and non-banking financial companies.

The MUDRA loans are categorized into three tiers:

  • Loans of up to 50,000 rupees, classified as the Shishu scheme.
  • Loans between 50,001 and 5 lakh rupees, categorized as the Kishore scheme.
  • Loans from ₹ 5,00,001/- to ₹ 10 lakh (Tarun)

Bonus: For working capital, MUDRA offers the MUDRA Card, a RuPay debit card providing hassle-free credit with flexibility.

Banks do not require collateral for loans up to ₹ 10 lakh for MSE sector units.

Women entrepreneurs can get loans at discounted interest rates.

₹ 10 lakh is the maximum funding allowed, making it ideal for businesses with short-term needs.

The loans are mainly used for:

  • Business loans for vendors, traders, shopkeepers, and other service sector activities
  • Working capital loans through MUDRA Cards
  • Equipment financing for micro units
  • Business loan options for commercial purposes only
  • Financial assistance for agricultural-related income-generating activities, such as fish farming, beekeeping, and poultry farming

Additionally, the government introduced the 59-Minute Loan Portal, offering Mudra and MSME loans in under 59 minutes.

Stand Up India Scheme

The Stand Up India Scheme is a government-backed initiative launched in 2016, designed to provide bank loans to Indian entrepreneurs in the manufacturing, services, and trading sectors.

The program is specifically aimed at supporting SC/ST and women entrepreneurs, with a focus on greenfield enterprises – new ventures in these sectors. The goal is to encourage the growth of these entrepreneurs, with 1.25 lakh bank branches expected to lend to at least one Dalit or tribal entrepreneur Top 10 MSME and Startup Business Loans by Government of India 2024 one woman entrepreneur in their region annually. The scheme is designed to be accessible, with loans available through three channels:

  • Directly at a bank branch
  • Through the SIDBI Stand-Up India Portal (www.standupmitra.in)
  • Through the lead district manager

To qualify for the Stand Up India loan, the borrower must repay the loan within 7 years, with a 18-month grace period.

Key eligibility criteria include:

• The borrower must be at least 18 years old.

• The business must be a private limited/LLP or a partnership firm.

• The firm's annual turnover must not exceed 25 crores.

• The entrepreneur must be a woman or a member of a scheduled caste or scheduled tribe.

• The loan is only available for greenfield projects.

• The borrower must not be a bank defaulter.

• The business must be involved in the sale of commercial or innovative consumer goods.

Additionally, applicants who file a patent application form within the specified timeframe Top 10 MSME and Startup Business Loans by Government of India 2024 be eligible for an 80% rebate as a tax benefit.

Credit Guarantee Fund Scheme for Micro and Small Enterprises

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) was launched in the year 2000, providing collateral-free credit to the micro and small enterprise sector.

This initiative was spearheaded by the Ministry of Micro, Small and Medium Enterprises (MSME) in conjunction with the Small Industries Development Bank of India (SIDBI), who established the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the CGMSE. However, the CGTMSE is not open to educational and training institutions, self-help groups (SHGs), and agricultural-related activities.

On the other hand, businesses with physical offices and assets such as real estate and machinery can greatly benefit from the CGTMSE scheme, as it is backed by the Government of India.

Under the CGTMSE initiative, entrepreneurs can tap into collateral-free loans of up to ₹10 lakh, while businesses seeking loans exceeding ₹10 lakh can secure primary security or mortgages of the land and buildings associated with the venture.

To initiate the CGTMSE loan process, the following documents are necessary:

  1. CGTMSE loan application form accompanied by passport-sized photographs
  2. Company Registration Certificate
  3. Business Project Report
  4. CGTMSE Loan Coverage Letter
  5. Any additional documents required by the bank

For borrowers seeking to secure their loans under this program, they must pay an extra premium for insurance, as well as a service fee, in addition to the interest charged by the bank.

The fee the borrower pays to the Trust under this program is a one-time premium of 1.5% and an annual service fee of 0.75% for the sanctioned credit facilities. For loans of up to 5 lakh rupees, the one-time premium and annual service fee are 1% and 0.5% respectively. The Trust approved a staggering 2 lakh crore rupees in guarantees in the FY24, the highest in a single fiscal year to date.

Established in 1990, the Small Industries Development Bank of India (SIDBI) is the supreme governing authority overseeing the licensing and regulation of micro, small, and medium-sized enterprise finance companies in the country.

