Exploring Government-Supported Micro Loan Programmes for MSMEs

December 03, 2024

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India's micro and small industries, which employ 20 crore people and account for 30% of the nation's GDP, are the backbone of the nation. According to Union Finance Minister Nirmala Sitharaman, micro, small, and medium-sized enterprises will be crucial to achieving the goal of making India a developed country by 2047.

 

Government-supported micro loan programmes empower entrepreneurs by providing them with financial assistance at competitive interest rates and favourable terms. If you are an entrepreneur looking for SME finance options, understanding government loans can be a game-changer for your business.

 

Government Micro Loans for MSMEs

 

1. Pradhan Mantri Mudra Yojana

The Pradhan Mantri Mudra Yojana (PMMY) is a flagship initiative by the Government of India aimed at providing financial assistance to small businesses in the form of loans up to ₹10 lakhs. Under PMMY, loans are classified into three categories:

  1. Shishu: Loans up to ₹50,000 for businesses in their early stages.
  2. Kishore: Loans ranging from ₹50,001 to ₹5 lakh for businesses that have already started but need further financial support.
  3. Tarun: Loans ranging from ₹5,00,001 to ₹10 lakh for established businesses looking to expand their operations.

 

Loans can be obtained from various financial institutions like banks, NBFCs, and MFIs, with interest rates and repayment terms varying depending on the institution.

 

2. Credit Guarantee Fund Trust for Micro and Small Enterprises

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a scheme by the Indian Government and SIDBI that offers collateral-free credit facilities to MSMEs. Eligible MSMEs can access loans up to ₹2 crore without collateral or third-party guarantee. The guarantee cover ranges from 50% to 85% of the loan amount. This scheme promotes entrepreneurship by reducing lending risk for MSMEs, encouraging lenders to extend credit to those with limited assets or collateral.

 

3. Stand-Up India

The Stand-Up India scheme is a government initiative aimed at promoting entrepreneurship among women and marginalised individuals. It provides government micro loans MSMEs ranging from ₹10 lakhs to ₹1 crore for setting up new enterprises or expanding existing ones. At least one-third of these loans are reserved for women entrepreneurs. These loans can be used for plant and machinery acquisition, working capital, or other business-related expenses, with a repayment period of up to 7 years.

 

4. National Small Industries Corporation (NSIC) Subsidy Schemes

The National Small Industries Corporation (NSIC) offers various subsidy schemes to support MSMEs in India. These schemes aim to enhance the competitiveness of small businesses by providing them with access to modern technology, marketing assistance, and other support services.

 

5. The Prime Minister Employment Generation Programme (PMEGP)

The Prime Minister Employment Generation Programme (PMEGP) is a credit-linked subsidy programme that promotes self-employment in rural and urban areas. It offers government loans to entrepreneurs or groups to set up micro-enterprises, with the remaining cost financed by banks or financial institutions.

 

6. Raising and Accelerating MSME Performance (RAMP)

SIDBI launched the Raising and Accelerating MSME Performance (RAMP) programme to support MSMEs in India. RAMP aims to bridge financing gaps and provide necessary support for operations. MSMEs can access debt or equity financing for capacity expansion, technology upgrades, marketing, branding, and working capital requirements through a network of partner financial institutions.

 

7. MSME Business Loans in 59 Minutes

The Indian government launched the MSME Business Loans in 59 Minutes scheme, offering SME finance up to ₹1 crore in 59 minutes through an online portal. The scheme uses advanced algorithms and data analytics to assess creditworthiness based on GST returns, income tax returns, bank statements, and other relevant information. The loan amount can be used for working capital, machinery purchases, or business expansion, with interest rates and repayment terms varying depending on the lending institution.

 

8. SIDBI Make in India Soft Loan Fund for MSMEs (SMILE)

SIDBI's Make in India Soft Loan Fund for MSMEs (SMILE) offers concessional interest loans ranging from ₹10 lakh to ₹1 crore to eligible enterprises. These loans can be used for land acquisition, plant and machinery purchases, or working capital needs. SMILE aims to provide affordable, flexible financing options, enabling MSMEs to scale up operations, create employment, and contribute to the Make in India initiative.

 

9. Bank Credit Facilitation Scheme

The Bank Credit Facilitation Scheme is a government initiative that offers a guarantee cover of up to 85% of a loan amount to MSMEs, allowing them to access credit without collateral security or third-party guarantees. This reduces lenders' risk and encourages them to extend credit to small businesses. The scheme can be used for working capital, machinery procurement, expansion, and new ventures.

 

10. Scheme of Fund for Regeneration of Traditional Industries (SFURTI)

The Scheme of Fund for Regeneration of Traditional Industries (SFURTI) is a government initiative by the Ministry of Micro, Small, and Medium Enterprises (MSMEs) to boost the competitiveness of traditional industries. It provides financial support for skill development, capacity building, infrastructure development, technology upgradation, marketing support, and cluster development through selected implementing agencies.

Final Thoughts

Government-supported micro loan programmes play a crucial role in supporting the growth and development of MSMEs in India. By availing the benefits of government micro loans MSMEs, you can empower your business and fuel its growth.

 

Take your business to the next level with Ujjivan Small Finance Bank MSME Loans. We have a host of MSME products tailored for your unique business growth needs. Additionally, we offer MSME Overdraft facilities for urgent business capital requirement. Browse through our suite of products and apply today!

 

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FAQs

1. What are the eligibility criteria for government micro loans for MSMEs?

Eligibility criteria vary depending on the specific loan programme. Generally, MSMEs should have a valid Udyog Aadhaar Memorandum (UAM) registration under the MSMED Act 2006.

2. Can I apply for multiple government micro loans simultaneously?

Yes, you can apply for multiple government micro loans if you meet the eligibility criteria and have a genuine need for additional financial support. 

3. Do government micro loans require collateral?

Many government micro loan programmes do not require collateral or third-party guarantees. However, some programmes may require specific assets or collateral based on the nature of the loan.

4. How long does it take to get approved for a government micro loan?

The time taken for loan approval varies depending on the loan programme and the financial institution involved. It can range from a few days to several weeks.

5. Are there any subsidies available under government-supported micro loan programmes?

Yes, some government micro loans MSMEs offer subsidies in the form of interest rate concessions or margin money subsidies to eligible MSMEs.

6. Can women entrepreneurs avail of specific benefits under government-supported micro loan programmes?

Yes, several government micro loans MSMEs have specific benefits reserved for women entrepreneurs.

7. Are government micro loans interest-free?

Government micro loans for MSMEs are not interest-free. However, these loans are provided at subsidised interest rates, lower than the prevailing market rates.

8. What is SME finance?

SME finance offers financial services tailored to meet the unique needs of small and medium enterprises (SMEs), including access to credit, working capital finance, trade finance, and insurance products.

9. Are government micro loans only available for manufacturing businesses?

No, government loans are available for MSMEs across various sectors, including manufacturing, services, and traditional industries.

10. Are government micro loans available for startups?

Yes, some government loans provide financial assistance to startups. However, startups may have additional eligibility criteria and documentation requirements.

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