SME loans are business loans extended only to small & medium-sized enterprises. These loans are tailor-made to suit the needs and requirements of SMEs.

SME loans may be used to finance working capital and/or capital expenditure requirements of businesses involved in the trading, manufacturing and service sectors.

All small & medium enterprises and other entities as defined under the MSMED Act, 2006, with a stipulated turnover, are eligible for these loans.

The top 10 government SME loan schemes in India are:

1. Pradhan Mantri Mudra Yojana (PMMY)

In April 2015, the Government of India launched the Pradhan Mantri Mudra Yojana SME loan. The main objective of this loan for SMEs is funding the unfunded, reducing jobless economic growth and monitoring and regulating microfinance institutions.

Nature of assistance

Under this scheme, loans can extend up to INR 10 lakh for non-corporate & micro-enterprises.

Eligibility criteria

This SME loan can be availed by any Indian citizen who has a business strategy in a non-farming sector, with income-generating ventures like manufacturing, processing, trade, service sector or any other field whose credit demand is less than INR 10 lakhs. The repayment period is between 3 to 5 years, and the average interest rate is 7.3% p.a.

How to apply

How to apply: Borrowers can apply online through the Udyamimitra portal or offline by visiting the nearest branch of a bank/NBFC.

2. MSME Business Loans in 59 Minutes

Launched as part of the Atmanirbhar Bharat Campaign, under this scheme, MSMEs receive in-principle approvals for loans of Rs. 1 lakh to Rs. 5 Crore within 59 minutes.

Entrepreneurs can utilize the loan for business expansion, scaling operations, purchasing raw materials, diversification etc.

Nature of assistance

Under this scheme, the loans provided to SMEs can extend up to INR 5 crores, with a minimum limit of INR 1 lakh from most authorised banks, and takes about eight to twelve days to be processed. The approval is received within 59 minutes, which is why the scheme is named as such.

Eligibility criteria

Any individual above 18 years and non-individuals such as existing firms and businesses with GST registration and other required documents, such as IT return for at least one year and bank statements of last six months, are eligible for this loan. The repayment tenure is flexible, and the interest rates are usually upwards of 8.5% p.a.

How to apply

Eligible borrowers can apply for the loan through the online portal set up by SIDBI

3. SIDBI Make in India Soft Loan Fund for MSMEs (SMILE)

SMILE scheme, a flagship scheme of SIDBI, provides SME loans with flexible or soft terms to meet the debt-equity ratio of MSMEs.

Nature of assistance

Under this scheme, MSMEs can apply for loans between Rs. 10 Lakh to Rs. 25 Lakh. SIDBI requires a 15% minimum promoter contribution, first charge overall assets and personal guarantees of promoters to extend the loan.

Eligibility criteria

Any MSME in operation for the last 3 years having a satisfactory financial position is eligible for this loan. SIDBI may give priority to newly established MSMEs in the manufacturing and service sectors. Ten years is the maximum repayment period, though borrowers can opt for a 36-month moratorium. The borrower’s profile and loan amount determine the interest rate.

How to apply

One can either approach the nearest branch of SIDBI or apply online. 

4. Stand-Up India

In 2016, the Government of India introduced the Stand-Up India loan scheme to provide SME loans to businesses run by SC/ST category individuals and women to support entrepreneurship.

The enterprise should be engaged in manufacturing, services, agri-allied or trading activities. It should also be a sole proprietorship, or the female entrepreneur or the SC/ST individual should hold 51% of the controlling stake.

Nature of assistance

Under this scheme, the loan granted can range from INR 10 lakhs to INR 1 crore. Every bank must provide this loan to a minimum of one SC/ST or woman entrepreneur. According to this scheme, the fund is expected to cover about 75% of the total project cost. It does not require any collateral or third-party guarantee.

Eligibility criteria

Any individual above 18 years and non-individuals such as existing firms and businesses in which 51% of the shareholding and controlling stakes are held by either SC/ST and/or women entrepreneurs can apply for this loan. The repayment period is seven years with a maximum moratorium of 18 months. 

How to apply

Borrowers can apply online through the Udyamimitra portal.

5. Credit Guarantee Trust Fund for Micro & Small Enterprises (CGT SME)

SIDBI and the Ministry of Micro, Small, and Medium Enterprises have jointly established the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTSME).

Nature of assistance

MSMEs can borrow collateral-free fund-based and non-fund-based SME loans up to Rs. 200 lakh from banks and NBFCs. CGTMSE pays a guarantee fee to the lender in exchange for financial assistance, ranging from 75 to 85% of the sanctioned loan amount.

