Growing a small business is challenging yet exciting at the same time. A lot needs to be done to get a business up and running. Arranging funds for daily operations and long-term business objectives takes a front row in the list of priorities. Most small businesses are bootstrapped, and the founder often has limited capital.
Therefore, relying on external financial aid like an investor’s capital or a Business Loan becomes necessary for growth. Over the last decade, the government of India has been proactive toward Business Loan for small businesses. Read on to learn more about the best small Business Loans in India.
Best Loans for Small Businesses in India
Here’s a list of the government’s best small Business Loan schemes in India.
- Pradhan Mantri Mudra Yojana
The Pradhan Mantri Mudra Yojana was launched in 2015 to offer loans up to INR 10 lakhs for non-corporate and non-farm SMEs. The goal has been to uplift small and medium enterprises which can generate employment. The loans offered are categorised as ‘Mudra Loans’ under this scheme and are provided mainly by regional rural banks, NBFCs (like Clix Capital) and Micro Finance Institutions (MFIs).
- Credit Guarantee Scheme
The government of India has launched the Credit Guarantee Scheme in partnership with the Small Industries Development Bank of India (SIDBI). The primary objective is to improve the credit delivery system and facilitate an easy flow of credit to the MSME sector. It also aims to make the financial system more inclusive to benefit the underserved and underprivileged. The lenders involved include public & private banks, foreign banks and regional rural banks. In addition, MSMEs engaged in manufacturing or service-based activities can apply for this scheme.
- Market Development Assistance Scheme
The Market Development Assistance Scheme is a flagship initiative by the Ministry of Commerce in India. The aim is to encourage exporters (including MSMEs in export) to venture into overseas markets. In addition, this scheme can provide funding for participating in international fairs, trade delegations, publicity, foreign study tours, etc. Another significant objective of this scheme is encouraging exports from small/micro manufacturing businesses.
- Bank Credit Facilitation Scheme
The Bank Credit Facilitation Scheme, initiated by the National Small Industries Corporation (NSIC), fulfills the credit requirements of MSMEs. The NSIC aims to fulfil both fund and non-fund-based credit support requirements. Both public and private sector banks participate with the NSIC to meet these credit requirements. The loan tenure is usually between 5 to 7 years but can go up to 11 years in some cases.
- Sustainable Finance Scheme
The SIDBI started the Sustainable Finance Scheme with the mission to fund sustainable development projects. The sustainable projects were those that contributed to energy efficiency and cleaner production goals. However, international or bilateral credit lines must not cover these projects. Both new and existing sustainable projects can apply for financial aid under this scheme. The broader objective is to encourage more businesses to develop sustainable practices in their business activities.
- Udyogini Scheme
The Udyogini Scheme was launched by the Women Development Corporation body under the government of India. It aims to improve the plight of Indian women entrepreneurs. It offers financial aid to women for strengthening and growing businesses. The goal is to motivate women from underprivileged sections to become entrepreneurs. Many financial institutions provide credit under this scheme in India. The best thing about getting this Business Loan is that it doesn’t demand collateral. However, there are some eligibility restrictions. For example, women applying for this loan must have an annual income of less than INR 1.5 lakhs *T&C* apply. It is important to note that there are certain exceptions to this norm.
Growing a small business is always challenging, but the outcome is worthwhile if it grows into an established corporation. Most small and medium-scale enterprises struggle with managing their finances. An online business loan can help them provide the required capital to carry on the business operations without interruptions. However, it is essential to consider the Business Loan interest rate before applying.