The small-scale business sector, which is more popularly known as the Small and Medium Enterprises (SME) sector, is responsible for contributing around 40% to the total Gross Domestic Product (GDP) of India. This sector is a key source of employment in India but faces stiff competition from privately-funded businesses. Realising this, the Government of India has come forward to offer many loan schemes to finance the small-scale business sector. These loans can be availed by the SMEs to fund their day-to-day operations, expand their business, purchase new equipment, etc.
|Name of the Scheme||Rate of Interest (p.a.)||Loan Amount||Repayment Tenure|
|SIDBI Make in India Loan for Enterprises (SMILE)||9.45% to 12.70%||Rs.25 lakh to Rs.50 lakh||Up to 10 years including 3 years moratorium|
|Pradhan Mantri Mudra Yojana (PMMY)||Varies from bank to bank||Up to Rs.10 lakh||Varies from bank to bank|
|Credit Guarantee Scheme||-||Up to Rs.200 lakh||-|
|Bank Credit Facilitation Scheme||Varies from bank to bank||Up to Rs.5 crore||5 years to 7 years|
|Stand-Up India Scheme||Up to base rate + 3% + tenor premium||Rs.10 lakh to Rs.1 crore||7 years|
|MSME Loans in 59 minutes||8% onwards||Rs.10 lakh to Rs.1 crore||As per the bank|
The eligibility criteria for government loans for small scale businesses will vary from lender to lender but the basic ones have been listed below:
|Type of Business||All micro enterprises engaged in trading, manufacturing, and services sector including professionals such as architects, doctors, CAs, etc.|
|Residential Status of the Applicant||Resident of India|
|Age||Between 25 years and 66 years|
|Status of the Business||New or existing enterprises|
|Application form||Filled and duly signed|
|KYC Documents||Business entity proof, partnership deed, incorporation certificate, shops, and establishment certificate, Articles of Association (AOA)|
|Bank Statements||For the last 6 months|
|Photographs||Passport-size photograph of applicant/co-applicants|
Availing government loans for small scale businesses will not cause you much sweat. Since most government loans are dispensed through banks and financial institutions, you can directly approach them to avail loans. You can visit the nearest branch of the bank or financial institution who will guide you on the loan application process.
Some lenders will also allow you to apply for business loans online on their respective websites. You can visit their websites, fill up the application form provided, upload the relevant documents, and submit it. Once you complete the process and the verification is done from the bank’s end, the loan amount will be credited directly into the bank account you provided during the application process.
Answer: You can choose to repay your small scale-business loan in any one of the following ways – Post Dated Cheques (PDCs), Electronic Clearing Service (ECS), and Direct Debit. ECS and Direct Debit are the more preferred form of repayment by borrowers of small-scale business loan.2. How much EMI do I need to pay for my business loan?
Answer: The Equated Monthly Instalment (EMI) that you need to pay towards your business loan will be based on the loan amount, repayment tenure, interest rate, etc. You can use the EMI calculator available on the home page of the BankBazaar website under the ‘Finance Tools’ section.3. What is the maximum amount of loan I can avail as a business loan?
Answer: The maximum amount of loan that can be availed as a small-scale business loan is Rs.5 crore but this will depend on factors such as the lender, the type of business, etc.4. Do I need to provide any collateral or security to avail a government loan for small scale business?
Answer: You will not be required to provide any collateral or security to avail a government loan for small scale business. However, some lenders may ask you to provide collateral if the loan amount is higher. Providing collateral will boost the confidence of lenders to lend to you as in the case of defaults, they can auction/sell it to recover the outstanding loan.5. Can I avail a loan under the Mudra scheme to start my own business?
Answer: Yes, you can. Under the Mudra scheme, loans can be availed in the range of Rs.50,000 to Rs.10 lakh. The amount of loan that you can avail to start your business will depend on the nature of business, lender, your credit history, etc.
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