Substantial steps have been taken by the Indian government and financial institutions to provide adequate loans for micro, small, and medium enterprises (MSMEs) to foster growth without interruption. Here is a quick rundown of 10 such loan schemes that could benefit this sector.
According to the Ministry of Micro, Small & Medium Enterprises' report, over 12 million MSMEs are registered across India and contribute significantly to its economy. As such, substantial efforts have been made by both government entities and financial institutions to ensure that these businesses have access to sufficient loans, enabling continued development. Here is a quick rundown of 10 such schemes that may benefit this sector:
1. MSME Business Loans in 59 Minutes
Under this scheme, qualifying MSME firms can quickly secure credit amounts ranging from Rs 1 lakh to Rs 5 crores through traditional institutional lenders and non-bank finance companies (NBFCs) at an interest rate of 8.50% annually.
2. Growth Capital and Equity Assistance Scheme (GEMs)
GEMs is an effective mezzanine debt instrument that can greatly assist India's MSME sector. When looking for financial resources for expansion or modernization, this fundraising instrument can provide crucial support. Typically, loan amounts range from Rs 25 lakh and above, depending on requirements. Moreover, it can cover non-asset-creating investments such as R&D or marketing expenses.
3. Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE)
Small businesses often lack collateral when applying for loans, making them considered high-risk borrowers, which can result in loan application denials. To combat this, the Government of India implemented this policy, allowing new and existing businesses to obtain collateral-free credit up to Rs 2 crore on an outstanding basis from select financial institutions.
4. Credit-Linked Capital Subsidy Scheme for Technology Upgradation
Small businesses often struggle to access the capital necessary for purchasing assets that directly contribute to sustainable growth. To assist, the Ministry of MSME launched this scheme, offering eligible businesses a capital subsidy of up to 15% towards technological infrastructure upgrades, with a maximum sanctioned amount of Rs 15 lakh.
5. Prime Minister Employment Generation Programme (PMEGP)
This scheme, launched by the Indian government, has seen great success as a credit-linked subsidy program, offering grants between Rs 5 lakh and Rs 25 lakh towards project costs. A primary aim of PMEGP is to generate new job opportunities in rural areas by helping entrepreneurs grow their microenterprises into larger businesses, thus creating new job openings in this sector.
6. Pradhan Mantri MUDRA Yojana (PMMY)
This scheme targets non-farming and non-corporate business entities. Under this initiative, enterprises in trading, manufacturing, and service industries can receive up to Rs 10 lakh as an unsecured business loan from various financial intermediaries.
7. National Small Industries Corporation (NSIC) Scheme
This dual credit and marketing support scheme from NSIC provides small-scale businesses with an invaluable competitive edge, helping them thrive in today’s market. Eligible businesses may receive a lump sum payment to increase advertising capabilities, while NSIC organizes tech fairs and exhibitions to promote them further. Single MSME units may avail of credit up to Rs 5 crore, with interest rates ranging from 9.5% to 12%.
8. Udyogini Scheme
Promoted by Women Development Corporations, the Udyogini Scheme has earned international acclaim for its support of businesswomen across India. Under this initiative, microenterprises led by women entrepreneurs in rural or underdeveloped areas can receive loans for msme of up to Rs 3 lakh, with subsidies from this program.
9. Stand Up India Scheme
The Stand Up India Scheme supports MSMEs from underprivileged areas of India, helping at least one SC/ST borrower and one woman borrower secure financing to launch greenfield projects. Funding is provided by the Small Industries Development Bank of India (SIDBI), with credit amounts ranging from Rs 10 lakh to Rs 1 crore, usually granted upon application approval.
10. SIDBI Make in India Soft Loan Fund for MSMEs (SMILE Scheme)
This scheme provides financial backing to small and micro enterprises in India. New enterprises can receive up to Rs 50 lakh in credit, while existing enterprises may receive as little as Rs 25 lakh. It features flexible terms to facilitate an optimal debt-equity ratio.
Conclusion
India’s MSME sector plays a crucial role in economic development and job creation, with over 12 million registered businesses contributing significantly to the country’s economy. As noted, these schemes provide various options that meet the varying needs of micro and small enterprises (MSMEs), ensuring that they have access to the funds required for expansion, modernization, and entrepreneurship. Government interventions, such as collateral-free loans, technology subsidies, or specific support programs for women entrepreneurs, demonstrate India’s commitment to fostering an entrepreneurial spirit. Given that MSMEs continue to flourish and expand rapidly, utilizing these financial programs is imperative to maintaining their growth and contributing to overall prosperity in society.
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