The growth of an economy largely depends on its MSME sector as they efficiently handle significant problems hindering its prosperity, such as unemployment and poverty. They are crucial to bring a balance in income equality and local development by providing employment to millions and harnessing local talent. The MSME sector creates more than 11 crore jobs in India, contributing significantly to the country’s overall GDP, total exports, and manufacturing output.
Given the extreme importance of the MSME sector in India, the government offers numerous credit schemes that strengthen organised as well as unorganised businesses in the economy. These schemes provide much-needed financial backing to small and medium-sized businesses, supporting their operations and driving expansion at affordable Business Loan interest rates. These are crucial for easy access to capital, helping convert lucrative business ideas into profitable ventures. Let’s look at a few Business Loan schemes Indian MSMEs might avail from the Indian government.
Business Loans and Their Uses
Many lending institutions and NBFCs provide Business Loans to companies, enterprises, and industries. These are excellent funding options for MSMEs that do not always have ready funds from investors or enough capital to continue business operations or support business growth.
Entrepreneurs can avail Business Loans online to expand their business or cover any business-related expenses. These include the following.
● Purchase raw material
● Upgrade machinery or equipment
● Build working capital
● Pay salaries and other financial obligations
● Expand the workplace
● Invest in marketing
● Enter new market
● Launch new products or services
● Hire or train employees
Popular Business Loan Schemes by the Indian Government
The Indian government actively launches beneficial Business Loan schemes to support the country’s MSME sector, which makes up over 8% of the nation’s GDP. Some of them are.
1. The MSME Loan Scheme
The MSME Loan Scheme is one of the most popular Business Loan schemes by the Indian government. It aims at providing working capital to various companies in the MSME sector. It makes Business Loans available in a few days as approval takes place almost instantly from the time of application. The most significant advantage of the scheme is its unbelievably low Business Loan interest rate, making repayment easily accessible without straining the budget. The scheme has a 3% reservation for women entrepreneurs with easier approval and a faster disbursal process.
2. MUDRA Loan Scheme
MUDRA, or Micro Units Development and Refinance Agency, offers low-cost Business Loans to fund small businesses. Meant explicitly for tiny and micro-scale businesses in the trading, services, and manufacturing sectors, a MUDRA Loan is of three types:
• Shishu Loan: For a Loan amount of up to Rs. 50,000
• Kishor Loan: For a Loan amount of up to Rs. 5,00,000
• Tarun Loan: For a Loan amount of up to Rs. 10,00,000
All businesses, including partnership firms, proprietary concerns, private limited companies, public companies, and legal entities, may qualify for a Business Loan under the MUDRA scheme. It is particularly beneficial for vendors, shopkeepers, commercial vehicles, grocers, and business owners looking for the latest equipment for their micro-units.
3. Credit-Linked Capital Subsidy Scheme
The CLCSS scheme by the Indian government primarily aims at supporting technological upgrades in MSMEs. It is a tailor-made scheme for small businesses looking for tech upgrades in their manufacturing, marketing, or supply chain operations. These loans are particularly helpful for partnership firms, sole proprietorships, co-operatives, and private and public limited companies.
Launched by the Ministry of MSMEs, the scheme aims at modernising enterprise systems and upgrading them with the latest technological power. Its highlight is the 15% subsidy a business uses to purchase industrial machinery and other technical equipment. However, the scheme has a ceiling limit of ₹ 1 Crore on the total subsidy amount. So, while planning to invest in expensive machinery and equipment, apply for an online Business Loan under the CLCSS scheme and save money.
4. Support Schemes from the National Small Industries Corporation (NSIC)
NSIC is an Indian Government’s ISO-certified enterprise under the MSME sector. It aids and promotes MSME growth by providing them with combined support services, including finance, technology, marketing, and other associated services. The corporation offers several schemes to encourage MSME growth in India, including marketing and credit support schemes.
● Marketing Support Scheme: Considering the intense competition in today’s market, planned marketing is crucial for any business development. NSIC offers schemes like Consortia & Tender Marketing to support such businesses. NSIC creates Consortia of MSMEs on their behalf to reduce their burden, sets up marketing intelligence cells to spread awareness about various MSME schemes, and conducts exhibitions and technology fairs at different times.
● Credit Support Scheme: Under the scheme, the corporation provides funding for procuring raw materials, marketing activities, and syndication.
The primary benefit is that the scheme offers MSMEs access to tenders without bearing their costs. MSMEs do not need to pay security deposits to obtain funding under this scheme.
5. Udyogini
The Indian government launched the Udyogini scheme to empower women in the MSME sector. Introduced by the Women Development Corporation, the scheme provides funding to support women entrepreneurs and help them meet their capital requirements. Although there are caps on the women’s age, income, and loan amount, there is no limit on income if a female entrepreneur is widowed or physically challenged.
Loan seekers do not need to provide any collateral or pay a processing fee to avail of an online Business Loan under the Udyogini scheme. Furthermore, the department has defined 88 business categories that can avail of a loan under the scheme.
While these government schemes come with several benefits, applying for and getting funds through them can be time-consuming due to the extensive documentation and processes involved. Alternatively, you can take unsecured Business Loans from reputable lending institutions like Clix Capital – well-known for providing sufficient loan amounts to enterprises based on their business vintage, repayment capacity, and annual turnover. Unlike government-backed schemes and offers, unsecured Business Loans can be applied online with minimum documentation and approved quickly after a brief in-person verification.
So, assess the pros and cons of all the loan options before applying to get the best Business Loan interest rate with easy repayment tenure.
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