Learn all about Government Loan Schemes for Small Businesses

Updated on: 03 Jan 2024 // 4 min read // Business Loans
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If you are looking to kick-start a small or medium-sized business in India, then it is highly probable that you will need some financial assistance at one point or the other. While you can always rely on banks and formal lending institutions for offering Business Loans Online, however, they may provide you loans on very stringent terms and conditions, not to mention, an exceptionally high rate of interest.

Besides, most lenders require a strong credit history in addition to collateral or at least a guarantor, before approving a loan. This may not be feasible for you as a new entrant in the market. It is for this very reason that the Government of India has launched some promising loan schemes for small businesses.

The government loan schemes for business aims at offering the much-desired assistance to new and established companies, at terms that are conducive to their circumstances. Let us take a quick look at some of these schemes offered by the central government and the leading public sector banks of India. 

NSIC Government Subsidy for Small Business

The National Small Industries Corporation, also known as NSIC, offers two distinct subsidies for small-scale businesses, which are as follows –

Raw Material Assistance

This is aimed at assisting the SMEs in the purchase of indigenous as well as imported raw materials.

Marketing Assistance

This is aimed at offering funds to SMEs looking forward to enhancing their competitiveness while increasing the market value of their products.

This scheme has been launched to help small-scale businesses overcome hindrances such as regional imbalances, and unfair distribution of national income and wealth. 

The Credit Guarantee Fund Scheme for Micro and Small Enterprises

Also known as the CGMSE, this scheme was launched back in the year 2000 by the Government of India, to offer collateral-free financial assistance to micro as well as small enterprises. Both, existing and new businesses are deemed eligible to receive credit under this scheme.

The credit is offered by the Central Government in conjunction with the Small Industries Development Bank of India (SIDBI), in a ratio of 4:1.

Under this scheme, a business can expect to procure working capital of up to Rs. 1 crore in the form of a term loan.

Market Development Assistance Scheme for MSMEs

As the name suggests, this scheme was designed to offer monetary assistance to Micro, Small as well as Medium Enterprises, who are seeking to gain a grip in the international market. The Market Development Assistance Scheme aids the participation of the enterprises in international exhibitions and trade fairs, as a part of MSME India stall.

The scheme also has a provision for offering funds pertaining to sector-specific market studies organised by any of the following –

  • Industry Associations
  • Export Promotion Councils
  • Federation of Indian Exports Organisation (FIEO)

Under this scheme, MSMEs receive up to 100% reimbursements on the cost incurred towards:

  • Participation in Fairs/Exhibitions abroad by EPCs
  • EPC Sponsored Buyer-Seller Meets/Trade Delegations Abroad
  • Promotional Activities within India by EPCs
  • Publication/publicity with Focus on Export

Credit Linked Capital Subsidy Scheme for Technology Upgradation

In order to reduce the prices, and remain competitive in the global as well as local markets, it is essential for MSMEs to upgrade all the processes right from manufacturing to marketing and sales. This Credit Linked Capital Subsidy Scheme or CLCSS is an initiative of the Ministry of Small Scale Industries (SSI) wherein a subsidy of 15% is offered to facilitate the necessary technology upgrades, with a cap of Rs. 15 Lakh per enterprise.

Under this scheme, all the sole proprietorship enterprises, partnership firms, cooperative ventures, private businesses, and public limited enterprises, and companies are deemed eligible to reap the various benefits.

Micro-Units Development and Refinance Agency Loan

Also known as MUDRA Loan, this loan scheme for small businesses is a pilot project of the Government of India, to offer development as well as refinance assistance to Micro Finance Institutes. The following categories of MFIs are included in this category –

  • Small companies
  • Small Businesses
  • Trusts
  • Section 8 Companies
  • Co-operative Societies
  • Small Banks
  • Scheduled Commercial Banks Rural Banks

MUDRA Loans are offered to businesses under three distinct groups, which are –

  • Shishu – This category is for companies in their nascent stage, wherein they can avail a loan amount of up to Rs. 50,000.
  • Kishor – This category is designed for established businesses that need working capital. The loan amount offered under this category is between Rs. 50,000 and Rs. 5 lakh.
  • Tarun – Designed for well-established businesses that require additional funds to expand, this category offers loan amounts of up to Rs. 10 lakh.

National Bank for Agriculture and Rural Development

Also known as NABARD, the unit was devised to aid and support agriculture-based enterprises of Rural India. Not only do these loans are designed to support the capital requirements of village industries, but also to encourage the successful functioning of cottage industries across the nation.

It primarily coordinates the provincial financing exercises of all enterprises under its purview. It also maintains contact with the Government of India, the Reserve Bank of India, as well as State Governments and some national-level establishments to ensure accurate approach detailing.

These are some of the best loan schemes for businesses provided by the Central and State Governments. Depending on your business type, its scale, and the stage it is currently in, you can pick a scheme that best suits your needs. That being done, all you will need to do is complete the application process, and before you know it, your businesses will be soaring high in the skies of success!