7 Leading Business Loans Options for Women Entrepreneurs

Business Loans are the financial assistance given by banks/financial institutions to business entities for capital investment and for working capital requirements that would help the growth of the business.

The loans provided for capital investment, i.e., for the purchase of machinery, building infrastructure, etc., and for setting up of new establishments are by way of term loans which have to be repaid within a stipulated period.

The funding provided for working capital, i.e., for the expenses required for the day to day operations of the business, for procuring stock, hiring staff, etc., will be revolving in nature and will be provided for a period of 6 months to one year. The working capital limits will be renewed on an annual review.

Business Loans for Women

Women empowerment being the order of the day, there is a lot of thrust on women entrepreneurship. Earlier, it was difficult for women to get financial assistance due to several social stigmas. However, in the present day, there is a lot of encouragement for women entrepreneurship which in turn is creating a lot of employment opportunities in the rural and semi-urban areas. There are various specialised loan products for women entrepreneurs with a lot of concessions.

The country is witnessing an enormous growth in the small and medium business sector and 45% of the industrial output is from the MSME Sector, which forms 40% of the GDP output. A major part of the credit goes to the women entrepreneurs who have successfully established small and medium sector businesses in the rural and semi-urban areas and have created an employment opportunity to several women in the rural and semi-urban areas.

Features and Overviews of Business Loans for Women

The features of Business Loans for women are:

  • Purpose:The loan is given for undertaking activities like farming, handicrafts, food processing, garment making, beauty parlours, canteens, xerox and std booths, etc., which will be categorised under the MSME Sector.
  • Quantum: The maximum quantum that some of the banks are providing for Business Loans to women is up to 1 Crore depending upon the activity. There are government-sponsored schemes that provide loans ranging from 25,000 to 50 Lakhs. The loan quantum depends on the scheme under which the loan is provided and the line of activity.
  • Security: There is no security required for loans up to 1 Crore. Credit Guarantee cover will be available.
  • Interest:The rate of interest depends on the scheme under which the loan is granted
  • Margin:The margin also depends on the scheme under which the loan is granted
  • Processing charge: As per the scheme guidelines

7 Leading Business Loans for Women Entrepreneurs

Name of the Loan Features

Stree Shakti Package offered by State Bank of India

  • This special scheme is designed exclusively for women by the State Bank of India with an objective to support women entrepreneurship.
  • 50% of the share capital of the business entity should be owned by women in order to be eligible for the loan under this scheme.
  • A loan up to 50 Lakhs will be granted
  • For loans that exceed a sum of 2 Lakhs concessions to the extent of 0.50% in the interest will be provided.
  • The margin will be lowered by 5% as compared to other categories.
  • No collateral security will be required for a loan up to 5 Lakhs for tiny sector units.
  • The women entrepreneurs who intend to avail a loan under the scheme should have enrolled in the EDP Programme organised by the respective state agency.

Annapurna Scheme

  • This scheme is mainly for food catering business
  • The maximum loan quantum is 50,000
  • Security by way of hypothecation of the assets created and personal guarantee is required.
  • The loan should be repaid with 36 months including the holiday period of one month.
  • The interest rate is as per the scheme guidelines
  • This loan will be provided in most of the branches of SBI

Dena Shakti Scheme

  • This is an exclusive financing scheme for women entrepreneurs by Dena Bank (Dena Bank is now merged with Bank of Baroda).
  • In order to expand the reach to women entrepreneurs, the bank has included various activities that can be financed under the scheme. The activities are:
    • Agriculture and allied activities
    • Small Enterprises (Direct & Indirect Finance),
      Micro & Small Manufacturing Enterprises,
      Micro & Small Service Enterprises (including small road & water transport operators), small business professionals and self-employed and all other service enterprises.
    • Micro Credit
    • Retail Trade
    • Housing
    • Education
  • The loan quantum will be 20 Lakhs for retail trade, education, and housing. The quantum for micro credit is 50,000.
  • Margin: As per the guidelines of the bank/RBI from time to time.
  • Interest: As per the guidelines of the bank from time to time. A concession of 0.25% will be extended to women entrepreneurs as applicable to the existing activities.

Oriental Mahila Vikas Yojana Scheme

  • This scheme aims at providing financial assistance to women entrepreneurs to start small businesses.
  • Women should have 51% ownership in the business to qualify for the loan.
  • For loans below 10 Lakhs and for loans up to 25 Lakhs sanctioned to Small Scale Industries no collateral security is required.
  • A concession of 2% in the rate of interest will be provided.
  • The loan has to be repaid within 7 years
  • The scheme has been initiated by the Oriental Bank of Commerce.

Mudra Yojana for Women

  • This scheme was introduced to aid women to start small businesses like a daycare centre, beauty parlours, tailoring units, tuition centres, etc. It will also be extended for group ventures by women.
  • The loan has been divided into 3 categories depending on the quantum and line of activity.
    • Shishu: For initialisation of a business with a loan up to 50,000.
    • Kishore: For an already established business a loan between 50,000 and 5 Lakhs will be granted.
    • Tarun: For the expansion of the existing business a loan between 5 Lakhs and 10 Lakhs will be granted.
  • No collateral is required for loans up to 10 Lakhs

Cent Kalyani Scheme by Central Bank of India

  • This loan will be granted to women managing businesses falling under the MSME category. Women engaged in agricultural activities or retail trade are also eligible for the loan.
  • The maximum quantum under the loan is 1 Crore
  • The borrower has to arrange a minimum margin of 20%
  • Both Term Loan and Working Capital Finance will be provided.
  • Prime security of hypothecation of stocks and receivables and the assets created out of the finance is stipulated.
  • No collateral security or personal guarantee is required
  • No processing charge will be collected for the loan
  • Rate of interest will be as per the guidelines of the bank from time to time.

