About 40 million MSMEs (Micro Small and Medium Enterprises) in India, including registered and unregistered companies. MSMEs usually come under lists of both the organized and unorganized sectors. Moreover, about 40% of the total GDP in India is contributed by these MSMEs and it acts as a critical source of employment. MSMEs’ actions provide solutions to critical problems in the nation such as income inequality, poverty, regional imbalances, unemployment, and so on.
For this, the Government of India has introduced different loan schemes for MSMEs to flourish their business as well as the economy. Let us study more about government subsidy loan for business in detail further:
What is meant by a Government subsidy loan for business?
As mentioned above, government subsidy loans for business are nothing but the loan schemes that are sanctioned to the SMEs to expand their business, fund their day-to-day operations, purchase new equipment, and so on.
The Small and Medium Enterprises fall under the sector of small-scale business and they are liable to contribute about 40% of the total GDP (Gross Domestic Product) of India. This sector acts as a main source of employment in the country but encounters tough competition from privately-funded businesses. This is the only reason why the government is providing subsidy loans to such businesses.
Let us take a look at the chief 5 government subsidy loan for business and its features.
1. Features of Stand-Up India scheme
- The Stand-Up India Scheme has been specifically designed to fulfill the fund requirements of Scheduled Tribes (ST)/Scheduled Caste (SC) businesswomen for establishing a Greenfield organization.
- This loan scheme is of complex nature. It simply means that the loan also includes a term loan and working capital.
- To achieve this loan scheme, the organization should be involved in the business of trading, manufacturing, or services.
- An ST, SC, or women entrepreneur has to hold a 51% controlling stake if the company is established as non-individual.
2. Features of PMMY – Pradhan Mantri MUDRA Yojana
- PMMY (Pradhan Mantri MUDRA Yojana loan scheme will generate income opportunities and employment offers in the sectors of agriculture, retail, services, and manufacturing.
- Under Mudra, three kinds of loans can be availed for various business stages named Tarun, Kishor, and Shishu.
- The Mudra Yojana loans will be extended by private sector banks, public sector banks, Regional Rural Banks (RRBs), cooperative banks, Non-Banking Financial Companies (NBFCs), foreign banks, and Micro Finance Institutions (MFIs).
- There is no need to offer security or collateral to get the benefits of the Mudra loan.
3. Features of SMILE – SIDBI Make in India Loan for Enterprises
- SMILE (SIDBI Make in India Loan for Enterprises) offers loan schemes in the form of term loans and soft loans.
- This scheme has been made to facilitate investment, foster innovation, enhance skill development, protect intellectual property, and form the best infrastructure for MSMEs.
- Rates of interest are competitive with a longer repayment period.
- The importance would be given to the new companies in the manufacturing and services sector along with an emphasis on smaller organizations within the MSME.
- The amount of the loan would be released to your bank account quickly.
- As part of the ‘Make in India’ campaign launched by the government of India, the MSMEs that are involved in 25 selected sectors will get full financial support at competitive interest rates.
4. Features of MSME Loans in 59 Minutes
- You have to submit minimum documents and only upload the scanned versions of the required documents. You can upload them online to get the loan.
- Under the scheme, you can receive a loan between Rs. 1 lakh and Rs. 5 crores. Even though you have the option to avail of this loan from any of the loan lenders, the rate of interest applied might be different and it begins from 8.5%.
- As the name suggests, the loan amount of up to Rs. 5 crores can be availed and it will be dispensed to your bank account in less than 60 minutes.
5. Features of CLCSS – Credit Linked Capital Subsidy Scheme
CLCSS (Credit Linked Capital Subsidy Scheme) is an innovative credit scheme established by the Ministry of MSMEs. The main objective of this scheme is to support the technology up-gradation of MSMEs specifically in semi-urban and rural areas. Under the CLCSS scheme, businesses can prefer a 15% subsidy on investment in eligible machinery but there is an optimum cap on the subsidy that is limited to Rs. 1 crore.
The benefits that the CLCSS provides to small scale industries are as follows:
- It assists small-scale industries to upgrade the required technologies to the latest ones.
- It renders a 15% subsidy for buying machinery, equipment, and an eligible plant that helps in decreasing the whole burden of small-scale industries.
- It enhances the growth of rural industries which can now produce high-quality items.
Steps to register for the Government subsidy loan for business
If you want to register for the government subsidy loan for business, you can follow the steps given below:
Step 1: You have to visit the official online portal of your desired bank that is related to the scheme.
Step 2: Then you have to register or sign up on the portal and log in with the valid credential and make use of One-Time Password (OTP) authentication.
Step 3: After that, you have to check the terms and conditions of the government loan scheme.
Step 4: Later, you have to enter other required information and financial credentials.
Step 5: At last, you should proceed further with the process by uploading the essential documents and filling in the forms on the portal.
Eligibility Criteria for availing Government subsidy loan for business
Have a look at eligibility criteria and documents that are needed to receive government subsidy loan for business right below:
The scheme bodies check the eligibility criteria of the loan applicants and ask them to provide all the data they need to evaluate as a part of the loan process. The following are the factors of eligibility criteria:
- Loan Amount
- Age of the Applicant
- Type of Business
- Annual Turnover
- Credit Score
- Capital Invested
Government loans are rendered to sole proprietorship, start-up businesses, individuals, partnership firms, MSMEs, SMEs, business owners, large enterprises, private limited companies, and so on. When it comes to the minimum age criterion to apply for government business for a loan, it is 18 years. To apply for a loan, the minimum business existence for the existing businesses is 2 years. As per the lenders’ demand, the applicants’ minimum credit score should be more than 650 to process the loan.
Essential Documents required applying for Government subsidy loan
According to various loan schemes, the documents that need to be submitted might vary. But, certain common documents might be asked to submit while applying for the loan schemes which are as follows:
- Self-created plan of the business
- Duly filled application form with passport-sized photographs
- Age, Identity, Address, and Income Proofs
- Information of income tax paid in the last 3 to 5 years
- CGST Identification Number
- ITR returns for the last 2 years
- Business address proof
- Bank statements of last 6 months
- List of partners or company directors of the company/partnership firm
- Details of the kind of loan that you want to avail
- Any other document asked by the loan lender