In this blog we will cover Small Business Loan Options-
Opening comments
Small Businesses loan option in India play a crucial role in strengthening the MSME sector of the country; till date, we have 12 million registered MSMEs that ensure rapid economic growth. The biggest challenge that small business owners face is the unavailability of funds at competitive interest rates.
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Lack of access to funding leads to lack of execution, and eventually, one fails to start the venture; banks aren’t in favor of supporting Small Business Loan Options, owners due to the high risk associated with it. Even if they approve, then a high rate of interest is charged that too with the secured form of loan.
The government of India also addressed this issue, identifying this as a concern. The Ministry of Micro, Small & Medium Enterprises enacted a few schemes that ensure Small Business loan options to Business owners. Stay tuned if you are a business owner or willing to start a venture!
Must read: What is Business Loan – Comprehensive Guide
Lets get dive into to understand the possibilities of Small Business Loan Options-
MSME Schemes 2023
The active Small Business loan options for Business owners in 2023 are defined below –
Pradhan Mantri Mudra Yojana (PMMY)
Prime Minister Narendra Modi has launched Pradhan Mantri Mudra Loan (PMMY) on 8th April 2015. Mudra stands for Micro Units Development and Refinance Agency. The scheme empowers small business owners to acquire funding at less interest rate to develop and expand businesses.
Small finance banks, cooperative banks, and NBFCs generally offer Mudra loans that one can apply for using the Online portal as well.
PMMY is itself categorised into three different financial schemes/products, namely
Shishu Mudra Loan
In Shishu, the minimum loan amount has no limit, and the maximum amount can go upto 50,000.
Kishor Mudra Loan
Business owners generally acquire Kishor Mudra Loan to meet ongoing financial needs when willing to expand their businesses. The loan amount ranges from INR 50,000 to 5,00,000.
Tarun Mudra Loan
For business owners with capital needs for the smooth functioning of Business operations or looking to enhance ongoing cash flow, the Tarun Mudra loan is your leading option; the amount offered is 5,00,000-10,00,000.
Must Read: Mudra Loan (PMMY) – Types, Eligibility Criteria
Credit Guarantee Fund Scheme (CGTMSE)
CGTMSE is a government initiative launched by the Ministry of MSME. The scheme is launched to resolve the complex credit problems of MSE business owners and other first-generation entrepreneurs. Generally these people don’t have exposure to the market and are unaware of the tactics of acquiring credit funds when needed.
The scheme ensures collateral-free credit schemes to micro and small enterprises (MSE); both old and new entrepreneurs are eligible under it. The Small Business Loan Options, offered is upto INR 2 crore without collateral and goes upto INR 5 crore according to eligibility.
Read: Apply for Udyam Registration certificate!
Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
It is an MSME initiative that focuses on developing unorganized businesses in rural areas; it was launched to fund traditional industries for their market regeneration and provide them with external support in maintaining long-term sustainability. SFURTI supports rural artisans, small industry entrepreneurs, design, innovation, packaging etc.
The Government of India provides Small Business Loan Options support of upto INR 5 crore to more than 500 artisans and INR 2.5 crore for up to 500 artisans willing to set up production facilities with new machinery, raw material support, digitization and business development.
Financial Assistance is allowed in SFURTI!
- Mini – (1000-2500 artisans) – 1 crore
- Major – (500-1000 artisans) – 3 crore
- Heritage – Upto 500 artisans – 8 crore
Read: Revised Guidelines for SFURTI
Small Industries Development Bank of India (SIDBI)
The Small Business loan options is governed by the Small Industries Development Bank of India; it is under the jurisdiction of the Ministry of Finance, which has an agenda of promotion, financing and development of the MSME sector.
SIDBI ensures skill-up support, entrepreneurial guidance, modernisation and funding needs. In order to promote the growth of micro and small businesses, SIDBI offers collateral-free loans of upto INR 1 crore.
The minimum amount offered is INR 25 lakhs, the interest rate starts from 8.36%, and the scheme comes with a moratorium period of 36 months with a maximum repayment tenure of 10 years.