Udyogini Scheme

  • Punjab & Sind Bank was the first to promote this scheme and was followed by many other banks, including Karnataka State Women's Development Corporation-KSWDC.
  • This scheme is encouraging women entrepreneurship to a great extent by granting loans at a considerably low interest.
  • The loan is sanctioned to women in the age group between 18 years and 45 years.
  • The family income should be up to 45,000
  • No income stipulation for widowed, destitute or physically challenged women.
  • For widowed, destitute, physically challenged women, women belonging to SC/ST category, a subsidy of 30% of the loan or 10,000, whichever is lower, will be provided.
  • The maximum quantum of the loan under this scheme is 1 Lakh.
  • For women belonging to general category a subsidy at 20% of the loan amount or 7,500 whichever is less will be provided.

How to Apply for a Business Loan for Women?

To apply for the Business Loan for women:

  • Log in to the official website of the bank from where the loan is being availed
  • Select the loan that you qualify for from the dropdown menu
  • Further, the basic details like name, contact address, mobile number, and email id has to be provided.
  • On completing the process click on the 'proceed' button
  • An OTP will be generated and sent to your registered mobile number, which has to be mentioned in the slot provided.
  • Once the application process is complete, you will get a call from a representative of the bank who will give you the details of the documents that have to be submitted.
  • On submission of the documents, the processing will be initiated
  • Approval of the loan will be intimated vide SMS and the loan will be disbursed on the execution of loan documents.

You can also apply online through MyMoneyaMantra.

Things to Know before Applying for a Business Loan for Women

In the present scenario, women worldwide are defining the performance of economies, countries, and organisations. Women empowerment is being supported in full swing. Various exclusive schemes to suit every category of business that is convenient for women who are both educated and uneducated have been introduced.

Women applying for a Business Loan should know certain basic things:

  • The concessions that they are entitled to
  • They should understand the scheme specifications and apply for a loan suitable for their line of activity.
  • They should assess the actual requirement of funds to run the business before applying for the loan.
  • They should be aware of training requirements to qualify for a loan under some of the schemes that are suitable for them.
  • They should be aware of the extent of the loan that will be without collateral security
  • They should be aware of the repayment period to asses if they will be able to pay back the loan within the stipulated time.
  • Knowing the special benefits that they are entitled to is very important before applying for a loan.
  • Women should be aware that the loans are given for starting a new business and also for expanding and modernising the existing business.
  • They should also know that a minimum of 50% ownership in the business is required to qualify for the loans under the schemes specially designed for women with a lot of benefits.
  • Get a checklist of documents that have to be submitted for the scheme under which you have opted to avail the loan. This will make the processing simpler since the required documents will be submitted at one go.

Benefits of Business Loan for Women

The following are the benefits of Business Loan for women:

  • Exclusive schemes have been designed for women to lend support to women entrepreneurship that will give economic independence to women.
  • The loans are available in the range of 25,000 to 20 Crores for initiation of small business and to expand and modernise the existing business.
  • Women get 51% of the ownership in the business since most of the schemes have this stipulation to qualify for the loan.
  • There are several concessions like concession in interest rates from 0.25% to 2% and reduction in the margin to the extent of 5%.
  • Some of the schemes provide subsidy to the extent of 10,000
  • Widowed, destitute, and physically challenged women are given preferences and also concessions/subsidy under some special schemes.
  • No processing charges will be collected
  • Supporting women entrepreneurship generates employment opportunities to women in rural and semi-urban areas.
  • Some of the schemes do not stipulate collateral security up to 1 Crore

FAQS

Which banks are actively supporting women entrepreneurship by providing exclusive Business Loans to women?

The banks that are actively contributing to women empowerment are:

  • State Bank of India
  • Oriental Bank of Commerce
  • Punjab & Sind Bank
  • Syndicate Bank
  • Central Bank of India

How easy is to for women to get Business Loans?

With a large number of schemes introduced to suit various lines of activities which even women without education can conduct, it has become very convenient for women to avail a Business Loan. Even to carry on a small business with very little investment, women need to avail a loan. Earlier, it would be very difficult for women to get a loan from banks/financial institutions. Now with the introduction of schemes to suit the requirement of every small business, loans have become easily accessible to women.

What is the EMI that has to be paid for a Small Business Loan?

The EMI depends on the loan amount availed and the tenure opted for. You can use MyMoneyMantra EMI Calculator to know the EMI that has to be paid.

If a woman is already a partner in an existing business, can she avail a loan for business expansion under any of the special schemes?

Yes. She can avail a loan under the special schemes provided she has a minimum of 50% ownership in the existing business.

What are the special benefits under the Business Loans for women?

The special benefits under the Business Loans for women are interest concessions, reduction in margin and availability of subsidy.

Is collateral security required to avail a Business Loan for women?

Each scheme has a stipulation of amount up to which the collateral security is waived. In one of the schemes, i.e., Cent Kalyani Scheme collateral security is waived up to 1 Crore.

Is skill training mandatory for women to avail Business Loan under the special schemes?

Under the Stree Shakti Scheme by State Bank of India, there is a mandatory stipulation that the candidate should have enrolment for the Entrepreneurship Development Programme organised by the respective state agencies to qualify for the loan.

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