Home Business Tips How to Apply for the Best Business Loan in India? – Types of Govt. Loan Schemes
Business Loan Subsidy - Khatabook

How to Apply for the Best Business Loan in India? – Types of Govt. Loan Schemes

by Khatabook

Anyone can dream of becoming a businessman. The inspiration for starting your own business might be the desire to clock out of your nine to five job or your entrepreneurial instincts. Be it anything, running a business can be a daunting task. You start it by investing your own money. But your business might require the extra money to pay the expenses or expansions. So many people have bootstrapped start-ups these days but there could be days when you might fall short of funds. On those days, you might consider the option of looking out for a business loan. Let us understand what it is and how to apply for the best business loan subsidy in our country?

What is a Business Loan?

A business loan is financial assistance taken by your company to meet the urgent needs of your growing business. It is a debt that your business is obligated to repay according to the terms and conditions finalized at the time of taking the loan for business. In India, you can take loans from private people or banks or Non-Banking Financial Companies (NBFCs).

Business loans enhance the chances for companies to achieve success. Since business loans are in high demand, but not every company that applies for a loan receives it. It depends on a lot of factors that matter to the lender of the loan. The lenders evaluate a company’s history, the amount of debt it has and the risk-taking capacity of the company.

How to Apply for a Business Loan Online?

There are many financial institutions such as banks and NBFCs from whom you can take a loan but before they lend you the money, you need to apply for it. Most of them have the option of applying for the loan online. You just need to go to their website and find the relevant tab where you can apply for a loan. Figure out your exact requirement and the loan amount you want based on your research. Then from the various options available on the website, you can apply for a loan on the website. You can opt for the one that has feasible terms and conditions; and interest rate as per your pocket.

Therefore, availing a business loan is as easy as buying something online these days. And for the various benefits associated with it, you must take a business loan depending on the size and requirement of your business; and see your business flourishing. In India, the government of India has taken various measures to ensure that the MSMEs and small businesses grow easily with the help of financial support from the govt. of India.

Small Business Loan Schemes by the Govt. of India

The govt. schemes are aimed at providing financial aid to entrepreneurs to finance their small scale businesses. There are various popular business loan schemes started by the govt. of India in order to safeguard small businesses and MSMEs during the turbulent and challenging times. Let’s discuss some of them.

#1. MSME Loan in 59 minutes

For whom:

  • This business loan scheme was launched by the govt. to provide financial assistance to the Micro, Small and Medium Enterprises (MSMEs) throughout India.

Rate of Interest: Equal to or more than 8.5%
Loan Amount: Rs. 1 Lakh to Rs. 5 Crore

#2. SIDBI Make in India Loan for Enterprises (SMILE)

For whom:

  • This business loan scheme has been designed to facilitate investment, foster innovation, protect intellectual property, enhance skill development and build good infrastructure in MSMEs.
  • Under this scheme, select 25 sectors will receive financial support as part of the ‘Make in India’ campaign launched by the govt. of India.
  • The focus of this scheme is on the smaller firms within the MSMEs.
  • New enterprises in the services and manufacturing sector will also be given importance.

Rate of Interest: Competitive interest will be charged at the discretion of the SIDBI.
Loan Amount: Equal to or more than Rs. 10 Lakhs.
Repayment tenure: Up to 10 years including 3 years moratorium.

#3. Pradhan Mantri Mudra Yojana (PMMY)

For whom:

  • Micro Units Development and Refinance Agency Ltd. (MUDRA) is an NBFC supporting development of the micro-enterprise sector in the country.
  • MUDRA provides refinance support to Banks / MFIs for lending to micro units having loan requirement up to 10 lakh.
  • MUDRA provides refinance to micro-business under the Scheme of Pradhan Mantri MUDRA Yojana. The other products are for development support to the sector.
  • The loans will be extended by public sector banks, private sector banks, cooperative banks, Regional Rural Banks (RRBs), foreign banks, Non-Banking Financial Companies (NBFCs), and Micro Finance Institutions (MFIs).

Collateral needed: None
Rate of Interest: Varies from bank to bank.
Loan Amount: Three types of loans can be availed under this Yojana for different stages of business:

  • Shishu: covering loans up to  50,000/-
  • Kishor: covering loans above  50,000/- and up to  5 lakh
  • Tarun: covering loans above  5 lakh and up to  10 lakh

Repayment Tenure: Varies from bank to bank.

#4. Bank Credit Facilitation Scheme (BCFS)

For whom:

  • This business loan is for SME units of all kinds that are operating within India.
  • Under this scheme, loans are facilitated by the National Small Industries Corporation (NSIC) which has signed a Memorandum of Understanding (MoU) with banks.
  • NSIC also helps with the documentation process and provides other necessary services related to the loan.

Rate of Interest: Varies from bank to bank.
Loan Amount: Varies from bank to bank.
Repayment Tenure: 5-7 years.

#5. Credit Guarantee Scheme for Micro and Small Enterprises (CGSMSE)

For Whom: 

  • The scheme was launched with an intent to offer collateral-free credit to the micro and small enterprise sector.
  • Under the scheme, guarantee cover can be availed up to 85% of the sanctioned amount of the credit facility.
  • For micro enterprises seeking a loan of up to Rs.5 lakh, MSEs owned and operated by women, and loans in the North-Eastern region, guarantee cover of up to 80% will be provided.

Rate of Interest: Varies from bank to bank.
Loan Amount: Up to Rs. 1 crore.
Repayment Tenure: Varies from bank to bank.

#6. Stand Up India Scheme

For whom:

  • This is a special loan only for the disadvantaged sections of the society viz. Scheduled Caste (SC)/Scheduled Tribe (ST)/women entrepreneurs in order to set up a greenfield enterprise engaged in manufacturing, trading and services.

Rate of Interest: Up to base rate + 3% + tenor premium
Loan Amount: Rs.10 lakh to Rs.1 crore
Repayment Tenure: 7 years

How to Apply for the Best Business Loan Subsidy?

Following are the steps involved in the application for the small business loans:

  1. To avail the small business loan facility, you can directly reach out to the banks and the financial institutions as the govt. loans are disbursed through them.
  2. The branch of the bank or the particular financial institution will guide you regarding the application process.
  3. Applying for a small business loan online is available at select branches and institutions. You just need to visit their website, fill up the application form and submit the relevant documents.
  4. Once this is done, the bank representative verifies the information given by you. After that, the loan amount will be directly credited to the account that you provide in the application form.

Eligibility:

  • All the MSMEs engaged in trading, manufacturing and service sectors are eligible to apply for this loan.
  • The applicant must be a resident of India having age between 25 years and 66 years.

Documents required:

  • An application form duly signed by the applicant.
  • KYC documents (business entity proof, establishment certificate, etc.)
  • PAN card
  • Financial documents (Projected turnover and current year performance, Tax audit reports, etc.)
  • Address proof
  • Bank statement for the last 6 months
  • Passport-sized photographs of the applicants
  • List of company directors or partners

So, don’t wait to fulfil your dreams! If you want to open a flourishing business in India and you need some help with your capital, then avail these schemes made available to you by the Government of India & kickstart your entrepreneurial journey!

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