The primary goal of SIDBI is to offer refinancing services to banks and financial institutions, engage in long-term lending and working capital finance to industries, and act as the primary financial institution in Top 10 MSME and Startup Business Loans by Government of India 2024 micro, small, and medium-sized enterprise (MSME) sector. The bank's promotion and development program is centered on Top 10 MSME and Startup Business Loans by Government of India 2024 rural enterprise development and fostering entrepreneurship.

SIDBI plays a pivotal role in fostering a thriving economy by fostering employment-oriented industries, especially in semi-urban areas, thereby fostering higher job creation and curbing urbanization. The institution offers a diverse range of loan options, tailored to meet the unique requirements of each business, with loan amounts varying from a few thousand to a maximum of INR 1 Crore, with the option to secure loans without providing any collateral.

SIDBI has established a network of Top 10 MSME and Startup Business Loans by Government of India 2024 with banks worldwide, providing entrepreneurs with access to exclusive loan concessions. The institution's loan Top 10 MSME and Startup Business Loans by Government of India 2024 cater to the diverse needs of entrepreneurs, providing a range of financial assistance, including direct and indirect loans, as well as microfinance options.

SIDBI's direct financial assistance includes a range of loan options, such as working capital assistance, term loans, foreign currency loans, and support for receivables, as well as equity support and energy-saving schemes.

The institution's indirect financial assistance includes refinancing options for primary lending institutions, such as banks and state-level financial institutions. SIDBI's microfinance options cater to the unique needs of MSMEs, providing term loans to support business growth and development.

Due to the multitude of loan schemes offered by SIDBI to MSMEs and startups, the eligibility criteria for each program vary significantly.

Udyogini

Udyogini is a women-centric business loan program, spearheaded by the Women Development Corporation to promote the welfare and growth of Indian women entrepreneurs.

Under this initiative, interest-free loans are offered to women from all walks of life, ensuring equal opportunities and eliminating any form of discrimination.

Udyogini is primarily offered by the Karnataka State Women’s Development Corporation, Punjab and Sind Bank, Saraswat Bank, and a multitude of private and public sector banks, as well as prominent Non-Banking Financial Companies.

Women Entrepreneurs in India can benefit from the Udyogini scheme, a business loan program designed specifically for them.

To be eligible, applicants must meet the following criteria:

• Be a woman entrepreneur, as the scheme is exclusively for women in business.

• Have a good credit score and Top 10 MSME and Startup Business Loans by Government of India 2024 proven repayment history, as the scheme is designed for those who can manage their finances effectively.

• Not have defaulted on any past loan with any financial institution, ensuring a clean credit history.

While the eligibility criteria are relatively straightforward, women entrepreneurs must still provide the following documents:

• A completed and signed application form, accompanied by a recent passport-sized photograph.

• A valid Aadhaar Card, Birth Certificate, and a Below Poverty Line (BPL) card, as well as a Ration Card.

• Proof of address and income, which can be in the form of a utility bill, bank statement, or any other document that confirms their financial stability.

• A Caste Certificate, if applicable, which can provide additional verification of their identity and eligibility for the scheme.

  • Original bank passbook details, including account, bank, branch, holder name, IFSC, and MICR.
  • Any additional documents required by the bank or NBFC.

It's essential to note that each lending institution has its unique requirements and rules for obtaining business loans.

For instance, the maximum loan amount for the Udyogini loan from Bajaj Finserv is INR 3,00,000, whereas the maximum loan amount from Saraswat Bank is INR 200 lakhs.

Coir Udyami Yojana

Launched in 2014, the Coir Udyami Yojana (CUY) is a unique credit-linked subsidy program in India, empowering entrepreneurs to establish coir manufacturing facilities.

This innovative scheme combines a 40% subsidy with a 55% loan, with entrepreneurs required to make a 5% upfront contribution to the project. The maximum amount available under the program is INR 10,00,000, with the added benefit of working capital, which should not exceed 25% of the project cost.

The CUY scheme offers financing to eligible borrowers, including individuals, non-profit organizations, self-help groups, registered associations, charitable trusts, and joint liability groups.

However, applicants must be aware that if their project has received funding under another government-backed initiative, they are not eligible for this program. Additionally, working capital is not taken into account when evaluating loan and subsidy applications.

The eligibility requirements for CUY differ slightly from those of other schemes.

