Large-scale industries have never had trouble obtaining finance for their businesses, owing to the impression that they provide the most job prospects to the general public. However, it is astonishing to see that huge enterprises employ less than five crore people across the country. The MSMEs, which fall under the unorganized sector, recruit around 12 crore people in India. Despite this, they have a constant scarcity of credit facilities.
Both the state and central governments in India have several loans designed specifically for MSME business owners to satisfy their needs. Many public sector banks also have a variety of programmes to help MSME enterprises. The schemes listed below assist entrepreneurs in obtaining financial assistance to meet their company demands.
- Pradhan Mantri Mudra Yojana (PMMY)
Micro Units Development & Refinance Agency Ltd – MUDRA
- Refinancing assistance to banks and NBFCs to increase the amount of money available for lending
- Onward lending to manufacturing, trading, and service businesses, as well as tractor finance, agriculture, and related operations, and two-wheeler loans
- In addition to financial aid, MUDRA strengthens MSME firms through financial literacy and other social support services.
- Sishu loan up to Rs. 50000, Kishore loan up to Rs. 5,00,000, and Tarun loan up to Rs. 10 lakhs are the three lending schemes offered by MUDRA.
- Credit Guarantee Fund Government Business Loan Scheme(CGTMSE)
The Credit Guarantee Fund Trust for Micro and Small Enterprises, or CGTMSE, provides credit guarantees on collateral-free term loans to qualifying MSME units. It primarily covers the funds received by MSME units from qualifying partner lenders. It also ensures payment to the lending institution, a percentage of the term loan, in the event of a default or the loan becoming a Non-Performing Asset (NPA).
This scheme’s guarantee cover is provided based on the borrower’s category or location. You can check out the details below –
| Particulars | Maximum credit guarantee provided |
| Micro Enterprises | – Up to Rs. 5 lakhs – 85% of the default amount (maximum Rs. 4.25 lakhs) – Above Rs. 5 lakhs up to Rs. 50 lakhs – 75% of the default amount (maximum Rs. 37.5 lakhs) Above Rs. 5 lakhs – Up to Rs. 2 crores – 75% of the default amount (maximum Rs. 1.5 crores) |
| Women Entrepreneurs/ MSME from North East Region and Sikkim | 80% of the default amount (maximum Rs. 40 lakhs) |
| MSE Retail Trade | 50% of default amount (maximum Rs. 50 lakhs) |
| All other eligible borrowers | 75% of the default amount (maximum Rs. 1.5 crores) |
- Business Loans from Banks and NBFCs
Business loans are available in both secured and unsecured formats. Entrepreneurs who look for capital to begin their businesses can apply for business loans. These loans are perfect for small businesses in India.
- Business loans can be in the form of term loans, working capital loans, vehicle loans or equipment loans
- Business owners can get up to 50 crores business loans based on the financial standing of their business
- Interest rate on business loans ranges between 8.5% to 22%
- You get up to 15 years to repay this loan
- Bank Credit and Guarantee
Banks provide qualifying businesses with credit, overdrafts, or bank guarantees. Banks assist with the line of credit, bill discounting, financial guarantees, advance payment guarantees, delayed payment guarantees, performance guarantees, and foreign bank guarantees, among other services. Loyal customers can enjoy their credit, which depends on a few factors. That includes their bank relationship, their business position, and their financial transaction history. They also charge a fee for issuing bank guarantees, which is a percentage of the total. The business owners may have to pledge their current assets or equities, for the lenders to obtain a banking guarantee.
- Instant Online Loans for Businesses
With the advent of online lending, many lending platforms have cropped up that offer Instant Business Loans for MSMEs. These loans are primarily processed online and disbursed within 24-48 hours.
- Get loan amounts of up to Rs.50 lakhs
- Interest rates start from 9% and can go up to 23%
- These are short term loans of up to 5 years’ repayment tenure
- These are unsecured loans, completely processed online
- Personal Loans or Top-up Home Loans
If your business is relatively new and there is no credit standing, you can apply for a personal loan with your credentials and use the money for your business. If you have an existing home loan, you can opt for a top-up home loan. On its processing, with the same interest rate as your home loan, you can use this amount towards your business.
- Stand-up India Scheme
The government launched the Stand-up India scheme to provide loans to businesses run by Scheduled Castes/Tribes and women. The Small Industries Development Bank of India is in charge of this scheme (SIDBI). Loans ranging from Rs. 10 lakhs to Rs. 1 crore are available under this scheme. Each bank must provide this loan to at least one Scheduled Caste/Scheduled Tribe or female entrepreneur.
The loan will cover approximately 75% of the total project cost, according to the loan terms. This program is open to businesses in the trading, manufacturing, and other service-related industries. A woman or a member of a Scheduled Caste/ Scheduled Tribe must own at least 51% of the shares in any business other than a sole proprietorship.
The number of start-ups has increased dramatically in recent years across the country. Several ideas have blossomed into thriving enterprises. Millions of Indians rely on these MSME businesses for their livelihood, and the economy has experienced a healthy increase in investments in them.
A considerable capital amount is a required criterion for any new MSME venture. Not everyone has access to venture capitalists who are willing to invest millions of rupees. The lack of timely and appropriate financing might depress the entrepreneurial spirit. Furthermore, for others, securing collateral or security can be difficult. Other factors, such as stringent government policies, the legal framework, regulatory loopholes, incorrect information, and so on, could hinder the process of obtaining the initial capital.
