Government Business Loans
Sounds surprising to many, but you need money to make money because an idea remains an idea without the capital backing and when you have to start your own business, you need to have a good amount of liquid cash by your side to start the process, not to mention the cash required to keep your business intact and to expand it further to new avenues.
India, as per a report published by NASSCOM, is the world’s third largest start up base and Indian government is more than willing to give the required platform to the entrepreneurs and thus is working towards providing conductive environment for the ideas and the ideators to thrive in their respective businesses.
Small business or startups or industries need to have lot of financial aid and support in order to grow, flourish and establish because they don’t have only to start with the business but also need to compete with the MNCs and the big organizations in order to create a place for themselves and not everyone who wish to have their own business is privileged to have such a financial backup at their end and thus small business loans has become the need of the hour as more and more people are opting to start their own business.
Types of Business Loan
In India, there are basically broad three categories under which you can apply the loan for. Loans available under these categories are quite specific to your business needs and thus you need to be very sure of what you need and how much you need to start your business.
Working Capital Loan
Working capital loan is basically to meet your daily expenses and all your expenses normally fall under working capital loans, especially the operational costs.
Corporate Term Loan
If you are thinking either to start or expand an already running business, corporate term loan is the option you should go for because as term loan, you have the luxury to borrow large sum of money from the banks or other financial institutions with a longer repay period.
You can avail term loan if you want to buy some fixed assets for your business. Term loans are secured with tenure of 1-10 years and have interest rate between 10% to 20%.
Government Loan for Business Startups In India
Indian government has made various options available to the dreamers who want to start their business. Both, the central and the state government are working towards providing various schemes in order to cater to the financial requirements of small businesses segments across the country. Few of them are listed below:
The Credit Guarantee Fund Scheme for Micro and Small Enterprises
Indian government has started this scheme in partnership with the Small Industries Development Bank of India (SIDBI) and provides unsecured loans up to 100 Lakhs to Micro and Small Enterprises in form of Term Loans or Working Capital Loans.
Launched by Indian government (MUDRA agency), also known as Micro Units Development and Refinance Agency Ltd funds non-corporate small businesses.
Types of MUDRA Loans?
There are three schemes, namely Tarun, Kishor, and Shishu.
- Shishu Loan - Under this scheme, you can get loan up to Rs 50,000 and at the rate of 1% per month. You can repay the loan over a period of 5 years. Shishu loan basically caters for the entrepreneurs who either are in their early stage of business or in need of lesser funds in order to get their business started.
- Kishor Loan - Under this scheme, you can get loan from Rs 50,000 up to Rs 5 lakhs. Entrepreneurs who have already started with their business and need cash inflow in midway would generally opt for the same.
- Tarun Loan - Under this scheme, you can get loan from Rs 50,000 up to Rs 10 lakhs. This is the highest level of amount that one can apply for a start up loan.
Main objective of Mudra bank is to reach out to the small scale entrepreneurs who usually don’t have much hold of banking system and thus the young, educated and skilled workers entrepreneurs are the main target under the MUDRA scheme.
StartUp India is a campaign started by PM Narendra Modi in order to boost entrepreneurship and to encourage startups. This campaign promotes bank financing for start-up ventures. One of the main focus of StartUp India is to eliminate red tape and bottlenecks and major hindrances one face while starting a business such as land permissions, environmental clearances, and foreign investment proposal. Apart from giving finance to the startups, StartUp India also considers companies that work towards innovation, development and improvement of products and have high degree of potential to create employment.
Coir Udyami Yojana
Coir Udyami Yojana is headed by the Coir Board funds up to RS 10 Lakhs and one cycle of working capital. However, the total funds lent under this yojana should not be more than 25% of the total project cost.
Government Subsidy for Small Business from NSIC
As a very well known fact, Indian government is working in all right directions to assist the budding small entrepreneurs in getting right financial aid for their business. The National Small Industries Corporation (NSIC) grants two subsidies for businesses running on small scale, i.e. raw material assistance and marketing assistance and thus gives the small run businesses the opportunity to not only focus on right quality of products but also assist them in the marketing because in today’s digital world, a business cannot survive and thrive without right marketing.
Credit Link Capital Subsidy Scheme for Technology Upgradation
This is an initiative taken by the Ministry of Small Scale Industries (SSI) wherein you can avail loan for the technology up gradation of your business. Under this scheme, you can get upfront capital subsidy of 15% wherein the maximum limit is Rs 1.5 Lakhs. All the partnerships firms, cooperative firms and sole traders are eligible for the scheme.
National Bank for Agriculture and Rural Development (NABARD)
Under this scheme, the major beneficiaries are village and cottage industries and are basically launched to provide help and support to the agriculture based businesses in the rural areas. Small enterprises are the backbone of Indian economy and thus NABARD takes all the essential and right steps towards funding rural and social innovations. It also takes the essential measures towards foundation working and keeps a check on the establishments which give monetary help to the Indian economy.
Mini Tools Room and Training Centre Scheme
It is an initiative taken by the Indian government to set up mini tool rooms and training centres and in order to do so, the government provides financial assistance to the state governments in form of one-time-grant-in-aid. In case a new mini tool room has to be set up, then the financial aid will be 90% of the cost of the required machinery and equipment which equals to Rs 9 crore and in case the existing room has to be upgraded, then the financial aid will be 75% of the total cost i.e. up to Rs 7.50 crore.