To be eligible, applicants must provide the following documents:

  • Caste certificate
  • For non-individual applicants, a certified copy of the organization's by-laws must be attached to the application.
  • A detailed business plan is required.
  • Identification and residential proof are necessary.
  • Valid identification documents
  • Property documents for the proposed location of the coir manufacturing facility
  • Proof of coir industry experience
  • Certificate of EDP (Entrepreneurship Development Program) training
  • Industrial establishment certificate (Issued by the Department of Industrial Development)
  • Detailed plan and estimate for the civil construction work.

    The plan must be certified by a chartered engineer

The loan under the Coir Udyami Yojana is financed through the CGTMSE scheme under the Ministry of Micro, Small and Medium Enterprises (MSME).

Bank Credit Facilitation Scheme

Launched in 2014, the Bank Credit Facilitation Scheme offers vital financial backing to micro, small, and medium-sized enterprises Top 10 MSME and Startup Business Loans by Government of India 2024 the provision of credit and comprehensive support in the documentation, filing, and submission of proposals to financial institutions.

Moreover, the scheme facilitates the easy acquisition of loans at competitive interest rates, thereby empowering businesses to make the most of this financial support.

Under this scheme, businesses can also access non-fund-based limits, such as guarantees and letters of credit, to further bolster their financial stability. For small enterprises in need of a quick, short-term loan to expand and improve their operations, this scheme offers a convenient and cost-effective solution, allowing them to access bank loans at low interest rates.

Furthermore, the scheme also provides assistance in opening a new bank account, switching banks, and transferring the account to another financial institution, thereby streamlining the financial operations of businesses. The amount of financial support available to micro, small, and medium-sized enterprises under this scheme varies in line with the size of the startup and Top 10 MSME and Startup Business Loans by Government of India 2024 MSME, thereby ensuring that businesses of all sizes can benefit from this vital financial support.

Every business, regardless of its size, whether micro, small, or medium, is entitled to participate in the Bank Credit Facilitation Scheme, provided the business is registered and recognized by the government.

The repayment period for the loan ranges from 5 to 7 years, although in exceptional cases, it can be extended to 11 years.

Those seeking to access loans through the Bank Credit Facilitation Scheme can reach out to the NSIC branch office.

The next step is to submit the application to any of the banks where the applicant has an account. However, it is essential for these banks to have a tie-up agreement with the NSIC or, alternatively, the applicant can submit the application to any bank registered under the scheme.

Sustainable Finance Scheme

The Sustainable Finance Scheme, spearheaded by SIDBI, is designed to support the development of projects that prioritize energy efficiency and environmentally friendly production methods.

At the forefront of the scheme's initiatives are projects that have garnered business loans, including eco-labeling, green construction, green microfinance, energy efficiency certifications, and renewable energy projects. As the landscape of sustainable startups continues to flourish nationwide, this funding opportunity is a game-changer. Entrepreneurs working towards a sustainable future, encompassing initiatives like waste management and biomass gasifier power plants, are encouraged to apply to this scheme.

Up to 90% of the project cost can be financed with a minimum of 100,000 INR and a maximum Top 10 MSME and Startup Business Loans by Government of India 2024 1,500,000 INR per eligible borrower under this program.

The repayment term, including a 6-month moratorium, should not exceed 3 years for loans of 500,000 INR or less, and 6 years for loans exceeding 500,000 INR.

Launched in the year 2000, the Credit Linked Capital Subsidy Scheme is a financial initiative designed to foster the growth and development of technology in small-scale industries, both in rural and urban Top 10 MSME and Startup Business Loans by Government of India 2024, across the nation.

This scheme offers a 15% capital subsidy to investors who invest up to Rs 1 crore in eligible plants and machinery. Key sectors under this scheme include the pharmaceutical and biotechnology industries, food processing, cosmetics, and the Khadi and Village Industries sectors.

To be eligible for this scheme, the following documents are required:

  • Identification documents, such as an Aadhar card, voter ID, or PAN card.
  • Proof of address.
  • Proof of business.
  • Recent photographs.
  • Know Your Customer (KYC) documents.

This scheme is particularly beneficial for manufacturing enterprises, fabrication units, and small businesses that rely heavily on machinery and equipment.

National Bank for Agriculture and Rural Development

National Bank for Agriculture and Rural Development (NABARD), established in 1982, serves as the pinnacle regulatory authority for the comprehensive oversight of regional rural banks and apex cooperative banks in India.