Eligibility criteria

Both new and existing MSMEs engaged in manufacturing and service activities are eligible. MSMEs involved in retail trade or operating as educational institutions, self-help groups or training institutions are not eligible. The interest rate of the loan is as per the RBI guidelines.

How to apply

Applicants can directly approach the lenders. They should also submit a business model explaining the viability of the project.

6. RMA Against Bank Guarantee

This is a scheme by National Small Industries Corporation (NSIC) to provide SME loans (as advanced payments or on credit) for purchasing raw materials.

Nature of assistance

  • MSME operating as a single unit in the manufacturing sector can avail loans up to Rs. 1000 Lakh. A Group of MSME units engaged in manufacturing activities can get loans up to Rs. 2000 Lakh.
  • MSME operating as a single unit in the service sector can avail loans up to Rs. 600 Lakh. A Group of MSME units engaged in manufacturing activities can get loans up to Rs. 1500 Lakh.
  • MSMEs engaged in infrastructure activities can avail loans of up to Rs 500 lakh, operating as a single unit or a group of units.

MSMEs also need to furnish a bank guarantee, equivalent to the loan amount, as security.

Eligibility criteria

All manufacturing MSMEs with Udyam Registration Certificate/ Udyog Aadhaar Registration can avail this SME loan scheme. The interest rate varies between 7.5% p.a to 9% p.a. The sanctioned limits are valid for one year. 

How to apply

Borrowers can apply through the field offices of NSIC or upload their applications online. 

7. Bank Credit Facilitation Scheme

This is another scheme facilitated by NSIC to provide fund and non-fund credit support to MSMEs through MoUs between banks and NSIC.

Nature of assistance

This scheme facilitates loans to various MSMEs with the help of different private and public sector banks.

Eligibility criteria

Both new and existing MSMEs from all sectors are eligible to apply. The amount of SME loans, interest rates, and repayment tenures vary from bank to bank. 

How to apply

MSMEs can directly approach branch offices of NSIC.

8. Growth Capital and Equity Assistance Scheme

SIDBI launched the Growth Capital and Equity Assistance Scheme to provide subordinated/mezzanine debt to MSMEs.

Nature of assistance

The loan amount varies but is usually above Rs. 25 Lakh. MSMEs can utilise the amount towards any bonafide expenditure for growth.

Eligibility criteria

MSMEs with three years of profitability and two years of satisfactory banking records are eligible. The interest rate is as per SIDBI’s internal rating, and the repayment tenure is seven years. Need-based moratorium options are also available.

How to apply

Borrowers can approach the nearest SIDBI branch or send an email to sfrc@sidbi.in.

9. Prime Minister Employment Generation Programme (PMEGP): 

The Prime Minister Employment Generation Programme is a Government of India-backed credit linked scheme. It was created in 2008 by merging two schemes, namely, Prime Minister’s Rojgar Yojna and Rural Employment Generation Programme. Under this program, SMEs can get a subsidy amounting to 15-35% of their project cost from the government.

Nature of Assistance

This SME loan scheme focuses on generating self-employment opportunities through micro-enterprise establishments in the non-farm sector by helping unemployed youth and traditional artisans. Assistance under this programme is only available to new units—INR 25 lakhs in the manufacturing industry and INR 10 lakhs in the business/service sector. 

Eligibility Criteria

Any individual who is above the age of 18 years is eligible for this SME loan scheme. Existing units or units that are already availing any government subsidy (State or Central) are ineligible. 

How to apply

The beneficiaries can submit their application online or visit the local office of KVIC.

10. Assistance to MSMEs for Recovery and Organic Growth during COVID-19 (AROG)

SIDBI has launched a special scheme to provide financial aid to MSMEs involved in manufacturing medical products or services to fight the global pandemic.

Nature of assistance

Borrowers can avail SME loans of up to Rs. 200 lakh with very low collateral.

Eligibility criteria

MSMEs that are existing customers of SIDBI are eligible based on the cash profit of their last audited balance sheet. New customers with cash profit for the previous two years are also eligible.

The interest rate is between 4.5% to 5% p.a. Term loans have a repayment tenure of 60 months, whereas working capital loans have a tenure of 18 months. Moratorium options are also available.

How to apply

Applications can be submitted online.

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Author

Ashmita Roy is a Content Marketer at Razorpay. When she’s not working, you can find her strumming her guitar or writing poetry. Dislikes writing about herself in third person, but can be convinced to do so via pizza or cheesecakes.

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