Written by : DG Gupta

A financial professional, qualified Chartered Accountants and Company Secretary examinations and enriched with experience of all types of accounting, taxation and compliance of Manufacturing as well as Service Industries

Government Loan Schemes for Small Businesses

DG Gupta
DG Gupta, CA, CS

Jul 29, 2021 14:49

When you first start a small business, creativity and drive may appear elusive and fleeting. Consider how it feels to be on a roll- you're driven, inventive, productive, and capable of moving mountains on your own. In India, small businesses usually fall in the category of MSMEs. Do you intend to start a small business, or are you looking for capital? The Government Loan Schemes in India can help. Its purpose is to support and promote small businesses in the country.

Micro, Small, and Medium Enterprises (MSMEs) are crucial to an economy's growth. We as an economy face serious issues such as poverty, unemployment, economic imbalance, and social inequality, for which MSMEs can be the solution. There are about 4 crore Micro, Small, and Medium Enterprises (MSMEs) in India in the registered and unregistered categories. MSMEs are classified as belonging to both the organized and unorganized sectors. These MSMEs account for around 40% of India's total GDP and continue to be an important source of employment. 'Make in India' is one of the government's initiatives aimed at boosting MSMEs' growth.

The government has implemented several schemes that provide loans to MSMEs to help them grow their businesses and economies. The entrepreneurs who manage such MSMEs might borrow money in the form of a loan under any of the appropriate programs for their needs.
To file for a government business loan, you should be at least 18 years of age. A 650+ credit score is necessary for the loan schemes to be provided by the different institutions. Individuals, entrepreneurs, SMEs, and MSMEs in the Trading, Manufacturing, and Services sectors are most likely to benefit from Government Loan Schemes. Government Loan Schemes are financial aid given via financial institutions.

The top Government loan schemes

There are numerous types of such schemes, and modern businesses may utilize various internet platforms to pick based on their needs. Let us learn about the top Government Loan Schemes for small businesses in India:

Startup India

It is designed particularly for Scheduled Caste (SC)/Scheduled Tribe (ST)/women entrepreneurs who want to establish a new business. The company should be in the manufacturing, commerce, or service industries. According to this loan, the cash is projected to pay approximately 75% of the entire project cost. If the company is not an individual venture, a minimum of 51 percent of the shares must be held by a woman or a member of a Scheduled Caste/ Scheduled Tribe.

Mudra loans

The MUDRA loans are authorized under the Micro-Units Development and Refinance Agency organization, which the Indian government formed to provide funding for micro-business units. The theme of MUDRA loans is to "finance the underfunded." MUDRA loans are available at all bank branches in India. Such loans pioneered the notion of low-cost lending for small scale businesses.

Mudra loans are classified into three types based on the level of development of the business functions that requires funding and the amount necessary. These loans are not subsidized in any form. If the loan application is linked to another government program that allows a capital subsidy, it will qualify for the Pradhan Mantri Mudra Yojana as well.

Mudra Loan categories:

Shishu loan - Loan limit till Rs 50,000
Kishor loan - Loan value exceeding Rs. 50,000 and less than Rs 5 lakhs
Tarun loan - Loan value ranging from Rs 5 lakhs to Rs 10 lakhs.

MSME Business Loan in 59 Minutes

The 59-minute MSME loan offered through government initiatives is a company capital credit starting from Rs 10 lakhs to Rs 5 crore that takes about 8–12 days to finish. Still, the approval for the loan is received within 59 minutes, and that is why the scheme is known as MSME business loan in 59 minutes. The interest on such loans is around 8.5 percent, and the loan amount given under this plan might vary from Rs. 1 lakh to Rs. 5 lakh.

Although interest rates are modest, they fluctuate based on the individual's credit record. The loans sanctioned under this plan are intended to enhance financial support to the country's growth while also encouraging their expansion in the country. The program enables both new and established businesses to benefit from the financial support given by the scheme. The lender must be GST-registered and IT-compliant to qualify for the loan.

The following is the prerequisites for this Government Loan Scheme:

GST registration of the business
Verification of income tax
Bank account statements in the last six months
Documentation concerning ownership
KYC credentials

Credit Guarantee Scheme (CGS)

The government set up the Credit Guarantee Fund Trust for Micro and Small Enterprises or CGTMSE to deliver affordable loans to the MSME industry. It provides for funding via loans sans collateral to firms in the MSME sector. Loans under the plan are available to both new and established businesses. Under this plan, MSMEs can obtain up to Rs. 2 crores in working capital borrowings, with preference given to prospective women entrepreneurs. CGS is an unsecured government, a business that does not have the condition for the borrower to submit any assets or guarantee any property to obtain the loan.

You must have an IT PAN number to apply for this loan. Manufacturing enterprises include retail trade, educational organizations, self-help groups, and training institutes; besides, firms in the service industry are eligible for funding under this loan scheme.


Udyogini denotes "women empowerment", and it is a Government Loan Scheme that has been launched to empower Indian women. This program provides funds to help women fulfil the capital needs for starting any venture.

The utmost sum available under this plan is around Rs. 15,000,000. To be eligible for this initiative, the woman must be between the age group of 18 and 55, and her household income should not exceed Rs. 15,00,000. Women facing challenges such as physical disability or who are widows have no income limitations. There is no processing charge or collateral required to get a loan through this program. To apply for this loan, women must supply passport-sized photos, a birth certificate, a Below Poverty Line proof, an Aadhar Card, a Caste Certificate, a passbook or operational bank account details, and proof of income.

Support in the form of National Small Industries Corporation Subsidy

The NSIC is an ISO-certified government enterprise under the MSMEs umbrella. One of its top goals is to help MSMEs in growing by offering services such as financing, technology, marketing, and other services around the country.

The NSIC oversees two schemes:

Marketing support
Credit support

The advantage of this loan program is that it allows small-scale enterprises to partake in tenders without incurring any fees, and MSMEs do not have to provide security deposits to get financial assistance under this scheme.

Leverage the Government Loan schemes for Small Businesses with Gotaxfile!

As government-sponsored banks back most small business loans, the processing time is in weeks or months, which is inconvenient for a small business owner searching for rapid business funding. With GoTaxfile, your loan can be authorized and disbursed in lesser time. This task is accomplished by integrating business analytics and internet technology for loan approval and disbursement rather than paperwork and time-intensive processing methods. We help small businesses get loans quite effortlessly with special assistance from our experts. Contact us now at GoTaxfile!

DG Gupta
DG Gupta, CA, CS

Jul 29, 2021 14:49

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