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Empowering Entrepreneurship: India's Top Government Startup Loan Schemes

In recent years, the Indian government’s proactive initiatives have been pivotal in empowering aspiring entrepreneurs and start-up enthusiasts to foster innovation and contribute to the nation’s economic growth. As part of these programs, several schemes have been introduced that not only provide business loans to startups but also give them the mentorship and knowledge transfer they require. Among these resources, one noteworthy avenue for fledgling businesses to explore is securing business loans for start-ups.

The government’s commitment to nurturing startups showcases its recognition of their potential to revolutionize industries, stimulate economic progress, and position India as a global hub for innovation and entrepreneurship. Here are some of the top start-up business loan schemes introduced by the Indian government to financially empower budding start-ups:

Pradhan Mantri Mudra Yojana (PMMY):

PMMY was launched in 2015 to provide financial support to micro and small businesses. The scheme aims to encourage entrepreneurship and provide funding to businesses in the manufacturing, trading, and services sectors. Loans are provided by various financial institutions and banks, and they are categorized into three segments based on the loan amount:

  1. Shishu: Loans up to Rs. 50,000
  2. Kishor: Loans from Rs. 50,000 to Rs. 5 lakh
  3. Tarun: Loans from Rs. 5 lakh to Rs. 10 lakh

These loans are collateral-free, making it easier for small businesses to access credit. The interest rates are generally competitive, and the scheme has helped numerous entrepreneurs realise their business dreams.

Eligibility Criteria

  • Business Type: Micro and small enterprises engaged in trading, manufacturing, or services sectors.
  • Loan Amounts: Up to Rs. 10 lakhs, categorised as Shishu, Kishor, and Tarun loans.
  • Age: Applicants should be at least 18 years old.
  • Business Turnover: Less than Rs. 5 crore per annum for non-farm income-generating activities.
  • Ownership: Proprietor, partner, or director of the business.
  • Credit Record: Good credit record with no defaults.
  • Loan Purpose: For income-generating and employment-creating activities.

Stand Up India Scheme:

Launched in 2016, the Stand Up India scheme is aimed at promoting entrepreneurship among women and individuals from the SC/ST communities. Under this scheme, eligible entrepreneurs can avail loans for setting up new ventures or expanding existing ones. The loans are available up to Rs. 10 lakh and are provided at reasonable interest rates. The scheme seeks to empower marginalised sections of society by providing them with the necessary financial support to become self-reliant and contribute to the country’s economic growth.

Eligibility Criteria:

  • Business Type: Greenfield projects (new ventures) in manufacturing, trading, or services sectors.
  • Loan Amounts: Up to Rs. 10 lakhs to SC/ST and women entrepreneurs.
  • Ownership: At least 51% shareholding by either an SC/ST or woman entrepreneur.
  • Loan Purpose: Setting up new enterprises or expanding existing businesses.

Startup India Seed Fund Scheme (SISFS):

Startup India Seed Fund Scheme was introduced to provide financial assistance to startups at an early stage. The scheme supports startups in various stages of development, from proof of concept to commercialization. Startups registered with the Startup India portal and possessing a valid PAN card are eligible to apply for funding. The funds are provided in the form of grants, and they can be used for different purposes essential for startup growth, such as hiring, research, and infrastructure development.

Eligibility Criteria:

  • Business Type: Startups recognized by the Department for Promotion of Industry and Internal Trade (DPIIT).
  • Funding Purpose: Proof of concept, prototype development, product trials, market entry, and commercialization.
  • Registration: Registered with the Startup India portal and has a valid PAN card.

Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE):

Launched by the Ministry of Micro, Small, and Medium Enterprises (MSME), this scheme aims to facilitate easy access to credit for MSMEs. It provides a credit guarantee to banks and financial institutions, encouraging them to extend loans to MSMEs with reduced collateral requirements. Under the CGTMSE, the government provides a guarantee cover of up to 85% of the loan amount, which reduces the risk for lenders. To avail the benefits of this scheme, MSMEs need to be registered with the MSME Ministry and possess a valid GST registration.

Eligibility Criteria:

  • Business Type: Micro and small enterprises in manufacturing or service sectors.
  • MSME Registration: Registered with the MSME Ministry and has a valid GST registration.
  • Loan Purpose: For loans up to Rs. 200 lakhs, covering term loans and working capital.
  • Guarantee Cover: Guarantees provided to banks and financial institutions for loans to MSMEs.
Scheme Loan Amount Interest Rate
Rs. 5 lakhs- Rs. 10 lakhs
11.15-20%
Rs. 10 lakhs- Rs. 1 Crore
12%
Up to Rs. 50 lakhs
4%
Up to 85% of the loan amount
14-18%

Conclusion

These government startup schemes play a vital role in fostering entrepreneurship, driving economic growth, and supporting the growth of small businesses in India. They create an enabling environment for aspiring entrepreneurs to access finance, develop innovative ideas, and contribute to the country’s development.

Amit Arora Finnable

AMIT ARORA

I am a seasoned retail banker with over 21 years of global experience across business, risk and digital. In my last assignment as Global Head Digital Capabilities, I drove the largest change initiative in the bank to deliver the end-to-end digital program with over US$1 billion in planned investment. Prior to that, as COO for Group Retail Products & Digital, I implemented a risk management framework for retail banking across the group.
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