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5 Government Loan Schemes For MSMEs & Startups In India

Loan Schemes for MSME & Startup

To help MSMEs and to make them more empowered, the Govt of India has introduced several loan schemes for MSMEs.

Govt of India is always keen to help and encourage more and more Micro, Small & Medium Enterprises (MSMEs) to spread their wings and achieve more success and growth. The reason is simple: Small businesses and MSMEs are driving India’s growth and progress. Although there is this term ‘Micro and Small’ in the very definition of MSMEs but their contribution towards making India what it is today, is MASSIVE.

Did you know? Currently, 6.5 crores registered MSMEs in India are employing 11 crore Indians, and the business done by MSMEs in India is responsible for almost 30% of India’s GDP.

Learn more about – What Are MSMEs? Its Definition, Benefits, Registration Process And Classifications Explained

As of March 2020, micro, small and medium enterprises generated 45% of India’s overall manufacturing output. Whooping 40% of India’s exports are done by MSMEs, across various industries. no other sector or vertical contributes to India’s overall business and economy than MSMEs, and the growth is only increasing.

To help MSMEs and to make them more empowered, the Govt of India has introduced several loan schemes for MSMEs. The sole purpose of such a Government Subsidy Loan for Business is to empower MSMEs financially and make them capable of generating more business, creating more employment, and contributing more towards India’s economy.

Learn more about – Which Business Comes Under MSME? Explore the Complete List of MSME Businesses

If you are an MSME enterprise in India and going through a rough patch, then there is no reason to worry. There exist several Govt Business Schemes for MSMEs and Govt Schemes for Startups, which can show you the way forward.

Key Government Schemes

Here are 5 Key Govt Loan Schemes for MSMEs

1. MSME Loan in 59 Minutes – Launched by SIDBI

Launched by SIDBI or Small Industries Development Bank of India, MSME loan in 59 minutes is one of the unique government loan schemes for MSME and new business, wherein a loan is approved in 59 minutes flat. Once the loan is approved, the process to disperse loans takes 8-9 days.

Under this scheme, Small businesses and MSMEs can get loans up to Rs 10 crore, under refinance schemes wherein 5 Nationalised (PSU) Banks are authorized to provide the loans. The interest rate on this special loan for MSMEs depends on the nature of the business, the current credit rating of the owner, and the tenure for which the loan has been approved.

Documents that are required for availing this loan under 59 minutes are:

  • GST documents
  • Income tax documents
  • Bank account statements for the last 6 months
  • Company ownership documents
  • KYC details of the owner
  • Credit rating/ CIBIL documents
  • Other relevant documents

Learn more about – Grab MSME Loan In 59 Minutes – The Detailed Guide To PSB Loan Benefits & How To Apply

Who Should Apply?

Small and Medium enterprises whose immediate capital need is under Rs 10 crore and wish to pay less interest rate (as low as 8% in some cases) can apply for this Govt scheme and avail of the benefits.

You can apply for this loan and get more information right here.

2. MUDRA Loan Schemes for MSMEs

Micro-units Development and Refinance Agency or MUDRA is another unique and innovative government scheme for non-corporate, non-farm small/micro-enterprises.

MUDRA was launched with the premise of ‘funding the unfunded’ MSMEs in 2015. More than Rs 40,000 crore worth of loans to MSMEs have been dispersed under Pradhan Mantri MUDRA Yojana (PMMY) (as of August 2020). MUDRA is also a type of refinance loan, which is approved and dispersed via public sector or Govt banks. Loans up to Rs 10,00,000 are provided under the MUDRA scheme.

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Learn more about – Pradhan Mantri Mudra Yojana – Mudra Loan Features, Benefits and Documents Required

There are mainly three types of MUDRA loans for various MSMEs and startups, based on their current phase.

  • New startups and MSMEs can avail of up to Rs 50,000 loan under the Shishu plan
  • Mid-range MSMEs and startups can avail up to Rs 5,00,000 under the Kishor plan
  • Established MSMEs and startups can avail up to Rs 10,00,000 under the Tarun plan

Who Should Apply?

