Government commercial loans for start-ups

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Every new business needs cash to start. The Indian government has recently taken the lead in directing the growth of start-ups and micro industries in India. The government has launched many programs to incentivize budding entrepreneurs by offering them government business loans on lower interest rates or other lucrative deals. These loans are mainly intended for start-ups and MSMEs. Below is the list of best business loans in India.
  • Pradhan Mantri Mudra Yojana (PMMY):
  • This program is managed by the Micro-Unit Development and Refinancing Agency (MUDRA).
  • It was launched in 2015.
  • It aims to provide loans to the service, manufacturing and trade sectors.
  • It has three sub-categories: Shishu, Kishore and Tarun.
  • The loan repayment period varies depending on the loan amount and loan subcategory.
  • The minimum loan amount is Rs. 50,000 and the maximum is Rs. 10 lacs.
  • Artists, traders or machine operators can benefit from this loan.
  • Stand Up India Program:
  • This scheme is managed by SIDBI.
  • This program is designed to uplift people in SC/ST categories and women entrepreneurs, mainly from tribal communities.
  • It facilitates loans of up to Rs. 10 lacs to Rs. 1 crore.
  • Only applicants with a good credit history or no bad credit history are eligible for a loan under this program.
  • It aims to provide loans to the service, manufacturing and trade sectors.
  • If an entity avails the loan, the institution must own 51% ownership with the SC/ST applicant.
  • Bank Credit Facility:
  • It is operated by National Small Industries Corporation (NSIC)
  • It aims to provide loans to MSME units in India.
  • The repayment term of the loan is 5 years to 7 years. In certain special cases, it can be extended up to 11 years.
  • NSIC partners with banks across the country to facilitate loans under this program.
  • Credit Guarantee System (CGS):
  • Under this program, loans can be used by new and existing MSMEs in manufacturing sectors.
  • Borrowers can avail up to Rs. 2 Crores under this scheme.
  • Retail trade, agriculture, educational institutions and self-help groups are excluded from this scheme.
  • Sustainable Funding Program:
  • This scheme is managed by SIDBI.
  • It offers loans to the energy sectors, including green energy, renewable energy, non-renewable energy and material technology.
  • This scheme was created to promote green energy by the government.

Eligibility Criteria for Government Business Loan in India:
Loan eligibility criteria vary from lender to lender and according to the scheme under which the loan will be available. However, there are basic eligibility criteria that each applicant must meet:

  • The applicant must be an Indian citizen.
  • Applicants must be between 25 and 65 years old.
  • Applicants must have a business plan ready or in progress.
  • Applicants should have a good credit history. Applicants with no default history with banks or financial institutions are preferred.

Required documents:

Every bank or non-bank financial company requires the following list of documents when availing a business loan in India.

Photographs 2 recent passport photos
Identity proof PAN CardPassportAadhaar CardVoter’s IDDriver’s License
Proof of address PassportDriver’s LicenseAadhaar CardPost-paid or Landline BillVoter’s ID
proof of age PAN Passport card
Bank statements last six months
proof of income Tax returns for the last three years Pay slips for the last two years
Proof of signature Signature verified by bankPAN CardPassport
Proof of IFSC code Voided/scanned check copy of the first page of the passbook from the same bank account

FAQs

  1. How old must a start-up be to apply for the loan?

Startups must be new or in operation for less than 5 years to be eligible for the government’s business loan scheme.

  1. Do private banks offer government business loans for start-ups?

If the government body has the link with the private bank, you can avail your business loan. Otherwise, you can get a business loan from any nationalized bank.

  1. How can I improve my credit rating?

If you have a pre-existing loan, paying EMIs on time will improve your credit score. If you haven’t taken a loan before, it won’t show up on any scorelists. You can take out any small loan and pay it back on time to be on the credit radar.

  1. What must be the turnover of the start-up to be eligible for a government business loan in india?

The start-up must have a net turnover of less than Rs. 25 crores for it to qualify for the business loan in India.

  1. What is the maximum loan amount I can avail?

The amount of your loan will depend on your credit score, the type of scheme under which you are receiving the loan and the type of business.

  1. What is an MSME?

MSME is the acronym for Ministry of Micro, Small and Medium Enterprises.

  1. Do female borrowers receive discounts or loan offers?

Yes, there are many programs that cater specifically to female borrowers. Women borrowers also obtain loans at lower interest rates and for a longer term.

  1. How can I benefit from the professional loan?

You can avail business loans by visiting the online government portal and applying through there, or you can visit the local branch of the bank from which you want to avail the loan.

  1. Can an individual from a non-business background qualify for the loan?

Yes, anyone can benefit from the loan. However, the interested applicant must have a business plan ready before applying for the loan.

  1. Do I need to provide collateral for the loan?

No, there is no specific collateral requirement for loans. However, if you have a credit risk, the lender may ask to provide collateral.

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