Top 5 Government Loan Schemes for Small Businesses in India


The small businesses of the 21st century have a lot going on. Due to the continuous cycle of ups and downs of the economy, running small and mid-sized businesses (SMBs) require more focus and innovation – which translates into a frequent need for investment.

As small and medium enterprises are the backbone of the economic development of India, the government is keen to help them with several subsidies and loan schemes. This article will discuss the top 5 government loan schemes that can aid your business to reach greater heights.

  • Pradhan Mantri Mudra Yojana (PMMY)

Micro-units Development and Refinance Agency, shortly known as MUDRA, is an organisation established by the Indian government to offer financial assistance to SMBs. The Pradhan Mantri Mudra Yojana (PMMY) comes under MUDRA and is a small scale industry loan by the central government that strives to “fund the unfunded”.

What Is the Eligibility for Mudra Loan?

This scheme offers small business loans to a wide range of sectors and business activities. Micro, Small and Medium Enterprises (MSMEs) can avail loans up to 10 lakhs without collateral. This scheme is frequently referred to as MUDRA loans and Non-Corporate Small Business Segment (NCSB) such as the following can apply.

  • Fruits or vegetable vendors
  • Repair shops
  • Artisans
  • Small industries
  • Truck operators
  • Small manufacturing units
  • Shopkeepers

In short, all types of trading, manufacturing, and service sector activities are eligible for a MUDRA loan.
MUDRA loans are of three types:

  • Sishu Loans – For loan amount up to Rs. 50,000/-
  • Kishor Loans – For loan amount up to Rs. 5,00,000/-
  • Tarun Loans – For loan amount up to Rs. 10,00,000/-


Can I Apply for Mudra Loan Online?

Of course, yes. MUDRA loans can be availed both online and offline by contacting the eligible financial lenders such as non-banking financial institutions (NBFCs), private sector banks, and commercial and co-operative banks.

The government also recently introduced the MUDRA card, which is essentially a debit card for your MUDRA loan account. Interestingly, unless you utilise a portion of the sanctioned amount, you won’t be charged the interest.

  • SIDBI Make in India Soft Loan Fund for MSMEs (SMILE)

This small business lending scheme is governed by the Small Industries Development Bank of India (SIDBI). SMILE is one of the best government loan schemes that aim to offer loans with below-market interest rates, also known as soft loans.

The minimum loan amount under this Indian government loan scheme for small business is Rs. 25 lakhs and is an ideal small scale industries loan from the government to meet the requisite debt-equity ratio for new MSMEs. The interest rate offered by SMILE scheme starts at 8.36%.

The scheme also comes with a moratorium period of 36 months and maximum repayment tenure of 10 years. New MSMEs, along with existing service and manufacturing sectors, can apply for this scheme.

  • MSME Business Loans for Start-ups in 59 Minutes

This central government small scale industries loan is a boon to the MSME sector, and its interest rate starts from 8.50%. Although the actual process might take 8 to 12 days, your loan eligibility will be communicated in just 59 minutes.

To be eligible for this government business loan, you must have GST verification, ownership related documents, KYC details and at least six months of bank history. Also, the interest rates are based on the nature of your business and credit rating.

If you’re wondering “How much loan can I get for small business?” then MSME business loans in 59 minutes may leave you wonderstruck. This scheme offers small scale business government loan of Rs. 1 lakh at the minimum and up to Rs. 5 crores. Also, there is a 3% reservation available for women entrepreneurs.

  • Stand-Up India

Headed by Small Industries Development Bank of India (SIDBI), Stand-Up India is an initiative to provide government small business loans to women entrepreneurs and individuals under the SC/ST category.

Under this scheme, small businesses can avail loans between Rs. 10 lakh to Rs. 1 crore. The loan amount will cover around 75% of your business project, and its interest rate is calculated as Bank’s MCLR + 3% + tenor premium.

Enterprises belonging to manufacturing, trading or servicing sectors are eligible for this scheme. If your company belongs to non-individual enterprises, at least 51% of its shares must belong to a woman or SC/ST entrepreneur to avail this loan.

  • Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

This government loans scheme was launched at the beginning of this century and offer central government small scale industries loan to the MSME sector. This scheme provides working capital loans, up to Rs. 10 lakhs without any collateral. You can also avail credit facilities up to Rs. 1 crore with the help of mortgage of your business land or assets.

New or existing MSMEs engaged in service or manufacturing activities (except retail trade), agricultural and educational institutions and self-help groups are eligible for this scheme.

In Conclusion

With initiatives like “Make In India” gaining more prevalence, the economy of SMEs, composed of nearly 42.50 million registered and unregistered businesses, is a crucial growth driver of the industry, contributing to almost 40% of India’s GDP.

And the sector doesn’t show any signs of slowing down – hence the continued support from the government. Even if your business doesn’t fit well with the requirements of the listed loan schemes, don’t worry! There are plenty of non-bank financial institutions (NBFCs) that offer business loans to enhance your business’s growth potential.

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