Government Loans for Small Scale Businesses

How to get Government Loans for Small Scale Businesses

Small Scale Businesses or industries need better support and financial aid in order to have proper growth and flourish well in the face of stiff competition from companies or organisation that are privately funded or have an established presence in the market.

Financing provided by the government is preferred because of lower rates available under government schemes. Such loans also help out in managing the day-to-day funding requirements of a business. There are many public sector banks which work in tandem with various government organisations to provide loans under government-aided schemes. Some of the prominent names are State Bank of India, Andhra Bank and Bank of Baroda, among others.

Financing Facilities available for Small Scale Businesses

There are many different facilities as per which loans or financing options are available to small scale businesses and their entrepreneurs. Some of the more popular ones are as follows –

1. Working Capital Finance – Can be availed through direct funding or a letter of credit. This kind of financing can help aid in the operating expenses of a business and it can also help in purchasing assets related to small scale businesses
2. Corporate Term Loans – Applied and used for starting new ventures, in the running of existing business or for expansion in any particular market
3. Term Finance – Term Loans are helpful in purchasing fixed assets like buildings, machinery and the like. With floating interest rates, these loans generally have a repayment period that could go up to 10 years

Specific types of Loans available from Public Sector Banks

The aforementioned banks have a variety of schemes under which operating finance is provided to small businesses. An overview of such schemes as per specific banks is mentioned below.

1. State Bank of India – Probably the first destination for most small scale entrepreneurs, SBI offers loans and schemes through multiple channels to allow a holistic financial support for small scale businesses. The bank extends specialised help to agricultural businesses and has set up specific centres that are present in rural and semi-urban branches. A few of its schemes pertaining to the development of agriculture are

1. Crop Loan
2. Horticulture Financing
3. Farm Mechanisation Schemes
4. Land Development Schemes
5. Minor Irrigation Projects
6. Agricultural Term Loans

Some of its funding schemes for businesses other than agriculture are as follows

1. Working Capital Finance
2. Corporate Term Loans
3. Deferred Payment Guarantees
4. Project Finance
5. Structured Finance

1. Bank of Baroda - This bank has a few schemes aimed at providing financial aid to small scale entrepreneurs but they have been quite effective nonetheless and are quite popular in the same sector. The schemes offered by Bank of Baroda can be listed as below-
   1. Working Capital Finance
   2. Term Finance
   3. Small and Medium Enterprise Loan Pack
   4. Small Business Borrowers
   5. Traders Loan
2. Andhra Bank - There are a variety of schemes offered by Andhra Bank and these mainly cater to the corporate and agricultural sector. A few of the important loan schemes available for small scale businesses are -
   1. Working Capital Loans
   2. Export and Import Finance
   3. Advance against Shares
   4. Term Finance
   5. Corporate Loans
   6. Project Finance
   7. Infrastructure Project Finance
   8. Kisan Vikas Card
   9. Kisan Sampathi
   10. Self Help Groups-Bank Linkage Programme
   11. Kisan Green Card

Loan Schemes and Facilities initiated by the Government of India

Apart from banks which provide financial support to small business through special loan schemes, the government of India has also set up schemes and makes use of different associations in order to zero in on businesses which might require financial support. Most of the programmes initiated by the government are implemented through the following organisations –

Small Industries Development Organisation (SIDO)

It serves to promote and helps in development of small scale industries. The major functions of this entity are as follows

Advising the government on new schemes for small scale industries Conducting surveys on the small scale industry sector and ascertaining key growth factors

Liaison with central ministry, planning commission, state governments, financial institutions and other organisations related to the development of small scale businesses Helping in linking small scale industries to large and medium scale industries Development of human resources through training and skill upgrades

For the above-mentioned functions, some of the schemes put forth by SIDO are as follows –

Credit Linked Capital Subsidy Scheme for Technology Upgradation

Credit Guarantee Scheme

ISO 9000/ISO 14001 Certification Reimbursement Scheme

Integrated Infrastructure Development (IID Scheme)

SSI MDA Scheme

Assistance to Entrepreneurship Development Institutes

Micro Finance Programme

National Small Industries Corporation Limited (NSIC)

Established to provide specially tailored schemes that facilitate

Marketing support through promotion and other contemporary means of marketing Credit support through functions like –

Equipment financing

Raw material procurement financing

Marketing activities financing

Bank-syndication aided financing

Performance and credit rating system

Technology support which allows material testing, implementation of new techniques, energy and environment services and training facilities

Small Industries Development Bank of India (SIDBI)

Established in 1990, this institution is by far the most popular one when considering the growth and development of small businesses. The schemes provided by SIDBI are as follows –

National Bank for Agriculture and Rural Development (NABARD)

It promotes mainly agro-based rural businesses. The financial aid offered by NABARD is extended mainly to cottage and village industries

World Association for Small and Medium Enterprises (WASME)

It is the only non-government organisation for SMEs in India. Apart from promoting the development of small and medium businesses in the country, it also provides some subsidised schemes for the growth of rural industries

Apart from the national schemes and organisations mentioned in here, there are also separate entities and schemes set up by many state governments whose focus is aimed at supporting and aiding industries and businesses exclusive to particular states and regions.