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Top Five Startup Business Loans by the Indian Government

Updated: Sep 4

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Many early stage startups and small businesses fade away due to lack of funding. Procuring seed funding is critical for the growth of a startup. In order to ensure that no idea remains unimplemented due to lack of funds, the Indian government has come up with a number of schemes to provide startup business loans. MSMEs and small businesses can also avail of such schemes. Through this post, we bring to you the top five startup business loans offered by the Indian government.

1. PSB Loans in 59 minutes

The whole idea behind this initiative is to provide reasonable loans to small businesses and MSMEs in an expedited manner. Through automation and digitization of various processes, loans are provided to such businesses within 59 minutes. And hence the name. The chief characteristics of this scheme are as follows:

  1. Loan Amount: An amount between INR 1 lakh to INR 5 crore is offered under this scheme.

  2. Rate of Interest: The rates of interest start at 8.5% per annum.

  3. Approval and Disbursal: As mentioned already, the loan is approved within 59 minutes. However, it generally takes about a week before the same is disbursed.

2.Mudra Loans

This scheme was launched under Pradhan Mantri Mudra Yojana. Under this scheme, individuals, businesses and entities can avail loans up to INR 10 lakh without seeking collateral from the borrowers. The intention behind this scheme was to offer small loans to startups and small businesses, with an emphasis on Non Corporate Small Business Segment (NCSB). The chief characteristics of this loan scheme are as follows:

  1. Eligibility: Any applicant including women, proprietary concern, partnership firm, private limited company or any other entity are eligible for loans under this scheme. Provided that their loan requirement is INR 10 lakh.

  2. Loan Amount: There is no minimum loan amount criteria. There are 3 types of Mudra loans, which are as follows:

  3. Shishu Loans: From zero up to INR 50,000.

  4. Kishor Loans: From INR 50,000 up to INR 5 lakh.

  5. Tarun Loans: From INR 5 lakh up to INR 10 lakh.

  6. Tenure of repayment is 5 years.

  7. There is no processing fee.

  8. These loans can be availed from private and public sector banks, commercial banks, regional rural banks (RRBs), small finance banks and corporate banks.

3. Credit Guarantee Fund Trust for Micro and Small Enterprises (“CGTMSE”)

The CGTMSE scheme is one which was introduced with the intention to enhance the credit delivery system to the MSMEs. This scheme is advantageous for startups and new entrepreneurs seeking to fund their businesses. Like Mudra Yojana, the loans here too, are collateral free. The chief characteristics of this scheme are as follows:

  1. Eligibility: New MSMEs and existing ones too can apply for loans under this scheme. These MSMEs should be involved in manufacturing or service activities.

  2. Loan Amount: Up to 2 crore per borrowing unit.

  3. Guarantee coverage is provided up to 75%.

  4. Credit facility is provided up to INR 1.5 crore.

4. SIDBI Make In India Soft Loan Fund For Micro Small And Medium Enterprises (SMILE)

This scheme was launched with the intention to boost the ‘Make In India’ campaign and consequently provide assistance to MSMEs. The main objective of this scheme was to provide loans in the form of quasi equity and term loan on relatively soft terms. Let us see some of the chief characteristics of this scheme:

  1. Eligibility: The emphasis is to cover new and existing MSMEs in the manufacturing and services sector.

  2. There is a minimum loan amount which is INR 10 lakh for equipment finance and INR 25 lakh for everyone else.

  3. Tenure & Moratorium: Repayment period is long and is up to 10 years. This includes moratorium up to 36 months.

5. National Small Industries Corporation (NSIC)

Although this is not specifically a loan scheme, it does provide financial assistance to startups and small businesses alike. The main objective of this scheme is to help MSMEs grow, by providing them assistance in forms of financing, technology, marketing, etc. The various characteristics of this scheme are as follows:

  1. Credit Support: Financial assistance is provided in order to procure raw materials, financing and marketing.

  2. Security Deposits: There is no requirement to pay security deposit for Small Scale Industries (SSI).

  3. Other types of financing: SSIs are given access to tenders at zero costs. For projects not exceeding INR 25 lakh, financing is provided for land procurement and building.

There are many more similar loan schemes being facilitated by the government. If an early stage startup is not able to procure seed funding from an investor, it can avail of such startup-friendly loans. If you have any queries regarding fundraising for startups, you can contact us by clicking the button below.



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