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Best Government Loans for Business in India with eligibility

Best Government Loans for Business in India with eligibility

If you are an entrepreneur or a small business owner in India, you might be looking for some financial assistance to grow your business. One of the options you can consider is applying for a government loan for business. Government loans are loans that are offered by various government schemes and agencies to support the development of micro, small and medium enterprises (MSMEs) in India. These loans usually have lower interest rates, longer repayment periods, and easier eligibility criteria than other types of loans.

In this blog post, we will discuss some of the best government loan schemes for business in India and their eligibility criteria. We will also provide some tips on how to apply for these loans and what documents you will need.

  1. Pradhan Mantri Mudra Yojana (PMMY)
  2. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
  3. Stand-Up India Scheme
  4. MSME loan scheme
  5. Making India Soft Loan Fund for MSMEs (SMILE) by SIDBI

01. Pradhan Mantri Mudra Yojana (PMMY)

The government’s flagship programme, PMMY, offers loans to non-corporate, non-farm small and micro companies up to Rs. 10 lakh. Three categories are used to group the loans:

  • Shishu (up to Rs. 50,000)
  • Kishore (Rs. 50,001 to Rs. 5 lakh)
  • and Tarun (Rs. 5 lakh to Rs. 10 lakh)

The loans can be used for various purposes such as working capital, machinery, equipment, vehicles, etc.

Eligibility:

To be eligible for PMMY, you should have a business plan and a good credit history. You should also be engaged in any of the following activities: manufacturing, trading, services, or allied agricultural activities. You can apply for PMMY through any of the participating banks or financial institutions.

Some of the paperwork you’ll require is:

– Aadhaar card

– PAN card

– Business registration certificate

– Proof of address

– Proof of identity

– Bank statements

– Income tax returns

– Profit and loss statement and balance sheet

– Project report

02. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

CGTMSE is a trust that was set up by the government and SIDBI to provide credit guarantee to banks and financial institutions that lend to MSMEs without collateral or third-party guarantee. The scheme covers loans up to Rs. 2 crore for both term loans and working capital loans.

Eligibility:

To be eligible for CGTMSE,

  • you should be an MSME as per the definition of the MSME Development Act, 2006.
  • You should also be engaged in any of the eligible activities such as manufacturing, services, retail trade, etc.
  • You can apply for CGTMSE through any of the member lending institutions (MLIs) of the trust.

Some of the paperwork you’ll require is:

– Aadhaar card

– PAN card

– Business registration certificate

– Proof of address

– Proof of identity

– Bank statements

– Income tax returns

– Profit and loss statement and balance sheet

– Project report

03. Stand-Up India Scheme

Stand-Up India Scheme is a scheme that aims to promote entrepreneurship among women and SC/ST communities by providing loans ranging from Rs. 10 lakh to Rs. 1 crore for setting up greenfield enterprises in the manufacturing, services, or trading sectors.

Eligibility:

To be eligible for Stand-Up India Scheme,

  • you should be a woman or belong to SC/ST community.
  • You should also be above 18 years of age and have not defaulted on any loan in the past.
  • You should also have a business plan and a viable project proposal.
  • You can apply for Stand-Up India Scheme through any of the scheduled commercial banks or online through the Stand-Up India portal.

Some of the paperwork you’ll require is:

– Aadhaar card

– PAN card

– Caste certificate

– Business registration certificate

– Proof of address

– Proof of identity

– Bank statements

– Income tax returns

– Profit and loss statement and balance sheet

– Project report

04. MSME loan scheme

The MSME loan is a government loan scheme for Micro, Small, and Medium Enterprises (MSMEs) in India. It is offered by several financial institutions, such as banks and non-banking financial companies (NBFCs), in partnership with the government. The loan scheme aims to provide financial assistance to MSMEs to help them grow and expand their businesses.

Eligibility Criteria for MSME Loan:

To be eligible for the MSME loan, a business must meet the following criteria:

  • The business must be registered as an MSME, as per the definition provided by the government of India. As per the definition, a business must have an investment of up to Rs 50 crore and an annual turnover of up to Rs 250 crore.
  • The business must have a good credit score and a track record of repaying previous loans.
  • The business must have a solid business plan and a clear strategy for growth and expansion.
  • The business must be profitable and should have a positive cash flow.
  • The business must be operating in a sector that is eligible for the MSME loan scheme.

Some of the paperwork you’ll require is:

– Aadhaar card

– PAN card

– Business registration certificate

– Proof of address

– Proof of identity

– Bank statements

– Income tax returns

– Profit and loss statement and balance sheet

– Project report

05. Making India Soft Loan Fund for MSMEs (SMILE) by SIDBI

Small Industries Development Bank of India (SIDBI), which launched SMILE in 2015, is in charge of it. With the use of soft loans, this programme aims to help new MSMEs get off the ground while also enabling expansion for already established ones. The interest rate under the SMILE programme is 8.36% and higher.

Eligibility for SMILE:

  • Applications for this programme are accepted from both newly established businesses and those in the manufacturing and services industries.
  • This programme will also cover current businesses that are starting new initiatives or upgrading existing ones in order to grow.
  • With a moratorium of 36 months, the maximum loan repayment term is 10 years.

Some of the paperwork you’ll require is:

  • – Aadhaar card
  • – PAN card
  • – Business registration certificate
  • – Proof of address
  • – Proof of identity
  • – Bank statements
  • – Income tax returns
  • – Profit and loss statement and balance sheet
  • – Project report

These are some of the best government loan schemes for business in India that you can avail if you meet their eligibility criteria. However, before applying for any loan, you should do your own research and compare the interest rates, repayment terms, processing fees, and other charges of different lenders. You should also prepare a detailed business plan and project report that showcases your business idea, market potential, financial projections, and risk analysis. This will help you convince the lenders about your creditworthiness and increase your chances of getting approved.

FAQs

Q.1- How to get a business loan for startup?

To get a business loan for a startup in India, you can apply for a Mudra loan scheme if the required loan amount is up to Rs. 10 lakh. If you need a loan for a sum greater than Rs. 10 lakh, you can directly apply for one from the bank or NBFC of your choice.

Q.2- Which documents required for business loan?

Some of the documents you will need are:

  • – Aadhaar card
  • – PAN card
  • – Business registration certificate
  • – Proof of address
  • – Proof of identity
  • – Bank statements
  • – Income tax returns
  • – Balance sheet and profit and loss statement
  • – Project report

Q.3- What is business loan interest rate by Indian government?

The Indian government provides business loans through various schemes such as Pradhan Mantri MUDRA Yojana (PMMY) and Stand-Up India Scheme. However, the interest rates for these schemes are not fixed and vary depending on the bank or NBFC that provides the loan.

For instance, the interest rate on a business loan from a bank or NBFC starts at 16% per annum for loans up to Rs. 2 crore with a maximum payback term of 5 years (which may be extended depending on the needs of the business).

Q.4- How to take business loan?

There are several steps you can take to apply for a business loan:

  • Understand your finances.
  • Prepare your business plan.
  • Know your financial limits Before you apply for a loan.
  • For your business, select a loan type.
  • Get your paperwork ready.
  • Check who you’re dealing with Before you apply for a loan.
  • Get expert advice.

Q.5- How much business loan can I get?

The maximum loan amount that can be availed depends on various factors such as the type of business, credit score, and other eligibility criteria set by the bank or NBFC.

For instance, the majority of financial institutions offer unsecured business loans without collateral starting at Rs. 10,000 and up to Rs. 2 crores in loan amount. However, some financial institutions, like HDFC Bank, provide quick business loans up to Rs. 75 lakh at the lowest interest rates.

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