India is emerging as a global leader in GDP growth, thanks in part to the contributions of small and medium-scale start-ups. On a scale, nearly 30% of the total GDP is contributed by SMEs (small and medium-sized enterprises), and that remains a vital source of employment in a developing country like India. Considering all these factors, the Indian government has introduced several new business loan schemes since the post-demonetization scheme, which have boosted the development of start-ups at various levels.
A maximum of Rs 100 Lakhs can be borrowed in the form of Term Loans or Working Capital Loans. Both new and existing Micro and Small Enterprises engaged in manufacturing or service activities, except in Educational Institutions, Agriculture, Self-Help Groups (SHGs), and Training Institutions, can avail themselves of these loans. The following is the list of eligibility criteria & loan options offered by the Government of India for start-ups.
- Mudra Loan Scheme.
- MSME Business Loans in 59 Minutes.
- The Credit Guarantee Scheme (CGS)
- Stand Up India Scheme.
- Coir Udyami Yojana.
- National Bank for Agriculture and Rural Development (NABARD)
- Credit Link Capital Subsidy Scheme.
- National Small Industries Corporation Subsidy.
ELIGIBILITY FOR A START-UP LOAN IN INDIA
To be eligible for applying for a start-up business loan in India, one must match the following criteria-
- The candidate must be a citizen of India.
- The candidate must have a unique business plan or strategy.
- The candidate must be between 21 and 65 years of age.
- ID proof of the candidate, such as PAN card, Aadhaar card, and Voter ID.
- Address proof, such as a Driving license or an Aadhaar card.
- PAN Card for the business start-up.
1. MSME (Ministry of Micro, Small and Medium Enterprises) LOAN
The MSME is the most sought-after Business loan for start-ups, which can be documented in just 59 Minutes. This scheme was first active in September 2018 and was formulated to encourage start-ups in India. Using this scheme, both existing and new start-ups can obtain a loan amount of up to ₹1 Crore. The duration of this loan process is 8 to 12 days, but approval or disapproval is finalized within the first 59 minutes of application processing.
To obtain a loan amount from an MSME, your GST, Income Tax, bank account statement (for the last six months), ownership document, and KYC are verified by government professionals. In addition to this, the interest rates are decided depending on your business nature and credit scores.
2. MUDRA LOAN
MUDRA (Micro Units Development and Refinance Agency ) is an official organization founded by the government of India to offer business loans to start-ups, micro, and macro business units. Due to small-scale companies and start-ups being overlooked by private banks, the government of India has adopted the concept of a Low-cost credit system. This loan option is also a refinanced loan approved by public, private, co-operative, scheduled, and rural banks across the country. Mostly, this MUDRA is suitable for start-ups in the manufacturing, services, and trading sectors. The structure that the MUDRA loan follows is Sishu (up to ₹ 50,000), Kishor (up to ₹ 5,00,000), and Tarun (up to ₹ 10,00,000).
3. Credit Guarantee Fund Trust
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) first came into practice in 2000 as a support system for loans to start-ups and micro-enterprises. One of the best features about this option is that it is a collateral-free loan option for both existing and new start-ups. Various private and public sector banks finance this type of loan.
The CGTMSE scheme offers working capital of up to ₹10 lakhs without any collateral or land certificates. However, for loan amounts exceeding ₹10 lakhs and up to ₹1 crore, some security document or land document is mandatory to avail credit for start-ups. Additionally, the primary assets built or created through the credit facility associated with the business unit are considered as security if the credit exceeds ₹ 10 lakhs.
4. Credit Link Capital Subsidy Scheme
The Ministry of Small-Scale Industries initiates the CLCSS scheme to upgrade and support business start-ups. This loan option is primarily concerned with financing technological upgrades of micro-scale industries. This technological up-gradation finance scheme is related to various processes such as marketing, supply chain, manufacturing, etc in the organization. Through this scheme, the Indian government aims to reduce the production costs of goods and services.
For eligible business start-ups, the CLCSS scheme offers a capital subsidy of 15 %, and the maximum amount that can be derived through this scheme is around ₹15 lakhs. The types of organizations that come under this business loan scheme are Proprietorships, Partnership Firms, cooperatives, private companies, and public companies.
5. NABARD ( National Bank for Agriculture and Rural Development)
The Central Government of India owns this bank to offer loans and help start-ups initiate businesses in fields such as cottage, agriculture, and handicrafts. It also provides refinance to lending institutions in village areas, acting as a facilitator for promoting institutional development by inspecting and monitoring the client banks.
6. Stand Up India Scheme
This is a special scheme under the Government of India designed to empower Scheduled Caste (SC) and Scheduled Tribe (ST) individuals and women entrepreneurs to initiate a start-up. With the help of this scheme, one can borrow a loan amount between ₹ 10 lakhs and ₹ 1 crore to begin a business in either the trading and services or the manufacturing domain. The tenure for this loan amount is approximately 7 years and is allocated to at least one woman borrower per bank branch or to at least one SC/ST person.