By fostering rural social innovations and social enterprises, the institution has played a pivotal role in rural India. Furthermore, NABARD has implemented a range of initiatives aimed at fortifying the credit delivery system, including the establishment of institutions, monitoring, and the development of rehabilitation schemes, as well as the restructuring of credit institutions and the training of personnel.

India's National Bank for Agriculture and Rural Development (NABARD) plays a pivotal role in providing farmers and rural artisans with access to long-term and medium-term refinancing Top 10 MSME and Startup Business Loans by Government of India 2024.

Through its initiatives, NABARD not only facilitates the growth of rural and village projects, but also supports the development of cottage industries. Furthermore, the organization specializes in providing long-term irrigation and rural infrastructure development funds.

It's essential to note, however, that NABARD loans are not directly offered, and applicants must first secure a business loan from a commercial or cooperative bank to be eligible for a subsidy under the NABARD scheme.

Unlocking Government Loan Schemes for MSME and Startups

Applying for government-backed loans, such as those offered by the Government of India, shares many similarities with traditional loan applications.

There are, however, two distinct approaches to pursuing Top 10 MSME and Startup Business Loans by Government of India 2024 loans:

    Getting Started with Your Startup Business Loan Application

    Begin by visiting your lender's website and filling out their online application form. Depending on their policies, you may need to submit all required documents either online or in-person.

    Alternatively, you can visit your lender's physical branch and complete their application form and submit the necessary documents in person.

    Common Eligibility Criteria to Register for a Startup Business Loan by The Government of India

    While each lender may have their own specific eligibility requirements, there are a few common criteria that all MSMEs and startups need to meet in order to qualify for a business loan.

    These requirements include:

    • Existing enterprises should not be older than five years.
    • Businesses with a total turnover of INR 25 crores or less are eligible.
    • Only Limited Liability Partnerships Top 10 MSME and Startup Business Loans by Government of India 2024 Private Limited companies can qualify for these government-backed loans.
    • Applicants must also have approval from the Department of Industrial Policy and Promotion (DIPP) to be considered.
    • Obtaining a guarantee from the Indian Patent and Trademark Office is a requirement for Top 10 MSME and Startup Business Loans by Government of India 2024 startup loans.

    Key Factors Influencing a Startup's Eligibility for Government Loan Schemes

    While the decision to approve a business loan rests with the financial institution, several factors can greatly impact your chances of securing the loan.

    Below, we have outlined the top five factors to be aware of:

    Securing a loan can be a game-changer for a business, but a well-crafted business plan is key to unlocking its Top 10 MSME and Startup Business Loans by Government of India 2024 potential. By outlining a clear plan for loan utilization, a business can significantly increase its chances of approval.

    This, in turn, can be a major deciding factor in the business's favor.

    Before submitting a loan application, it's essential to gather all necessary documents. This is a crucial step in the loan application process, as the lending institution will be evaluating the business's credibility and potential for repayment.

    By having all documents in order, a business can avoid potential delays and increase its chances of approval.

    Essential Documents for Government-Backed Startup Business Loans in India

    Are you unsure about the documents required to apply for a startup business loan in India? Look no further. We've compiled a list of the essential documents you'll need to get started. By having these documents in hand, you'll be well-prepared to present a strong loan application to the lending institution.

    PhotographsTwo copies (passport-size)
    Proof of IdentityPAN Card, Passport, Aadhaar Card, Voter’s ID, Driving License
    Address ProofPassport, Driving License, Aadhaar Card, Postpaid Phone Bill, Voter’s ID
    Age ProofPassport, PAN Card
    Bank StatementsLast six months
    Proof of IncomeIncome Tax Returns, Salary Slips,
    Signature ProofBank verified signature, PAN Card, Passport
    IFSC Code ProofCanceled/scanned cheque, copy of passbook’s front page of the same bank account

    Before proceeding with a loan, lenders may have their own set of requirements, so it's essential to be prepared with a variety of documents.

    For those who find it intimidating to secure a loan from the Government of India, Top 10 MSME and Startup Business Loans by Government of India 2024 here to help.

    We suggest a cash-flow based financing approach, which offers a flexible, highly scalable, and 100% digital fundraising process. This approach allows founders to raise funds without diluting their equity or providing collateral, and the repayments are based on a percentage of their monthly revenue.

    Here are some key points to consider:

    9 Types of Business Loans in Top 10 MSME and Startup Business Loans by Government of India 2024 Are Unsecured Business Loans: A Comprehensive Guide for Startups and Small Businesses