Micro, small and medium enterprises (MSMEs) form a substantial chunk of the organized business sector in India, employing a large swathe of the population. In its Annual Report, the MSME Ministry revealed that as of 2015-16, an estimated 63.3 million MSMEs were functioning across various sectors in India. Together, these enterprises contributed nearly 29% of India’s GDP, generating approximately 110 million (11 crore jobs) across rural and urban areas of the country.
Thus, there can be no doubt about the value of the MSME sector to the Indian economy. However, despite being such key contributors to economic development, MSMEs often suffer incredible difficulties in managing their working capital and finances.
Features of Term Loan Scheme:
- Short-term loans are usually disbursed quickly.
- These loans can be availed by both self-employed and salaried individuals, depending on the terms laid by the lender.
- The application and transaction done during the course of a short term loan are mostly paperless.
- The Equated Monthly Instalment (EMI) tenure is decided based on the income and repayment capacity of the borrower.
- Short-term loans can be customised as per the borrower’s needs, i.e., the loan amount and the EMI amount can be decided by the borrower, but it shouldn’t exceed 12 months.
- Short-term loans have higher interest rates than Personal Loans. Since the duration is lesser, the borrower pays less money towards the rate of interest.
Eligibility criteria for Recovery Loan Scheme
Businesses that have taken out a CBILS, CLBILS or BBLS facility previously will be able to access the new scheme, although the maximum they will be allowed to borrow will depend on the individual lender’s assessment and scheme requirements. The approach may vary among lenders, but all businesses must meet all other eligibility criteria.
- Is viable or would be viable were it not for the pandemic;
- Has been impacted by the coronavirus pandemic; and
- It is not in collective insolvency proceedings.
MUDRA Loans
The MUDRA loans are sanctioned by the Micro-Units Development and Refinance Agency, an organisation established by the government of India to provide finance to micro-business units. The theme behind MUDRA loans is to “fund the unfunded”. All bank branches across India provide MUDRA loans. Such loans have helped create the concept of low-cost credit for micro and small businesses.
All businesses, including proprietary concerns, partnership firms, Private Limited companies, Public Companies, and other legal entities, are eligible to apply for a loan under this scheme.
Stand-Up India
Stand-up India scheme introduced by the Government to provide loans for businesses run by Scheduled Castes/ Scheduled Tribes and women. Small Industries Development Bank of India (SIDBI) governs this scheme. The loan granted under this scheme can range from Rs. 10 lakhs to Rs. 1 crore. Every bank must provide this loan to a minimum of one Scheduled Caste/Scheduled Tribe or a woman entrepreneur. According to this loan, the fund is expected to cover approximately 75% of the total project’s cost.
Those businesses engaged in trading, manufacturing, or other sectors relating to services are eligible to avail a loan under this scheme. If the company is not an individual undertaking, then a minimum of 51% of the shares must be held by an individual who is a woman or who belongs to Sthe cheduled Caste/ Scheduled Tribe.
Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGFMSE)
This is a loan scheme launched by the government of India that allows for funding through loans without collateral to those businesses that fall under the MSME sector. The business plans under the scheme can be granted to both new and existing enterprises. The Credit Guarantee Fund Trust is a trust established by the Ministry of MSMEs and the Small Industries for the purpose of implementing the CGFMSE scheme. The funding under this scheme can provide working capital loans of up to Rs. 200 lakhs, with preference given to eligible women entrepreneurs.
Undertakings involved in manufacturing activities, such as retail trade, educational institutions, self-help groups, and training institutions. Furthermore, businesses in the service sector are also eligible to avail themselves of funding under this loan scheme.
National Small Industries Corporation Subsidy
The NSIC is a Government enterprise under the MSMEs, and it is ISO certified. One of its primary functions is to support the growth of MSMEs by providing services, including finance, technology, market access, and other support across the country.
The benefit of this scheme is that it offers small-scale industries access to tenders without incurring any costs, and MSMEs also do not have to pay security deposits to avail financial aid under this scheme.
Udyogini
Udyogini, meaning ‘women empowerment,’ is a scheme initiated to empower Indian women. The scheme has been introduced by the Government of India through the Women’s Development Corporation. The funding under this scheme is provided to support women in meeting their capital requirements for starting a business.
The maximum loan that can be granted under this scheme is Rs. 15,00,000. For a woman entrepreneur to be eligible to apply for this scheme, she must be between the ages of 18 and 55 years, and the annual income of her family must not exceed Rs. 15,00,000.
There is no limit on income for women who are physically challenged or widowed. There is no processing fee or collateral required for availing a loan under this scheme.
