Top 8 Government Business Loan Schemes for MSMEs

Micro, Small, and Medium Enterprises (MSMEs) are the backbone of India's economy, contributing around 30% to the GDP and employing over 11 crore people. Their growth is pivotal for India's economic development. However, access to credit remains a major hurdle. In response, the Government of India has launched various schemes to provide financial support, especially after disruptions like COVID-19. Let’s explore these MSME loan schemes, their eligibility, and the benefits they offer.

Major Government-Sponsored MSME Loan Schemes

1. Pradhan Mantri Mudra Yojana (PMMY)

Launched in 2015, this scheme provides loans up to ₹10 lakh to non-corporate, non-farm small enterprises. The scheme operates under three categories:

• Shishu: Up to ₹50,000
• Kishore: ₹50,001 to ₹5 lakh
• Tarun: ₹5 lakh to ₹10 lakh

These loans fall under and classified as MUDRA loans.   MUDRA stands for Micro Units Development and Refinance Agency Ltd. It was established by the Government of India in 2015 under the Pradhan Mantri Mudra Yojana (PMMY) to provide financial support to non-corporate, non-farm small/micro enterprises. MUDRA primarily refinances microloans provided by banks, Non-Banking Financial Companies (NBFCs), Micro Finance Institutions (MFIs), and other lending institutions to foster entrepreneurship and boost the micro-enterprise sector.

Loans are provided through banks, small finance banks, NBFCs, and MFIs, with a focus on startups and small businesses, especially in rural areas. The loans can be applied through the UdyamiMitra portal.

2. Prime Minister’s Employment Generation Programme (PMEGP)

A merger of the Prime Minister’s Rojgar Yojana (PMRY) and Rural Employment Generation Programme (REGP), this scheme aims at promoting self-employment among the youth and traditional artisans.

• Loan Cap: ₹25 lakh for manufacturing and ₹10 lakh for services.
• Subsidy: 15% to 35%, varying by location and category (urban/rural, general/special).

Eligibility extends to individuals above 18 years, including SHGs, production cooperatives, and charitable trusts.

3. Credit Guarantee Fund Trust for Micro & Small Enterprises (CGTMSE)

Established by the Ministry of MSME and SIDBI, this scheme provides collateral-free loans up to ₹2 crore.

• Coverage: 85% for loans up to ₹5 lakh, 75% for others, and 50% for retail trade.

This scheme helps MSMEs secure funding without third-party guarantees, facilitating faster access to credit.

4. Credit Linked Capital Subsidy Scheme (CLCSS)

Focused on technology upgradation, CLCSS provides a 15% capital subsidy for loans up to ₹1 crore for purchasing modern equipment.

• Eligible Sectors: Manufacturing units looking to adopt state-of-the-art technology.

This scheme helps MSMEs enhance productivity and competitiveness.

5. Equity Infusion through Fund of Funds

To address the equity shortage in MSMEs, this scheme offers equity funding through venture capital and private equity.

• Fund Size: ₹50,000 crore.
• Purpose: To help MSMEs with growth potential get listed on stock exchanges and attract private investments.

6. Credit Guarantee Scheme for Subordinate Debt (CGSSD)

Launched to support stressed or NPA MSMEs, this scheme provides subordinate debt funding to promoters of stressed MSMEs.

• Loan Limit: 15% of promoters’ equity or ₹75 lakh (whichever is lower).
• Repayment: 10 years with a 7-year moratorium on principal repayment.

7. SIDBI Make in India Loan for Enterprises (SMILE)

This scheme supports MSMEs under the ‘Make in India’ initiative by offering soft loans for modernization and expansion.

• Loan Size: Minimum ₹10 lakh for equipment and ₹25 lakh for others.
• Repayment: Up to 10 years with a 3-year moratorium.

It aims to boost smaller enterprises in both the manufacturing and service sectors.

8. MSME Business Loan for Startups in 59 Minutes

This scheme automates and digitizes the loan approval process, providing loans in principle within 59 minutes.

• Loan Amount: ₹1 lakh to ₹5 crore.
• Interest Rate: Starts at 8.5%.

Businesses must be IT-compliant and GST-registered (optional for certain loans). The process is fully online, ensuring quicker disbursements.