Small enterprises, which have just started out, and need an initial push of funding to set up business operations can apply for this Govt scheme, and avail benefits. Since Rs 10 lakh is the maximum funding allowed for established MSMEs, this loan scheme works best for short-term but urgent needs.

More details about MUDRA and information on how to avail of MUDRA loans can be found at www.mudra.org.in website.

3. Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE)

Launched by the Ministry of Micro, Small and Medium Enterprises (MSME Ministry) and Small Industries Development Bank of India (SIDBI). The Credit Guarantee Fund Scheme for Micro and Small Enterprises or CGTMSE Scheme provides loans to small enterprises and businesses without any collateral.

Both new and existing businesses can avail of collateral-free loans up to Rs 10 lakh under this scheme. However, for loans of more than Rs 10 lakh and up to Rs 1 crore, MSMEs can provide primary security or mortgage of land and building associated with the business, which is again covered under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)Hence, the assets which are created by the business using the credit facility is considered as a security for loans up to Rs 1 crore.

Learn more about – CGTMSE Loan for MSMEs: The Ultimate Guide Explaining What it is, Features, Eligibility, & Procedure

Who Should Apply?

Businesses that have a physical presence and have assets like real estate and machinery are the best candidates for the CGTMSE scheme by the Govt of India. Since loans up to Rs 1 crore can be availed via mortgaging, businesses can make use of their existing assets, and expand/improvise their operations.

More details about Credit Guarantee Fund Scheme for Micro and Small Enterprises can be availed here.

Getting Govt. Support by Your Side


4. Credit Facilitation Through Bank by National Small Industries Corporation (NSIC)

Launched by the Ministry of Micro, Small and Medium Enterprises (MSME), the Credit Facilitation Through Bank scheme is one of its kind loan facilities which is provided by The National Small Industries Corporation (NSIC) under Central Government Schemes.

Under this scheme, NSIC has signed MoU with several Private and Govt banks to provide fast, easy, and special-purpose loans to MSMEs in India. NSIC also helps the MSMEs and small businesses to complete the documentation, and fulfill all the legal formalities.

Some of the biggest banks such as ICICI Bank, HDFC Bank, Axis Bank, YES Bank, and others are part of this MoU with National Small Industries Corporation for offering quick loans to MSMEs.

Learn more about – What is NSIC? Its Schemes, Registration Process and Required Documents for Registration

Who Should Apply?

Small enterprises that are in need of a quick, short-term loan for expanding and improvising their operations can use this unique Govt scheme, and avail loans from the banks directly at low interest. Since govt also helps them with the documentation and legal issues, availing loans under this scheme is seamless.

More details about this scheme can be availed here.

5. Credit Link Capital Subsidy Scheme (CLCSS) for Technology Upgradation

Government of India and the Ministry of Micro, Small and Medium Enterprises (MSME) offer loans and credits to small enterprises under the Credit Link Capital Subsidy Scheme (CLCSS) for Technology Upgradation.

As the name suggests, this government scheme has been designed to enable MSMEs to upgrade to the latest technology seamlessly and to remain competitive in the domestic and global markets. Loans up to Rs 15 lakh are provided for enabling MSMEs to use the latest technology, which is a subsidy of 15% of the overall updation expenditure.

Learn more about – What is CLCSS or Credit Linked Capital Subsidy Scheme? What are the Benefits of CLCSS for Technology Upgradation?

Who Should Apply?

For Manufacturing enterprises, fabrication units, textile startups, and those small businesses which use machines and equipment, this Central Govt Loan Schemes is an excellent opportunity to improvise and adapt the latest technology.

To know more and apply for this loan scheme, please visit here.

Confused about the best govt loan schemes for MSME and startups? Consult with experts on govt loan schemes for MSMEs and small businesses right at MSMEx, which provides a unique platform for selecting the best and most experienced business advisors and consultants.



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