Government Loan for Business Startup in India


15 Jul 2019 | 5 min read

Government Loan for Business Startup in India

The Nasscom report titled, “Indian Start-up Ecosystem 2018: Approaching Escape Velocity,” says India has the third-largest number of startups in the world. Startup culture is thriving in the country and in order to succeed in the business; entrepreneurs need funds. Angel Investors and Venture Capitalists generally give these funds. However, it is not easy to get funds every time you pitch. Due to the increasing number of startups in the county, the Government of India is doing its best to support and promote them. The Government aims to make credit easily available to small and medium enterprises. The Government offers loans for a startup in India to ensure that the small businesses have the finance they need. If you are an entrepreneur, you need to take note of this business loan for startup available for you. Most importantly, these loans have no collateral. 

MUDRA Loan Scheme

Micro Units Development and Refinance Agency Ltd. (MUDRA) aims to provide startup business loans in India to micro-units and the small business sector. The scheme has been designed keeping the stage of growth and funding requirements of the micro-units in mind, and it is divided into three stages. The first stage is Shishu, which has a loan amount of Rs. 50,000 and there is no collateral requirement. The interest rate is 1% per month, and the loan is repayable over five years. The second stage is Kishor, where the loan amount ranges between Rs.50,000 up to Rs. 5 lacs. The third stage is a loan amount ranging between Rs. 5 lacs to Rs. 10 lacs. The loan will be provided as per the requirement of the customer, and they are all collateral-free loans. 

  • Sishu Loans up to Rs.50,000
  • Kishor Loans up to Rs.5,00,000
  • Tarun Loans up to Rs.10,00,000

More: Know More about SBI e Mudra Loan?

Credit Guarantee Scheme

An essential form of startup loans in India, the CGS makes collateral-free credit available to small enterprises. It helps first-generation entrepreneurs and micro-enterprises avail small loans at low-interest rates. The amount of loan will depend on the eligibility of the borrower, and the maximum loan amount is Rs. 100 lacs. Government of India has partnered with SIDBI for the loan, and it gives unsecured loans in the form of a working capital loan or term loans. 

Bank Credit Facilitation Scheme

Started by National Small Industries Corporation, this scheme aims to fund the medium and small-scale enterprises in the country. They arrange credit support from banks at no cost and the tenure of repayment depends on the income generated by the enterprise. It ranges from 5 to 7 years but can go up to 11 years. 

Stand Up India Scheme

The Stand-Up India Scheme offers Government loans for business ranging between Rs. 10 lac and Rs. 1 crore to at least one Scheduled Tribe or Scheduled Caste borrower to set up a Greenfield enterprise. It is also granted to at least one-woman borrower per bank branch to promote woman entrepreneurship among the scheduled caste and scheduled tribe. The tenure of the loan is 7 years. 

Market Development Assistance Scheme for MSMEs

This is a scheme that helps the micro, small, and medium enterprises gain exposure by participating in International exhibitions and trade fairs. It helps them display the potential and strengthens the units. 

National Bank for Agriculture and Rural Development

NABARD is a development bank that offers credit to promote agriculture, small industries and cottage industries, village industries, and handicrafts. It acts as a facilitator for rural prosperity that improves institutional development by monitoring and inspecting client banks. 

Coir Udyami Yojana

Coir Board heads this scheme and aims to set up coir units in the country. It will provide loan for startup up to Rs.10 lac and will fund one cycle of working capital. However, the total funds should not exceed 25% of the cost of the project. The tenure is 7 years. 

SIDBI Make in India Soft Loan Fund for MSMEs

Headed by SIDBI, the fund provides loads to enterprises for expansion, technology upgrade, modernization and other projects for growing the business. It offers term loans to MSMEs. For the general category, the loan amount is 10% of the total project cost subject to a maximum of Rs.10 lac and for a scheduled tribe and scheduled caste, the loan amount is 15% of the cost subject to a maximum of Rs. 30 lacs. The applicant should have a stake of 51% in the enterprise. 

Credit Linked Capital Subsidy for Technology Upgrade

The small-scale industry startups which have registered with the Directorate of Industries and have upgraded their machinery and plant with new technology are eligible for this scheme. The loan amount ranges up to Rs.1 crore at the rate of 15%. 

Sustainable Finance Scheme

This scheme is headed by SIDBI and is meant for renewable energy projects like solar power plants, wind energy generators, and mini hydel power projects, etc. The objective of the scheme is to assist the value chain of energy-efficient projects that help sustainable development. The scheme provides business loan for a startup in the form of a working capital loan or a term loan. 

Eligibility criteria for the loan

The primary objective of the Startup India Scheme is to promote startup and small-scale industries to create wealth and generate employment.

The eligibility criteria are as follows:

  1. It should be a firm not older than 5 years and the turnover of the firm should not be more than Rs. 25 crores.
  2. In order to get approval from the DIPP, the applicant firm should be funded by an Angel Fund, Incubation Fund or a Private Equity Fund.
  3. The company must be a limited liability partnership or a private limited company. 
  4. The firm should have a letter of incubation.
  5. It should have obtained a patron guarantee from the Indian patent and trademark office.
  6. It should have obtained approval from the Department of Industrial Policy and Promotion.
  7. It must provide innovative products and schemes.
  8. The Angel Fund, Private Equity Fund, Incubation Fund, Angel Network, and Accelerators need to be registered with SEBI. 

Consider these loans for a startup in India and take your business to new heights. The Government of India is participating at a micro level to ensure that small and medium scale industries benefit from the loans.

In addition to Government loans, banks and NBFCs are providing business loans at a competitive interest rate. At Afinoz you can compare the offers from various lenders and choose the best option, suitable for you. Apply now to avail a business loan.

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