Micro & Small Enterprises Cluster Development Program (MSE-CDP)
The scheme enables MSE businesses to grow by empowering them in terms of advancements in sustainable and green manufacturing technology, easy access to the market, skills, qualities etc.; the scheme applies to existing entrepreneurs by providing them with standard facility rooms, design centres, play facilities etc. Indian government enables support upto 80% of the project cost or a maximum of INR 30 crores.
Infrastructure development includes developing roads, power distribution drainage etc, in new/existing industrial areas or flatted complexes. The government of India provides 70% of the project cost or a maximum of INR 15 crore.
Stand-Up India
Stand-up India was launched by the Small Industries Development Bank of India (SIDBI). This initiative provides government-based small business loans to women entrepreneurs and individuals under reserved categories such as schedule caste and schedule tribes.
In stand-up India, small businesses can avail of loans upto INR 10 lakhs to INR 1 crore; it will cover 75% of the project cost, and the interest rate is calculated per bank MCLR +3%+tenure premium.
Final Thoughts
On the verge of making the nation self-sufficient and more independent in business and trade, the government of India has launched various schemes that ensure small business loan options to entrepreneurs who lack access to funding. People in India are afraid to start new businesses due to a lack of capital, poor execution, or no knowledge and practice of the skillset. Addressing this as a big issue, OneNDF provides easy small business loans at competitive interest rates and 5x disbursals.
Get in touch with them and get the credit within 24 hours! Hurry Up, don’t miss the shot!
Knowledgeable modules:
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Different Types of Companies: Meaning & Classification
Small Business Loan Options: Frequently Asked Questions
Q.1 Who is eligible for small business loans options?
Business entities whose been making profit for the past 2 years and have a minimum annual income of INR 1.5 lakhs per annum.
Q.2 Which bank is best for Small Business Loan Options?
- HDFC Bank Business loan
- Axis Bank Business loan
- ICICI Bank Business loan
- Kotak Mahindra Bank Business loan
Q.3 What is the minimum amount for small business options?
5 Lakhs is the minimum amount that can be offered in Business loans.
Q.4 How do small business loans work?
Like other business loans, one borrows an amount from a lender and repays it with interest over a defined period. Amount, interest and tenure will vary from loan to loan and profile to profile.
Q.5 Are Business loans hard to get?
Loans are hard for applicants with poor credit scores and unorganised profiles; salaried persons are prohibited from getting business loans. On the other hand, it is easier for applicants with good CIBIL scores, high finances, and multiple years in Business.
Q.6 What is Pradhan Mantri Mudra Yojana (PMMY)?
PMMY is a government scheme launched by Prime Minister Narendra Modi to empower small business owners with funding at lower interest rates for business development and expansion.
Q.7 How can one apply for a Mudra loan under PMMY?
Small finance banks, cooperative banks, and NBFCs generally offer Mudra loans. Applicants can apply for these loans using the Online portal provided by the scheme.
Q.8 What are the categories of Mudra loans?
PMMY offers three different financial schemes/products:
- Shishu Mudra Loan: No minimum limit, maximum amount up to 50,000.
- Kishor Mudra Loan: Loan amount ranges from INR 50,000 to 5,00,000 for business expansion.
- Tarun Mudra Loan: Leading option for capital needs, offering amounts from 5,00,000 to 10,00,000.
Q.9 What is the Credit Guarantee Fund Scheme (CGTMSE)?
CGTMSE is a government initiative to provide Small Business Loan Options, credit schemes to micro and small enterprises (MSE) and first-generation entrepreneurs, offering amounts up to INR 2 crore without collateral.
Q.10 What is Udyam Registration, and how does it support MSMEs?
Udyam Registration is a tech-first framework introduced by the Ministry of Micro, Small and Medium Enterprises (MSME) to support the expansion of MSMEs in India. It provides a permanent registration number and streamlines procedures for businesses to access various schemes and benefits.
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